More Permian Basin natural gas facilities to be expanded as production closes in on demand

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A natural gas processing company based in Fort Worth, Texas sought to grow its presence in the Permian Basin, purchasing two facilities on either side of the region.

Brazos Midstream announced it acquired the facilities from Diamondback Energy in the eastern Delaware sub-basin near the Texas-New Mexico border and in the Midland Basin further east into Texas.

Subsidiary Brazos Delaware closed on its acquisition the Pecos Gathering System from Diamondback in Reeves County, Texas, per a Nov. 3 news release, while Brazos Midland announced it acquired the Mustang Springs Gas Gathering System in Martin County, Texas.

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Brazos already operated the Pecos system for Diamondback since 2017, but the acquisition augmented the company’s existing system by adding 150 miles of natural gas gathering pipelines and four associated compressor stations.

The system was planned to be expanded, the release read, to continue meeting growing demand for gas producers in the area

The Mustang Springs system was also planned to be expanded, read the release, as producers planned for growth in the basin.

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Brad Iles, Brazos chief executive officer said the move was intended to capitalize on continued and expected future growth in fossil fuel development in the Permian Basin, which spans southeast New Mexico and West Texas.

The purchased infrastructure will augment Brazos’ portfolio of about 800 miles of natural gas and crude oil pipelines, about 460 million cubic feet of gas processing capacity and 75,000 barrels of crude oil storage capacity.

“We are excited to announce both acquisitions and the expansion of our relationship with Diamondback, one of the Permian’s premier oil and gas operators,” Iles said. “The Pecos system is a perfect bolt-on acquisition for our existing Delaware Basin business and will allow Brazos to extend our reach to new producer customers.”

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He said the Midland purchase, which included the formation of Brazos Midland, would better position the company for increases in production throughout the Permian.

“We are also very pleased to form Brazos Midland to complete the acquisition of a high-quality asset supported by Diamondback’s strong existing production and robust development plans, which provides a great platform in the core of the Midland Basin with tremendous potential for third-party growth,” Iles said. “We look forward to continued growth across a broader Permian platform.”

A fossil fuel production grew – led by the Permian Basin – to meet increased demand on the heels of the COVID-19 pandemic, oil prices dipped in recent weeks.

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When the COVID-19 health crisis first hit the U.S. last year, business and travel restrictions were enacted and stymied fuel demands, leading to an historic decline in the price per barrel of oil to less than $0 per barrel for the first time in history.

But as COVID-19 vaccines became increasingly available and restrictions were lifted, demand surged and overtook supply, meaning prices soared in fall 2021 beyond pre-pandemic levels.

As production continued to grow to meet demand, prices fell with the Chicago Mercantile Exchange reporting $67 per barrel on Tuesday compared with a peak of $84 per barrel on Nov. 9.

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Since then, the price per barrel steadily declined as production ramped up and the federal government called on other countries to increase production while also tapping into U.S. reserves to meet demand.

Extraction operations continued to grow in the Permian as a result of the heightened demand, as Baker Hughes reported the basin as a whole added two drilling rigs in the last week for a total of 280 as of Nov. 24, up by 119 rigs from a total of 161 a year ago.

Texas added two rigs itself for a total of 273 on Friday, per Baker Hughes’ latest data, climbing by 126 rigs from a count of 147 on the same date in 2020.

New Mexico held steady at 83 rigs, records show, marking an increase of 25 from a total of 58 last year.

Adrian Hedden can be reached at 575-618-7631, achedden@currentargus.com or @AdrianHedden on Twitter.

This article originally appeared on Carlsbad Current-Argus: More Permian Basin natural gas facilities to be expanded

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