MIDLAND - There's no doubt we're producing a lot of oil in the Basin but it's not getting out fast enough. A new pipeline project is expected to change that.
"We have increased our production with all of the drilling and some of these things that are going on now. We have more rigs running in the Permian basin now than they were running in 1981, the big boom," Oil Consultant, Morris Burns, said.
One problem we are having is getting the oil out of the Permian Basin fast enough. Now, Magellan Midstream Partners is going to transport crude oil out to the refineries in Houston with a pipeline.
"Because of the increase in crude oil production in the Permian Basin, which is expected to increase for the next several years, there is a need for an additional pipeline to take away capacity and to be able to move that crude oil from where it's produced to where it's consumed," Bruce Heine with Magellan Midstream Partners, said.
Currently, Magellan Midstream Partners has a pipeline that transports refined product from Houston to El Paso. What they will do now is convert that pipeline to flow from the Basin into Houston. There will be two sites to pump out the oil to the East. One in Crane and one in Midland. The project comes with a price tag of $375 million and is expected to transport up to 225,000 barrels per day to Houston.
"Essentially what we are doing is taking Texas oil, produced out in the Permian Basin, transporting it in a Texas pipeline to Texas refineries to be converted to refined products that are produced in Texas. So it has a number of benefits, not only for the producers in the area but also for the state of Texas," Hiein said.
Local experts say this is a good thing for the Basin.
"This is a good switch because it means we are producing a lot more oil than we can haul by tanker and by the existing pipelines," Burns said.
Magellan Midstream Partners expects the project to be in full operation by early 2013. Producers will have to come up with shipper agreement with Magellan and they will have to pay a tariff to move the product to Houston.