On Wednesday, CEO of Plains All American Pipeline LP Willie Chiang expressed his thought that consolidation in the oil pipeline industry is likely as the industry is shifting out of a growth pace, going forward, and facing more challenging time.
“The Permian is going to be a key part of the future. The takeaway capacity is more than needed currently not just for crude but also for NGL (natural gas liquids) as well as natural gas. The constraints have been significantly been removed with the reset of production, which positions it well for when the production comes back,” he said.
In the US, midstream firms raced to add pipelines as shale production boomed, but at the moment, pipeline capacity out of the Permian basin is exceeding the needs at the current production levels.
As both major oil benchmarks nearing three-month lows on the back of the global health crisis, some pipeline projects have been abandoned, most noticeably in the Permian Basin.
Earlier on Wednesday, Enterprise Products Partners LP abandoned a major 450,000 bpd Permian crude pipeline project in Texas while agreeing to give customers lower near-term commitments on other pipelines as oil prices remain stagnant.
Other projects, including Phillips 66 and Plains’ joint venture Red Oak project, have been deferred.
The oil and gas rig count has nosedived by roughly 71.5% year-on-year.
Looking ahead, Chiang expected Permian oil producers to increase completion activity as prices recover to USD40-45/barrel and upon reaching the USD45-50/barrel, rig counts are likely to significantly rise.
