By DAN MURTAUGH
The gusher of crude from the Permian Basin has spurred new
investments from refinery and pipeline companies trying to
take advantage of low prices caused by rising supplies.
Delek US Holdings expects to expand its refinery
in Tyler, Texas, by 25%
in early 2015, and Sunoco Logistics asked shippers if they
wanted to commit to a new pipeline to carry West Texas oil
across the state and into southern Louisiana.
s underscore the continued
influence of the shale boom on the US energy landscape more
than five years after hydraulic fracturing and horizontal
drilling helped reverse a decades-long decline in oil
Theres like a wall of crude oil coming out of the
Permian, said David Hackett, president of Stillwater
Associates, an Irvine, California-based energy consulting
firm. The first project
s look like theyre
all filled up, now the next wave is getting announced.
The Permian Basin in West Texas and New Mexico is the largest
oil field in the US. Its expected to produce 1.63
million bpd of oil in August, up 86% from August 2008. The
rapid increase has caused prices in the Permian hub of
Midland, Texas, to slump to $11.50/bbl below the US benchmark
in Cushing, Oklahoma, from a discount of 35 cents a year
earlier, according to data compiled by Bloomberg.
The growing production has exceeded pipeline
development, which we think will continue to result in
periods of wide Midland/Cushing crude differentials,
Jeff Stevens, chief executive officer for Western Refining
, said April 5 in an
earnings call. Western operates a refinery
in El Paso, Texas.
Delek wants to refine more of that cheap oil at its plant in
Tyler, 100 miles (160 kilometers) east of Dallas. It plans to
increase crude capacity there by 15,000 bpd to 75,000 in the
first quarter of 2015, the company said in its quarterly
earnings statement. The refinery
gets 92% of its crude
from West Texas now, the company said in an investor
The plant will also expand sulfur-removing systems to
increase gasoline production by 18% to 41,000 bpd and
low-sulfur diesel and jet fuel output by 27% to 33,500 bpd.
Total cost of the expansion
will be $70 million.
Sunoco announced an open season for companies to make binding
commitments to ship crude on the Permian Longview and
Louisiana extension pipeline. The line would take 100,000 bpd
from Midland to Longview in northeast Texas and then 80,000
bpd to Anchorage, Louisiana. The project
, which would use some
existing pipelines, would be ready to start operating in the
second half of 2016.