Noble Energy has said that that it has supplemented its Delaware Basin takeaway with an additional firm sales agreement to transport oil to Corpus Christi on the Texas Gulf Coast. The independent’s five-year executed sales agreement covers firm gross sales of at least 10,000 bpd of oil beginning this month, increasing to 20,000 bpd in October 2018.
Under the agreement, Noble will use its existing firm transport capacity from the Delaware Basin – part of the prolific Permian Basin – to Corpus Christi. Shortly following the start of full service on the EPIC crude pipeline, the oil is then expected to use Noble’s firm transportation capacity on this new pipeline.
Construction of the 730-mile (1,175-km) EPIC pipeline is anticipated to start in the fourth quarter of 2018, with the crude system slated to be in service in the second half of 2019.
Noble’s agreement comes as both oil and gas takeaway capacity is increasingly in short supply in the booming Permian. The bottlenecks are predicted to continue – for crude at least – until the second half of 2019. The takeaway capacity crunch has resulted in a widening differential between the wellhead price in Midland, Texas and in Cushing, reaching US$10 per barrel.
Noble has previously executed firm sales agreements to the Gulf Coast or Cushing markets for its Delaware Basin crude oil covering gross oil volumes of 10,000 bpd for the second half of 2018 and 5,000 bpd for 2019. In May, Noble announced that it had secured 100,000 bpd of firm transportation capacity on EPIC for 10 years under a strategic agreement.
EPIC will connect the Permian and Eagle Ford regions to Corpus Christi with a capacity of up to 590,000 bpd. The pipeline has received an acreage dedication from Apache as well as from Noble. The latter has secured options to acquire up to a 30% ownership in the pipeline and up to a 15% ownership in the EPIC natural gas liquids (NGL) pipeline.
Houston-based Noble also provided an update of its basis hedge position for the remainder of 2018 and for 2019. For the second half of 2018, Noble has secured a total of 20,000 bpd of Midland-Cushing basis swaps at a price differential of US$2.30 per barrel. For 2019, the company has hedged 27,000 bpd of Midland-Cushing basis at a price differential of US$3.23 per barrel.