Permian's Double E Pipeline enters service as West Texas gas output surges

The startup of the Double E Pipeline this week promises to significantly expand downstream market access for Permian Basin producers, possibly fueling new production growth in New Mexico and West Texas.

Extending some 135 miles from the Lane Processing plant to the Waha Hub in West Texas, the newbuild pipeline brings an incremental 1.35 Bcf/d in flow capacity to the core of the Delaware Basin.

Double E will receive gas from at least seven processing facilities, including six in New Mexico and one in Texas, with its strategic location placing it within proximity of some 20 to 25 other processing plants.

For capacity holders, the pipeline offers expanded access to West Texas' benchmark Waha Hub with interconnectivity to key downstream pipelines, including Kinder Morgan's Gulf Coast Express and Permian Highway Pipelines to East Texas as well as the Trans Pecos Pipeline to the Texas-Mexico border.

The project, a 70-30 joint venture among Summit Midstream Partners and ExxonMobil subsidiary XTO Energy, already has a substantial majority of its throughput capacity underpinned by 10-year take-or-pay volume commitments — 750 MMcf/d of which is currently held by JV partner XTO Energy.

Drilling, production

The startup of the Double E Pipeline this month comes just as oil and gas prices in West Texas are surging, fueling renewed interest in exploration, drilling, and production in the Permian.

In the past 12 weeks, benchmark WTI oil prices have climbed to over $80/b, up from just $68 to $69/b in late August. Over the same period, gas prices at Waha have jumped to an average of $4.70/MMBtu this month — up from late-summer levels in the mid- to upper $3s/MMBtu, S&P Global Platts data shows.

After flattening out during the peak summer months, rig counts in Texas and New Mexico are again on the rise, reaching a 19-month high at 272 as of the week ended Nov. 10. Compared with year-ago levels, the Permian Basin rig count rose more than 65%, Enverus data shows.

Crude and natural gas volumes are already on the rise.

On recent third-quarter earnings calls, midstream companies, including Enterprise Products Partners, Plains All American, MPLX, Magellan Midstream, and NuStar Energy, reported rising crude and liquids volumes in the Permian Basin with a bullish outlook in Q4 and beyond.

On its own quarterly earnings call, natural gas midstream giant Kinder Morgan also reported an uptick in transport volumes out of West Texas driven in part by high utilization on its Permian Highway Pipeline.

In November, Permian gas production has averaged just over 13.7 Bcf/d — up 400 MMcf/d from last month and about 700 MMcf/d higher compared with November 2020. According to the most recent forecast from S&P Global Platts Analytics, total gas production from West Texas could surpass 14 Bcf/d by Q1 2022.