Permian to get new gas processing facility from ArcLight and Diamondback

Houston — Private equity group ArcLight and an affiliate of independent oil and gas producer Diamondback Energy will build a 60 MMcf/d gas processing plant to serve the Permian's Midland Basin, complementing an existing midstream system that the two joint venture partners operate, the companies said Thursday.

In a statement, the companies said their joint venture plans to build and operate the plant in Martin County, Texas, as well as incremental gas gathering and regional transportation pipelines.

The activity continues a trend in the prolific shale play, which spans West Texas and southeastern New Mexico, as significant amounts of associated gas are being lifted by crude producers.

A new entity tied to Arclight and Diamondback called Amarillo Rattler already owns and operates the Yellow Rose gas gathering and processing system with estimated total processing capacity of 40 MMcf/d, and more than 84 miles of gathering and regional transportation pipelines in Texas' Dawson, Martin, and Andrews counties.

The facility is expected to begin full commercial operation in mid-2021. Diamondback has contracted for a portion of the plant's capacity. Expansion is possible, the companies said. The joint venture has reached a gas gathering and processing agreement in exchange for Diamondback's dedication of certain leasehold interests to that agreement, the statement said.

Among traditional midstream players, Enterprise Products Partners has been adding significant processing and transportation capacity in the region. In particular, it has been looking to expand its Mentone natural gas processing facility in Texas amid further growth in drilling activity in the Permian.

The drilling boom has also spurred the addition of new gas pipelines serving the Permian, as well as the development of other similar projects. Kinder Morgan, which moves more than a third of the gas consumed in the US, is operating its Gulf Coast Express pipeline. It is building a second Permian gas pipeline and is considering a third.