Shale production is surging in the United States, however it’s surging into pipeline bottlenecks, creating mass delivery issues. Pipeline shortages are having a particularly frustrating effect in Oklahoma and in the Texas Permian Basin, forcing some companies to truck barrels up to 500 miles in order to get it to the gulf coast. These bottlenecks are expected to last until 2019, or even 2020, and combined with a tight labor market for drivers, there is a finite limit to the amount of crude that could be used to help stabilize the international market.
Industry experts are counting on an increased production from the U.S. to offset increasingly risky situations in Venezuela and Iran. Unfortunately, the Permian Basin needs to wait for new pipelines to add capacity for their increased production. Four companies in particular are working to help relieve some of the bottleneck by 2019 and 2020. Plains All American Pipeline is working on its Cactus II pipeline that’s expected to open by the third quarter of 2019 and have a capacity of 585,000 barrels per day. Philips 66 is working on its Gray Oak pipeline which could open in late 2019 and have a capacity of up to 700,000 barrels per day. The EPIC crude pipeline is scheduled to open in late 2019 with a capacity of 590,000 barrels per day and Enterprise Product Partners is planning to convert one of its natural gas pipelines to have a capacity of 650,000 barrels per day of oil with an expected start in 2020. Permian Basin producers are ready to ramp up production, but they’re forced to wait until most of these projects are completed.
The United States is poised to become more prominent as an influencer in the global oil market, and the new pipelines being developed are the key to supporting further production growth. Output is projected to grow by 4.3 million barrels/day by the end of 2019, and additional infrastructure is necessary to opening these bottlenecks and making these projections a reality.