- As Permian Basin operators move to alleviate production bottlenecks with new pipeline projects, analysts are now warning about an overbuild by the time the pipelines begin to come online late next year.
- Three major projects are scheduled to open in late 2019 - Plains All American's (PAA, PAGP) Cactus II, anticipated to carry as much as 670K bbl/day; Phillips 66 (PSX, PSXP) and Andeavor’s (ANDV, ANDX) Gray Oak pipeline, proposed for 700K-1M bbl/day; and the private equity-backed EPIC pipeline, which could carry as much as 675K barrels - potentially adding more than 2M bbl/day of capacity.
- Plains, Energy Transfer Partners (NYSE:ETP) and Magellan Midstream Partners (NYSE:MMP) also are expanding existing crude pipes, which are expected to add 400K bbl/day of capacity by the middle of next year.
- Other projects are planned to enter service in 2020 or 2021, including two giant pipelines by ETP and a Plains partnership with Exxon (NYSE:XOM) that could each take 1M barrels of oil.
- “If you’re starting to build three or four of these pipelines out of the Permian at the same time, there’s a potential to max out the available construction capacity," says Baird analyst Ethan Bellamy. “If there are delays, they’re probably due to construction capacity and labor and acquisition of pipeline in a timely and cost-efficient manner.”
- But others believe the Permian is up to the challenge, including Again Capital's John Kilduff, who says, “They’re finding more and more oil every day... The good old days are back, and you’re going to see all of these be put into action.”
- Now read: A 12% Yield, Just Reported Major Growth In Q1, With Much More Growth Due In 2018
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