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Plains plans faster in-service date for Permian pipelines to meet surging demand

Plains All American Pipeline LP is hitting the gas on pipeline projects in Texas as shipper demand soars for transportation in the Permian and Delaware Basins.

The Houston-based partnership is taking measures that could include higher project spending and using site-generated power to shave months off the in-service dates of the Sunrise expansion and Cactus II pipeline projects, COO Willie Chiang said on an Aug. 7 conference call. The company will mobilize as many as 11 portable generators to get the Sunrise expansion into at least partial service by the end of the year.

"Given higher shipper demand and commercial opportunities currently present in the Permian Basin we're trying to accelerate both of these projects as much as reasonably practical, including incurring additional cost to expedite material deliveries and vendor services, and even install temporary generators for our pumps until permanent utility power is available," Chiang said. "Such efforts should allow us to place the Sunrise expansion project into partial service in the fourth quarter of this year."

Cactus II will see partial service begin late in the third quarter of 2019, with full service targeted at its original date of April 2020 as the result of obtaining a key permit faster than Plains anticipated, he said.

Pipeline operators have been scrambling to boost capacity between producing regions and Texas refining and exporting regions since advanced well-completion techniques boosted output from mature basins and the U.S. government lifted a ban on oil exports. The Sunrise expansion will see approximately 180 miles of pipe laid between the Texas points of Colorado City and Wichita Falls which, when combined with the use of spare capacity and other enhancements, will add approximately 200,000 barrels per day to the existing system. Cactus II has a capacity of 525,000 bbl/d and will terminate near Corpus Christi, Texas. The $1.1 billion project has seen rise in cost as a result of tariffs on imported steel imposed by the Trump administration. Chiang said the company's partners in the project have exercised options to take a 35% stake in Cactus II.

Plains is also working with Exxon Mobil Corp. to develop a jointly owned pipeline network to transport liquids out of the Permian. The two companies have signed a letter of intent for the project, which is expected to have capacity of more than 1 million bbl/d. Plains expects its stake in the project to be "meaningful, but well less than 50%," with the bulk of capital investment to be made in 2020 and contributions to EBITDA starting in 2021. The project would have origination points at the Wink and Midland areas of Texas and delivery points in the Houston region, Chiang said. Activity already underway includes "survey work, finalizing route selection, engineering, cost estimates, sourcing of long-lead items and finalization of commercial agreements, including the formation of our joint venture," he said.

Separately on Aug. 7, Plains reported second-quarter adjusted EBITDA of $506 million, an increase from $451 million a year earlier. The S&P Global Market Intelligence consensus estimate of adjusted EBITDA was $478.6 million.