Release of Permian Projects Dashboard and Methodology
Late last week, ExxonMobil, Plains All American Pipeline, L.P. (Plains), and Lotus Midstream, LLC announced that they had formed a joint venture, Wink to Webster Pipeline LLC, to pursue the development of an intrastate crude oil pipeline that will have origin points at Wink and Midland to multiple locations near Houston. In addition, they announced that they had ordered nearly 650 miles of domestically-sourced 36-inch diameter line pipe for use in the project.
To assist our customers in tracking all Permian projects being developed to provide takeaway capacity, LawIQ is excited to release the first version of our new monthly Permian Progress Dashboard that will provide snapshot status of all projects, displaying project status by the product type - natural gas, crude or natural gas liquids. You can access links to the Dashboard at the end of this Insights.
The Permian Dashboard is being released exclusively to our customers, and your feedback can help shape the content to maximize its value for you. As we highlighted in Out of the Gates in 2019 - Project Cost Data and a Permian Dashboard from LawIQ, we are committed to continuously enhancing all aspects of our offering (analytics platform, twice-weekly Insights, and advisory services).
As we noted in Permian Pipeline Project Update - Movers, Shakers and Others, monitoring the development of pipeline projects in Texas requires a different approach, and today we provide insight into the approach we have developed.
LawIQ’s Commitment Score
Because intrastate projects in Texas lack the level of historical data available for FERC interstate projects, our method for monitoring Permian projects cannot mirror our FERC projects methodology. Instead, we have developed and are monitoring a list of 16 different activities we believe are the best indicators of a developer’s commitment to completing a project. The table below lists all 16 elements and the maximum value that is ascribed to each one. A score of 100 would be achieved once the project goes into service.
The point value assigned to the various activities represents the value of the activity’s completion as a leading indicator of a developer’s overall commitment to the project. For that reason, the activities in Phase 3 carry a greater weight, because these actions, along with the start of construction, are key events in a project’s path to completion. In particular, the acquisition of the right of way and the completion of condemnation actions are essential to a project beginning construction. In an environment like Texas, where construction is not contingent on regulatory approvals, the acquisition of the right of way may be the best indicator that a project is moving forward.
Judging Right of Way Acquisition
Three recent projects that have either gone into service or are anticipated to be in service by June 30 of this year validate the value of using acquisition of the right of way as a leading indicator of both project commitment and project progress.
Comanche Pipeline was placed into service in January of 2017. Both Grand Prix and Shin Oak are scheduled to be placed into service by June of this year. In the chart below, each project’s monthly easement acquisition progress is depicted as the project approached its actual or projected in-service date. To normalize the data, we measure each project based on the easements per pipeline mile as the projects progress.
Easement Acquisition Per Pipeline Mile by Month
As seen in the chart, the project sponsors began their acquisition between 17 and 22 months prior to the anticipated or actual in-service date, and had generally completed the acquisition at least eight months to a year prior to the projected in-service date.
Each of these projects needed to acquire approximately two easements per mile of right of way. As we monitor the other projects, we intend to follow the easement acquisition process and the condemnation process and weight these processes heavily for two primary reasons. First, unlike many of the regulatory approvals, obtaining the right of way is a precondition to beginning construction. Second, unlike many of the other activities, these activities require expenditure of substantial resources and commitments to third parties, including the courts.
As part of our Permian Progress Dashboard, for each project that is less than 18 months from its proposed in-service date, we will provide a comparison of its easement acquisition progress to the average acquisition progress, as reflected by the purple line in the chart above.
Set forth below is how Gray Oak, Cactus II and Gulf Coast Express stack up against the trendline from these prior projects.
Customers can access the first report for each of the product types by clicking on the links below. If you have any trouble linking to the Dashboards please call or email us at 202-505-5296, info@lawiq.com.
Insights Coming Soon
- Greenhouse gas analysis at DC Circuit and FERC
- EIA burn of gas compared to capacity holders