Permian Pipeline Expansion on Hold as Producers Shift Focus to Steady Output
Top executives from major U.S. pipeline companies say they are putting plans for new crude oil pipelines from the Permian Basin on hold due to slower-than-expected production growth and construction challenges.
The comments, made at an energy conference in Houston on Thursday, October 24, reflect a strategy shift for pipeline operators and Permian producers. With a wave of consolidation within the basin, oil companies are now prioritizing disciplined spending and maintaining steady output to avoid flooding the market.
Jim Teague, co-CEO of Enterprise Products Partners, said during the conference that his company was not interested in building a new pipeline from West Texas. This sentiment was echoed by Willie Chiang, CEO of rival operator Plains All American Pipeline, who noted that companies are more likely to optimize existing pipelines than build new ones.
Despite a decline in plans for new oil pipelines, existing infrastructure is seeing some expansion. Enbridge Inc. announced plans to increase capacity on its Gray Oak pipeline by 120,000 barrels per day (bpd) by 2026. Apart from Enbridge, Enterprise has indicated they may convert a natural gas liquids pipeline to carry crude oil.
Shale pipeline operator EPIC Consolidated Operations is also exploring a significant expansion. CEO Brian Freed stated they are considering increasing capacity on a pipeline from the Permian to South Texas by 300,000 bpd, although the timing of the project remains undetermined.
"Most of the producers out of the Permian, because of the consolidation, are taking a more measured pace," Freed added.
This shift in strategy reflects a change in producer behavior. Executives believe that Permian drillers are unlikely to return to the rapid growth phase that fueled pipeline construction in the past decade.
"A range of roughly $60 to $90 (per barrel) doesn't change their plans too much," said Chiang, suggesting that producers prioritize stable growth over maximizing output even with potential price increases.
Government estimates project a modest increase in Permian production of around 300,000 bpd in the coming years, which aligns with industry expectations.
"Consolidation has led most Permian producers to adopt a more measured approach," concluded EPIC's Freed.