Permian fever spreads to oil, natural gas pipelines

The Permian Basin land rush is spreading to oil and gas pipelines.

Plains All American Pipeline said it will expand its crude oil gathering system in America’s hottest shale play through a $1.2 billion purchase from Concho Resources Inc. and Frontier Midstream Solutions. The Alpha Crude Connector System is located in the oilrich northern portion of the Permian’s Delaware Basin and will serve to expand the volume that the company is able to move from West Texas to Corpus Christi and other delivery points, Plains said Tuesday.

The deal is the latest of many in the Permian, the largest and most prolific oil field in the U.S., as its crude-soaked layers of rock have delivered good returns for producers even during the market crash. On Monday, Targa Resources Corp. agreed to buy a set of pipelines in the region from Outrigger Energy for as much as $1.5 billion. The Permian’s oil production has almost doubled since 2012, while the natural gas that comes along with the crude has also turned it into the second-richest gas play in the country.

“We expect aggregate crude oil production on the dedicated acreage to double over the next two to three years,” Greg Armstrong, chairman and chief executive officer of Plains, said in the statement. “We believe overall Permian Basin crude oil volumes have the potential to grow as much as 50 percent or more during this same time period.”

The deal is expected to close during the first half of 2017. Plains also announced the sale of unrelated assets, including a gas storage facility in Michigan and a pipeline segment in the Midwest, for $380 million.