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Permian: Oil Pipeline Takeaway. Too Much or Just Fit?

10/16/2017

Onshore Gulf Coast Crude Infrastructure

Midstream key regional players continue to plot new pipelines to take all the petroleum from West Texas to refineries, export hubs and petrochemical plants.

However, even with production from the Permian Basin being up 24% since the year began, the capacities being built may not find their customers.

Almost a two-fold increase in takeaway will mean lower margins. Production will not keep up with such growth soon enough.

No operator abandons existing projects. Yet, a hunt for partners has begun.
Among the players involved are Kinder Morgan Inc. (NYSE: KMI), DCP Midstream LP (NYSE: DPM), and also Targa Resources Corp. (NYSE: TRGP) not to mention others.

Some analysts say output can accommodate many of the new transportation lines. Permian production should rise through 2026 but it may peak sooner.

The competition for deals to fill the pipelines is so fierce that margins for operating the lines are likely to be thin without consolidation.

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