New Permian Basin player Lotus Midstream LLC is saddling up with ExxonMobil Corp. and Plains All American Pipeline LP in their plans to move more than 1 million b/d of crude oil and condensate from West Texas to the Texas coast.
Lotus, formed earlier this year with a $400 million commitment from Encap Flatrock Midstream, said the parties expect to form a joint venture and issue a final investment decision (FID) by the end of the year.
As envisioned in June by ExxonMobil and Plains, the system is to have initial points in the Permian Basin in both Wink and Midland, with delivery to markets east of Houston near the Houston Ship Channel in Webster, Baytown and Beaumont. ExxonMobil runs two of the nation’s largest refineries in Baytown and Beaumont.
The project sponsors are placing a priority to run the system via existing pipeline corridors to limit community and environmental disruptions.
Lotus, based in Sugar Land south of Houston, is working to build its Permian crude oil credentials. In August it acquired the Centurion oil pipeline system and a southeastern New Mexico oil gathering system in the Permian from Occidental Petroleum Corp.
For the pipeline on the drawing board, ExxonMobil’s Permian crude production “should serve to anchor the project,” said Tudor, Pickering, Holt & Co. (TPH) analysts. The supermajor is one of the largest producers in the Permian, where it had 27 operated rigs running at the end of March. In addition to backing oil takeaway from the Permian, ExxonMobil also is helping to move more natural gas from the basin, including through the 2 Bcf/d Permian Highway Project, which was FID’d in early September by Kinder Morgan Inc. and EagleClaw Midstream Ventures LLC.
Construction is underway for an “initial wave” of 1.9 million b/d of capacity headed to Corpus Christi about 300 miles south of Houston, TPH noted.
According to TPH, the “first wave” from the Permian to the Texas coast includes Plains-backed Cactus II Pipeline, the Gray Oak Pipeline system and one by Epic Pipeline Co. LLC. Epic also is building a parallel natural gas liquids line.
The second wave of crude oil takeaway from the Permian is expected to come via the Permian-Gulf Coast pipeline, which was FID’d in early September, as well as the ExxonMobil-Plains system that Lotus intends to join.
“Assuming full design capacity of confirmed and proposed projects (i.e. expandability), implies nearly 8.0 million b/d of total local refining and takeaway, necessitating sustained production growth through mid-2020's to approach full utilization,” TPH’s team said.