Because of “high customer demand” from Permian Basin producers, Epic Crude Oil Pipeline is expanding the size of its system and moving up the start date, with expectations to begin transport to South Texas by 3Q2019, at least three months sooner than originally anticipated.
The Epic Midstream Holdings LP subsidiary, through a lease agreement, would use a portion of a parallel natural gas liquids (NGL) system now underway by Epic NGL Pipeline.
Epic made the decision to utilize the “third and final phase” of the NGL pipeline while the crude system and Epic NGL fractionator remain under construction. The NGL pipeline would convert back to liquids service once the crude oil system is completed, now anticipated in early 2020.
“Given our recent commercial success and subsequent upsizing of the pipeline, we remain responsive to growing demand for crude oil transportation from the Permian Basin.” said Epic CEO Phillip Mezey. “We are proud to be able to offer an interim solution for our customers, while we continue to build out the EPIC Crude Oil Pipeline to service this region.”
The portion of the NGL line being placed into crude service would originate in Crane, with an additional injection point in Wink. The crude line would have “multiple terminal and refinery connections” in South Texas near Corpus Christi and Ingleside.
The 24-inch diameter NGL line would carry 400,000 b/d for interim crude service. Because of commercial demand, Epic plans to upsize the diameter of the crude line to 30 inches from 24 inches, which would expand Permian capacity to about 600,000 b/d.
By installing additional pumps and storage, Epic said it could increase the 30-inch oil capacity to around 900,000 b/d.
“The 30-inch pipe has been ordered from two steel mills and is expected to start arriving in early 2019,” Epic said. “The same construction crews from the Epic NGL Pipeline will be utilized enabling significant synergies to the construction timeline. All major equipment and pumps are currently on hand.”
Construction of the final phase of the Epic NGL line “is progressing on time with three contractors working on the project over five spreads of the pipeline path.”
Subject to approval by the Federal Energy Regulatory Commission, the oil system would offer early service through contracts executed with some shippers following completion of open seasons.
Committed shippers for oil service now include Apache Corp., Diamondback Energy Inc. and Noble Energy Inc., Epic said. In addition to offering early crude service to its shippers, Epic has completed a second open season for additional oil transport.
Epic’s earlier-than-expected oil takeaway from the Permian would join Plains All American Pipeline LP’s Cactus II, also designed to move West Texas crude to Corpus Christi. Plains now expects to ramp up service on Cactus next September.
“Together with the 400,000 b/d of takeaway from the Cactus II line in September 2019, we see Midland differentials contracting to pipeline economics for at least the last four months of 2019, if not earlier,” said Tudor, Pickering, Holt & Co. analysts.
Based on the two systems starting up next fall, “Our previous $8/bbl Midland-Cushing crude differential in 4Q2019 is too wide, and we revise it down to $2.50/bbl…”