Exxon Deepens Commitment to Get Permian Oil to the Gulf Coast

By Jon C. Ogg Updated Jan 31, 1:15AM EST · Published Jan 30, 1:50PM EST

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Exxon Deepens Commitment to Get Permian Oil to the Gulf Coast — © Thinkstock

Sometimes news releases from private companies have a broader impact than first meets the eye. A company called Lotus Midstream announced on Wednesday that it, Exxon Mobil Corp. (NYSE: XOM | XOM Price Prediction) and Plains All American Pipeline L.P. (NYSE: PAA) have formed a joint venture called the Wink to Webster Pipeline. This news release is not really enough to bump stocks of the larger oil giants, but what matters is that this is yet another focus by Exxon on the Permian Basin that will get more of the local production to the Gulf Coast.

The joint venture has ordered almost 650 miles of domestically sourced pipelines that can transport over a million barrels per day of crude oil and condense capacity. The 36-inch-diameter line pipe will be constructed and is currently targeting the first half of 2021 for the launch date from the Permian Basin in West Texas and will transport the oil to the Texas Gulf Coast. Its origin points will be at the Wink and Midland operation and it will push oil to Webster and Baytown locations near Houston. The project will also have connectivity to Texas City and Beaumont.

Getting oil out of the Permian Basin has been less than easy, but the area has massive oil deposits in the ground. Companies have been aggressively targeting new projects that would make it easier for them to get closer to market prices for the oil they drill. There was one report that Shell was ready to spend $8 billion to double is Permian acreage and newer data showed that Kinder Morgan was also set to invest heavily to ramp up its infrastructure to get Permian oil to the Gulf Coast.

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Plains All American Pipeline will lead project construction and already has initiated pre-construction activities. Also disclosed, as is seen in many infrastructure announcements, that it will generate more than 3,100 construction jobs. The press release stated:

The project will be supported by new operational storage capacity at the origin points to facilitate the segregation of multiple crude qualities prior to shipment. Once online, the project will play a critical role in supporting growing production in one of the world’s most prolific crude oil basins.

Plains has a market value of nearly $17 billion. A press release from earlier in January indicated that it handles more than 5 million barrels per day on average of crude oil and natural gas liquids in its transportation segment. Exxon has a market value of $303 billion.

Crude oil was last seen trading up 2.5% at $54.62 on Wednesday.

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.