Shell to build Permian gas gathering lines

OREANDA-NEWS. September 29, 2016. A subsidiary of Royal Dutch Shell will partner with Crestwood Equity Partners to build a 230-mile (370km) natural gas gathering system on Shell's acreage in the Delaware basin in Texas' Permian basin.

The \\$180mn system will be financed by First Reserve, Crestwood's indirect general partner, and will be owned by a Crestwood-First Reserve joint venture. The Permian basin of west Texas and southeastern New Mexico ranks as the second largest US gas-producing area by volume.

Shell acquired 618,000 net acres in west Texas from Chesapeake Energy in 2012 for \\$1.9bn with plans to increase production.

The gathering system will serve about 100,000 acres of Shell's Texas gas production position in an area that spans Loving, Reeves and Ward counties, Crestwood said. The initial system is designed for gas production of about 250mn cf/d (7mn m3/d). It includes 194 miles of low-pressure gathering lines, 36 miles of high-pressure trunklines and compression facilities that can be expanded with production over time.

The Crestwood gathering system is expected to begin service in July 2017.

Crestwood will provide gathering, dehydration, compression and liquids handling services on a fixed fee basis. Shell also has an option to purchase up to a 50pc equity interest in the system before 1 September, 2017.

The rig count in the Permian basin has risen in 13 of the last 14 weeks. Active rigs climbed to 202 last week, up by 51pc from the 2016 low in mid-May, according to oil field service provider Baker Hughes.