P2K Pipeline Map

Permian to Katy, “P2K,” Pipeline. Photo Courtesy of Sempra LNG & Midstream, Boardwalk Pipeline Partners.

According to industry experts, the Permian Basin located in West Texas will soon produce enough crude to surpass all OPEC nations except Saudi Arabia. Despite limitations in labor and pipeline transport capacity, it is estimated that production will nearly double from the current 3.3 million barrels per day, to 5.4 million barrels per day by 2023. This trend of growth in the Permian mirrors the increase in oil production experienced by the nation as a whole. Indeed, total United States production has recently surpassed the Saudis, making America the world’s second largest oil producer, with the Russians retaining the top spot.

In addition to oil, the Permian Basin is also an abundant source of natural gas, a fuel type important for electrical generation. Texas’ consumption of natural gas is seasonal, and local demand for it fluctuates correspondingly. However, the manufacturing boom in Mexico has caused the construction of many new factories, most of which rely on natural gas for power generation. The Permian’s proximity to the south of Texas, and the ease of delivery this facilitates, makes it optimally placed to serve the Mexican market.

This massive increase in production, along with optimistic production projections, has inspired a whole slew of new pipeline projects to transport crude oil and natural gas from the Permian. However, the enthusiasm for new pipeline construction may not merely be due to the generally accepted future growth estimates. Some experts have suggested that the current “takeaway” capacity of existing pipelines, the volume of product that can be piped away from the Permian daily, may have already been surpassed by raw production, or is nearing that point. As previously mentioned, the Permian’s present day, total production capacity, is thought to be around 3.3 million barrels per day. According to one expert however, the current daily capacity of takeaway pipe serving the Permian may be less than 3 million barrels per day. This means that the Permian’s full capacity may already be underutilized.

Liquid products produced out of the Permian often head to processing facilities to be converted into a variety of formulas and distributed to consumers. One such destination is the so-called “Gulf Coast Market,” an expanding collection of processing, storage, and shipping facilities that includes the Houston area. This region is a highly desirable pipeline termination point because it provides access, not only to the domestic market, but also to international markets, such as Mexico. Upcoming Texas Condemnation projects such as the Permian-Katy, or “P2K” project being developed by Boardwalk Pipeline Houston and Sempra LNG, and the recently announced Permian to Beaumont line being planned by ExxonMobil and Plains All American Pipeline L.P., are examples of the kinds of projects expected in the next few years. Landowners in the path of these pipelines should keep an eye out for construction announcements that could affect them, because many of these pipeline companies may use eminent domain to take the pipeline easements.

Written by Christopher Chan and Justin Hodge.