Schexnaydre Law Firm, LLC

New oil surge needs infrastructure

It's long been a worry of the oil industry that there simply are not enough pipelines to handle the demand in much of North America. Canada has proven very slow to build up the capacity necessary to handle the demand for their oil from Alberta, in particular. But pipelines across North Dakota have also been built far behind the curve for the Bakken field.

It may come as a surprise, then, that there is demand for new oil infrastructure in Texas. But it is driven by the increasing demand for oil and the inability of these other fields to bring it to the refineries, primarily in Louisiana, at reasonable cost.

The problem in North America

The International Energy Agency (IEA) published its five year forecast on March 5, 2018. It includes tremendous growth in North America, particularly Canada, as demand for oil increases. That nation, in particular, could see a rise from 4.8 million bpd to 5.6 million by 2023, simply to keep up with demand.

That means that they have to get it to market one way or the other. With a shortage of pipelines in Canada, there is a warning that pressure will be placed on all of North America to make up any difference caused by delays in building key infrastructure. Canadian oil is already trading at a discount to West Texas Intermediate (WTI) because of transportation costs.

The net result? Much more pipeline and other infrastructure development in Texas will be necessary to pick up the slack and fill the rising demand.

Plans are in the works

One such pipeline expansion is being proposed by Energy Transfer Partners. They have an existing 30-inch line from the Permian to Nederland, Texas and are considering an expansion.

With a net 100,000 bpd coming online just last December, the existing infrastructure is only barely keeping up with production. Another 200,000 bpd is eyed to provide capacity necessary to keep up.

This is in part the result of Texas being called on to take up the slack created by the slow rate at which pipelines are being build further north. It's also in addition to a lot of natural gas infrastructure which is being built in and around the entire region.

Signs of great growth

With this much investment in the area, there are many signs that the predicted growth is indeed real and plans are coming into fruition. Despite the talk of growth further north, Texas is likely to see the biggest net increases in oil production in the near future, at least.

 

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Schexnaydre Law Firm, LLC
2895 Highway 190, Suite 212
Mandeville, LA 70471

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