Mexican Pipeline Delays Stall Long-Awaited Relief in Permian Basin

oil-and-gas-industry-oillfieldLate last year, reports began to circulate that in-service dates for two new Mexican pipelines would be delayed. These pipelines, which include Enbridge’s Nueces-Brownsville project and multiple projects in Mexico, are intended to help move gas from West Texas to South Texas and beyond. The now confirmed delays have altered forecasts for Mexican supply, and have also led to higher-than-expected Liquefied Natural Gas(LNG) imports and lower-than-forecasted U.S. pipeline exports to Mexico.

The biggest impact of all is on Permian outflows. The delay will not only postpone anticipated production increases but also stall long-awaited debottlenecking relief to the basin. The intent for these new lines is to provide relief to the U.S. Permian Basin in both West Texas and New Mexico, where production has grown so fast that it exceeds the current pipeline takeaway capacity.

Just last year, the U.S. oil and gas industry shattered the oil production record by exceeding 11 million Barrels of Oil per Day (BOPD) for the very first time. The U.S. broke yet another record in November by becoming a net oil exporter for the first time in 75 years – and growth will not be slowing any time soon. According to a report by Wood Mackenzie analysts, Permian oil production is ramping up at “breakneck speed,” with growth estimated at more than 400,000 BOPD year-over-year on average through 2022.

Much-Needed Relief from Mexican Pipelines Stalled

Officially delayed by the project developer, the in-service date for the Samalayuca – Sasabe pipeline project has been pushed until sometime in the second half of 2019. When finally completed, the Samalayuca – Sasabe will be a 472 MMcf/d line that connects Waha to northwestern Mexico. These markets are currently served by the El Paso South Mainline (EPNG SML).

While the northwestern Mexico markets are experiencing an increase in demand, the main purpose of the Samalayuca – Sasabe project is to relieve westbound constraints by shifting supply through the Arizona border. By liberating capacity on the EPNG SML, the Permian Basin will finally be able to increase its total exports and breathe a sigh of relief.

Likewise, the Wahalajara system, a collection of three pipelines, has also been delayed by the project developer until May 2019. Collectively, these pipelines will connect Waha to Central Mexican markets around Villa de Reyes and Guadalajara. Though some pushback is expected on South Texas exports into Central Mexican markets, the Wahalajara pipelines projects are expected to ultimately contribute to a net increase in total U.S. pipeline exports to Mexico and the Permian Basin.

Major West Texas Pipeline Project also Delayed

Around the same time as the Mexican pipeline delays, the completion of a large natural gas pipeline from Texas to Mexico was also delayed until April 2019. The pipeline is being built by Canada’s Enbridge, a major petroleum pipeline and storage company. A six-month extension was requested by the company after weather conditions and delays in the completion of the Mexican portion of the project made it impossible to test the pipeline. Once completed, this pipeline will be the largest natural gas pipeline flowing from the U.S. to Mexico.

How are oil and gas companies in the booming Permian Basin handling the news? Oil producers in the region are worried that these pipeline projects might not even hit their 2019 targeted start-up dates. To make matters even more challenging, project developers are having to compete for limited manpower, machinery and transportation resources to develop other, key oil and gas infrastructures. So, despite companies racing to add new pipeline capacity to ease congestion, West Texas producers are accepting the idea that “sustained relief” might not happen until late 2019.

“These projects are also occurring in conjunction with similar gas and natural gas liquids pipelines also under construction which are putting additional strains on construction resources,” says John Coleman, senior analyst for North American crude oil markets with Wood Mackenzie.

He went on to explain, “Couple this with a very tight trucking market in the U.S. and, more importantly, in West Texas and you can see a scenario in which one or multiple pipelines get delayed from various construction constraints.”

Where Oil and Gas Companies Can Find Fast Funding

Does your oil and gas company need a flexible funding solution to help you weather the effects of pipeline delays and constraints? If cash is tight, it can be difficult to find new workers, hire more manpower and purchase machinery and transportation. Limited working capital can also make it extremely difficult to accept new projects and opportunities.

If you need to boost your business’ cash flow, you should consider partnering with an invoice factoring company. Invoice factoring is a financing tool that allows your business to sell unpaid invoices at a discount in exchange for quick capital. Since the factoring company is buying receivables at a discounted rate, you avoid adding a burden of debt. You are simply being given money your business has already earned.

When it comes to oil and gas, no one knows the U.S. oilfield industry like Security Business Capital. Located in the heart of the Permian Basin, we have built an experienced and dedicated team of individuals with years of expertise in providing flexible cash flow solutions that help businesses thrive. Our invoice factoring services will provide a quick source of funding you need to hire more workers, pay bills on time, invest in additional equipment and increase the size of your business.

If you are interested in learning more about how our invoice factoring services work or how they can help your oil and gas company grow, get in touch with us today for a free quote and consultation.