A Permian-Houston link
Phillips 66 and Enbridge are joining to build a pipeline to move oil from West Texas.
Houston-based Phillips 66 and Canada’s Enbridge said Monday they’re teaming up to build an oil pipeline stretching from West Texas’ Permian Basin to export hubs near Corpus Christi, Houston and Freeport.
The project falls in line with growing shale oil production from the Permian that’s funneled to the Gulf Coast and shipped overseas to fuel the nation’s rapidly growing crude export industry.
Phillips 66 and Enbridge said they’re beginning to solicit interest this week from customers and will finalize the pipeline plans based on customer feedback. The Gray Oak Pipeline tentatively would transport 385,000 barrels of oil equivalent a day with room to expand. The goal is to complete the pipeline by late 2019.
Courtesy of the shale boom and the authorization from Congress two years ago to export crude oil, there are a slew of pipeline projects proposed to ship petroleum from the Permian.
There are at least 15 projects to expand or construct pipelines that will traverse the state from West Texas to the Gulf Coast, shipping crude, natural gas or natural gas liquids. These proposals routinely cost more than $1 billion each and range from 300 miles to more than 700 miles long. The proposed oil pipelines would roughly double the current capacity levels from the Permian.
“Exports are now the most significant factor in the U.S. crude market,” Sandy Fielden, Morningstar’s director of oil and products research, wrote in a report on Monday.
Crude exports have risen to nearly 1 million barrels a day this year, roughly doubling 2016’s export averages. Crude exports even surged to 1.7 million barrels a day in October with U.S. oil cheaper than international benchmarks.
Most Gulf Coast refiners are configured to process thicker grades of crude oil, so the lighter West Texas oil mostly will ship to foreign markets.
No one expects all of these proposed pipelines to be built, but the combination of Phillips 66 and Enbridge offers some of the industry’s deepest pockets.