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Texas Oil & Condensate Overview

By May 12, 2021April 6th, 2023No Comments

Oakville, Ontario – May 12, 2021, Oil and Gas Energy Production in Texas is home to several O&G shale plays that produce oil condensate including some of the most significant nationwide. Each of the state’s shale plays within a larger petroleum basin area has varying regional characteristics of the depth of the formation and the type of oil or gas products produced. In Texas, the major basins and their associated shale plays include:

  • Anadarko Basin—Granite Wash and the Cleveland Formation.
  • East Texas Basin—Bossier, Cotton Valley, and Haynesville-Bossier.
  • Fort Worth Basin—Barnett.
  • Western Gulf Coast Basin—Eagle Ford and Pearsall.
  • Permian Basin—Avalon, Bone Spring, Cline, Spraberry, Yates, Yeso, and Wolfcamp.
  • Palo Duro Basin—Bend.

According to the U.S. Energy Information Administration (EIA) study, the six basins in Texas represented 90 percent of the growth in O&G production in the United States.  In 2019, production of crude oil and lease condensate increased in the United States by 506 MMBbl (12.7%) from 2018’s production level. Crude oil imports decreased 353 MMBbl.  United States had 47,107 MMBbl of proved reserves of crude oil and lease condensate as of December 31, 2019

A sedimentary basin lying underneath the western part of Texas and the south-eastern part of New Mexico, the Permian Basin Shale covers roughly 75,000 square miles, almost half the size of California.

Experts say that it’s cheaper to drill and complete oil wells in the Permian Basin than most other major fields. Moreover, there are certain parts of the shale play whose well-returns are the best in the U.S.

Over the past year, production from the Permian in West Texas and New Mexico has changed, with more super-light oil being extracted, as producers focus drilling in the western part of the basin.  West Texas Intermediate at Midland (WTI Midland) – the barrel most associated with the Permian – and West Texas Light (WTL), produced in the western Delaware sub-basin of the Permian.

WTL is so light that it is nearly considered condensate, a type of oil that generally requires blending with very heavy crude for U.S. refiners to process it.  West Texas Intermediate at Midland (WTI Midland) – the barrel most associated with the Permian – and West Texas Light (WTL), produced in the western Delaware sub-basin of the Permian. WTL is so light that it is nearly oil considered oil condensate, a type of oil that generally requires blending with very heavy crude for U.S. refiners to process it.  The increased production growth of production of oil condensate in remote areas has created a great opportunity for transportation companies in Texas.

What is Oil Condensate?

Condensate is an extremely crucial component of what’s coming out of wells being drilled all across America, and especially in Texas. Condensate is an oil, but an extremely light one. Condensate is, as mentioned, a by-product of hydrocarbon drilling and it may be in either liquid or gas form, depending on the pressure and temperature at the time it’s released. It is nearly transparent and almost odorless.

Condensate is a mixture of light liquid hydrocarbons, similar to a very light (high API) crude oil. It is typically separated out of a natural gas stream at the point of production (field separation) when the temperature and pressure of the gas is dropped to atmospheric conditions.

Once separated from natural gas, condensate is generally treated like a crude oil. It can be blended with other heavier crude streams or sent to market directly by pipeline or tanker. Condensate can be processed in a refinery if blended with more conventional crude. Alternatively, it can be sent directly to a condensate splitter for separation into its components.

Condensate is typically valued lower than crude oil because of its high light ends content, which yields a lot of lower value LPGs and light naphtha and makes it difficult to process in high volumes in a refinery. However, there are some condensates containing up to 40% of jet fuel and diesel that are priced higher than crude oil, as they contain very little residue material.

The primary use for condensate oil is to make fuels, like gasoline. In fact, in some circles it is known as natural gasoline. That is really only the beginning of its usefulness, however. It’s a key element for making certain types of plastic and is an effective dilutant used to stabilize heavier crude oil and get it to the correct weight before it gets sent to the oil refinery.

Texas Railroad Commission, which oversees the Eagle Ford and Permian basins that account for most condensate output, publishes monthly production data, but only counts condensate that comes from natural gas wells. Most states, including North Dakota, do not report it at all.

Processing Condensate

With the development of new horizontal drilling technologies that are allowing producers to access tight oil formations, lighter crude oils and condensates, volumes are being produced in greater quantities. These lighter products pose significant environmental and logistics challenges because of their high vapor pressures.

In some cases, it is necessary to remove the lighter entrained NGL to bring these lighter crude oils and condensates to market.  Crude oil or condensate is transported from oil and gas sites to a refinery or other refining operations by tankers, barges, rail tank cars, tank trucks, and pipelines.

