Andeavor moves forward with Permian pipeline

The 130 mile pipeline system will begin in Lea County, New Mexico, connect to a terminal in Loving County, Texas and then connect to a pipeline feeding Andeavor's El Paso Refinery.

The first phase of the Conan Crude Oil Gathering Pipeline will be able to move 250 000 bpd of crude oil. Future phases of the system could expand capacity up to 500 000 bps.

Andeavor officials reported that the system is already under construction and is expected to begin commercial operations in mid 2018. The estimated capital investment for the first phase of the gathering system is estimated at US$225 million, of which US$75 million is expected to be spent this year.

The Conan Crude Oil Gathering Pipeline was originally announced by El Paso based Western Refining Inc. in May. The company completed a merger with San Antonio based refining company Tesoro Corp. (NYSE: TSO) in June and the combined company rebranded as Andeavor earlier this month.

Operating with more than 4.9 million bbls or storage capacity, Andeavor's El Paso refinery receives crude oil from the Wink Pipeline. The 450 mile Wink Pipeline is owned by Kinder Morgan Inc. and carries crude oil from the Permian Basin to El Paso. The Conan Crude Oil Gathering Pipeline is expected to connect to the Wink Pipeline and supply the El Paso Refinery.

The pipeline will be built in the Delaware Basin, the western portion of the prolific Permian Basin oil field. Oil and gas companies have invested billions of dollars over the last two years into the Permian despite lower oil prices, which have been hovering in the high US$40s.

Andeavor expects to begin commercial service in mid 2018.

Late last year, the US Geological Survey discovered the US’ largest continuous oil deposit in the Permian region. By some estimates, the Permian has yielded over 30 billion bbls of oil since 1920.