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UPDATE: Pipeline powerhouses combine for 600-mile Permian-to-Gulf oil project

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UPDATE: Pipeline powerhouses combine for 600-mile Permian-to-Gulf oil project

A consortium of some of the biggest names in the midstream energy business are moving forward with plans to build a new crude oil pipeline that would deliver supplies from the Permian Basin to the Texas Gulf Coast region.

Energy Transfer Partners LP, Magellan Midstream Partners LP, MPLX LP and Delek US Holdings Inc. on Sept. 4 announced the Permian Gulf Coast pipeline, a 600-mile, 30-inch diameter system that would originate from Wink, Crane and Midland in Texas and transport crude to Energy Transfer's terminal in Nederland, Texas, and Magellan's terminal in East Houston.

The partners said they had enough commitments to move forward with the line, but they plan to hold another open season this week to gauge interest in expanding the project. The pipeline is scheduled to begin operations in mid-2020, though construction is subject to regulatory and board approvals.

Energy Transfer executives have been talking about a Midland-to-Nederland oil project for months. During a May conference call, CFO Thomas Long described the proposal as a 30-inch pipeline with initial capacity of 600,000 barrels per day of capacity, expandable to 1 MMbbl/d. "This new pipeline will provide unprecedented flexibility to the expansive ship channel markets, as well as to significant markets and refinery corridor in the Nederland, Beaumont areas," he said at the time.

A shortage of crude oil takeaway infrastructure from the Permian Basin has West Texas drillers and pipeline companies scrambling to build new projects. Nearly 4 MMbbl/d of new projects, including Permian Gulf Coast, have already been proposed.

Analysts at the energy investment bank Tudor Pickering Holt & Co. said the project will push Permian Basin takeaway and local refining capacity to about 6.75 MMbbl/d by mid-2020, which should accommodate production growth planned in the region.

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