New Permian Basin natural gas pipelines will be built by Summit Midstream Partners

The Woodlands based Summit Midstream Partners, LP announced last week that they have executed an agreement with Exxon Mobil’s shale division, XTO Energy Inc. The agreement is for Summit Midstream to build, own, and operate a natural gas gathering and processing system.

Summit will build the system to service the northern Delaware Basin – the western part of the Permian basin – located in Eddy and Lea counties in New Mexico. Both counties border Texas, almost directly west of Midland.

Summit predicts the initial phase of the project will be up and running by next June, and the total cost of the system will be roughly $110 million.

“Today’s announcement represents a significant step for Summit. This greenfield development project establishes Summit as a key midstream service provider in the Delaware Basin, one of the most active, economic and exciting plays in North America,” said Steve Newby, president and chief executive officer of Summit Midstream, in a company press release.

The company will start by building a gathering and processing system with both high and low pressure gathering and discharge pipelines and two compressor stations. Summit Midstream will also initially build a cryogenic processing plant that has a 60 million cubic feet per day processing capacity but also has the capability to be expanded into a 600 million cubic feet per day plant in the future.

Steve Newby added, “This initial system is expected to provide SMLP with a platform for significant organic expansion across crude oil, natural gas and produced water gathering and/or processing services for years to come.  We look forward to executing additional commercial agreements with other producers in the area.”

Summit Midstream Partners, which started in 2009, specializes in owning and operating midstream infrastructure assets primarily near shale formations. Currently with operations in the Appalachian, Williston, Fort Worth, Piceance, and Denver-Julesburg Basins, Summit Midstream will now add the busy Permian Basin to their resume.

The partner in the deal, XTO Energy, was originally Cross Timbers Oil Company but changed its name back in 2001. The company is headquartered in Fort Worth, TX and focuses primarily on natural gas production. XTO Energy merged with Exxon Mobil in 2010 with a deal that was valued at $41 billion. XTO Energy is now the shale drilling division of the Exxon Mobil and is a leading gas producer in the United States and Western Canada.

XTO Energy announced last month that the company plans to move 1,600 workers from its Fort Worth headquarters to Exxon Mobil’s 385-acre campus located north of Spring, TX. The move will begin next year and continue into the year 2020.

Both companies are boons to the Houston and Texas economies. This latest deal will process and move more liquefied natural gas in the Permian Basin, and some of the LNG may eventually make its way to the Port of Houston for export, again helping the Houston economy.

Article written by HEI contributor Raymond Arrasmith.

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