A Better Way to Predict In-Service Dates for Permian Projects
In Permian Buildout - Helping to Solve the Mysteries of Texas , we wrote about the difficulties in tracking the progress of projects located solely within the state of Texas. That is why, earlier this year, we began providing customers with our Permian Edge, a monthly report that tracks all of the major pipeline projects designed to move crude, NGLs and natural gas out of the basin and to viable markets. While the main purpose of the Permian Edge is to handicap which of the many projects vying for the market will actually go forward, we have heard from our customers that you would also like it to follow the projects once they start construction, and gain our insight as to when a project may go into service.
We have tested using satellite imagery to assess project progress, and we know some conduct flyovers of the pipeline right of way to assist in determining project progress. Neither of those tools yield the confidence level we need to make accurate predictions of in-service dates for our customers, so we continued to search for a better alternative, which we’ve found. Today we discuss the data we will be using going forward to inform our judgment, with an explanation of two completed projects as well as a spotlight into one that’s ongoing, Phillips 66’s Gray Oak. We will continue using imagery to monitor construction at above-ground facilities, such as compressor and pump stations, and we welcome any comments or suggestions you might have about how to improve the process even more.
Why Is This Better?
We experimented with the use of satellite imagery and were not satisfied that above-ground visuals were sufficient to allow us to track progress on the pipeline and make projections of in-service dates for two main reasons. First, any image from above the ground is literally a snapshot of the day the image is taken. While one can “assume” progress based on the visible changes, it is often difficult to determine whether the right of way has been fully restored after construction is complete or has simply been cleared in anticipation of the start of construction. This makes it difficult to tell whether an area has been skipped, because of an environmental or landowner issue, or if the work is complete throughout a region. Also, in many of these areas, work is progressing on two different pipelines by two different companies offset by only 50 feet and by short intervals of time, which can create further ambiguity.
Second, covering the pipeline with dirt is not the final step before a project can commence service in the area. Under federal and state safety regulations, the pipeline must be pressure-tested to assure that it has the required integrity needed to operate safely in the future. The gold standard for this pressure test is called a hydrotest, which requires the operator to fill the pipeline with water and maintain a certain test pressure for a period of time to confirm that the pipeline has been constructed properly. Once this hydrotest is completed successfully, the pipeline is generally ready for service.
We have begun acquiring historical and ongoing data on these hydrotests throughout the state of Texas to allow us to follow the progress of construction and to make predictions as to when a pipeline will enter service by comparing current projects to those that have been completed.
Establishing a Baseline of Data
Set forth below is the data we gathered for two pipelines that have already entered service (Energy Transfer’s Comanche Trail and Enterprise Product’s Shin Oak). We then combine the two projects to create a curve that can be used as a benchmark for future projects.
Some key takeaways from this data are the following:
- The first hydro-test was done at least seven months prior to the in-service date, which means the data becomes usable well in advance of the project’s in-service date
- The last test was at least 30 days in advance of the actual in-service date, which will provide market intelligence at least a month before the in-service date
But Wait, There’s More!
The data not only provides information on the progress of the pipeline, but also provides us with an insight into which particular portions of the pipeline are complete. This will enable us to determine, for instance, whether certain segments of a project will be ready to free-flow gas or provide interim service between specific points. A good example of that is Phillips 66’s Gray Oak pipeline which is projected to be in-service by the end of this year. The following chart shows its progress on the approximately 480 miles of 30 inch mainline that it is installing between Crane County and Corpus Christi.
Consistent with the baseline projects we used, Gray Oak began its hydrostatic tests starting about eight months prior to its in-service date, but is running ahead of the average curve, which may mean it can put the pipeline into service before the end of the year.
The data also enables us to look at a more detailed level to determine the segments of the pipeline that have been tested and those that have not. Set forth below is the map as displayed on the Texas Railroad Commission’s website with our descriptions of the testing status for various segments of the proposed pipeline.
The 20-inch pipelines on the East and West ends of the 30-inch mainline have generally not yet been tested and most of the eastern end of the 30-inch line has also not been tested. The pattern of the testing will be key to understanding which segments may be able to go into service earlier than the remainder of the pipeline. For instance, it is possible that the mainline to Corpus Christi will be in-service before the 20-inch lateral running to Sweeny/Freeport.
We will be sending out this month’s Permian Edge early next week. Please let us know if you would like to receive a copy.
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Insights Coming Soon
- Update on Enbridge's Line 3 and Line 5
- Oil Pipeline Route Analysis