Oil condensate is processed at facilities like Cogent 200,000 Mcf/d processing plant at the Big Lake Processing Complex in Reagan County. The refrigerated, cryogenic plant serves growing production from the Wolfcamp formation. The high-efficiency UOP Russell plant is capable of high recovery rates for natural gas liquids including ethane, propane and oil condensate.

Lucid Roadrunner Natural Gas Processing is built to process oil condensate.  The plant has the capacity to process 200 million cubic feet per day (MMcf/d) of rich gas and will serve producers developing the prolific Wolfcamp, Bone Springs and Avalon formations of the northern Delaware Basin. The location of the Roadrunner Natural Gas Processing Complex is strategic to the company’s existing infrastructure and customer base in the northern Delaware Basin.

Transportation of Condensate

Oil & Gas Operators business depends on oil and gas pipeline and transportation facilities, some of which are owned by others.  In addition to the existence of adequate markets, oil and natural gas production depends in large part on the proximity and capacity of pipeline systems, as well as storage, transportation, processing and fractionation facilities, most of which are owned by third parties. The lack of availability or the lack of capacity on these systems and facilities could result in the curtailment of production or the delay or discontinuance of drilling plans. This is more likely in remote areas without established infrastructure, such as western Delaware sub-basin.

Pipeline is by far the lowest-cost transportation method for oil, gas, refined products, chemicals and so on. However, pipeline construction can’t keep up with production due to the long lead times, and in any case, pipelines are not a practical solution in many areas, because the life of individual wells may not justify the investment or support the long-term production volume commitments. Given the current gluts of oil and natural gas in the play locations, the ability to supply the resource-intensive operations and get the produced commodities to market quickly is driving these innovative logistics solutions and infrastructure development.

Transportation of petroleum products by motor vehicle or railroad tank car is regulated by government agencies throughout most of the world. Agencies such as the US DOT and the Canadian Transport Commission (CTC) have established regulations governing the design, construction, safety devices, testing, preventive maintenance, inspection and operation of tank trucks and tank cars.

Petroleum products and crude oil tank trucks are typically constructed of carbon steel, aluminium or a plasticized fibreglass material. The capacity of tank trucks is governed by regulatory agencies, and usually is dependent upon highway and bridge capacity limitations and the allowable weight per axle or total amount of product allowed.

With roughly 1.22 billion tons of gasoline, Avgas, diesel fuel, Jet A, and other chemicals being hauled each year in tanker trucks that can each hold 10,000 gallons of product, tanker design is vital when preventing accidents.

Roughly one-quarter of all freight hauled in the United States is transported in tanker trucks, and of that, nearly half is petroleum products like gasoline, diesel, and aviation fuel.

Permian Top Producers

Over the past year, production from the Permian in West Texas and New Mexico has changed, with more super-light oil being extracted, as producers focus drilling in the western part of the basin.  West Texas Intermediate at Midland (WTI Midland) – the barrel most associated with the Permian – and West Texas Light (WTL), produced in the western Delaware sub-basin of the Permian. WTL is so light that it is nearly considered condensate, a type of oil that generally requires blending with very heavy crude for U.S. refiners to process it.  West Texas Intermediate at Midland (WTI Midland) – the barrel most associated with the Permian – and West Texas Light (WTL), produced in the western Delaware sub-basin of the Permian. WTL is so light that it is nearly considered condensate, a type of oil that generally requires blending with very heavy crude for U.S. refiners to process it.

  • EOG Resources – Crude Oil and Condensate Volumes 482 Mbbld.  EOG’s total estimated net proved reserves were 2,527 million barrels of oil equivalent (MMBoe) comprised of 52 percent crude oil and condensate, 20 percent natural gas liquids and 28 percent natural gas. Approximately 97 percent of these reserves were located in the United States.  http://www.eogresources.com/

 

  • BPX Energy business comprises BP’s onshore oil and gas operations in the ‘Lower 48’ states of the US, including assets acquired from BHP on 1 November 2018. The business has significant activities producing natural gas, NGLs and  574,000 barrels of Condensate & Oil Volumes across six states, including production from unconventional gas, coalbed methane (CBM) and shale gas assets. http://www.bp.com/

 

  • Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. Diamondback’s activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork, Bone Spring and Cline formations.  Diamondback Energy Condensate & Oil Volumes 403,244 Mbbl. http://www.diamondbackenergy.com/

 

  • Occidental’s U.S. business is focused in the Permian Basin of West Texas and southeast New Mexico, one of the largest and most active oil basins in the United States, accounting for approximately 30 percent of the total U.S. oil production. Occidental is the No. 1 producer in the Permian Basin, with operations focused on the Delaware and Midland basins, as well as the Central Basin Platform.  Oxy Condensate & Oil Volumes 662,000 Mbbl  http://www.oxy.com/

 

  • Chevron is one of the largest producers of oil and natural gas in the Permian. Our holdings total approximately 2.2 million net acres. Approximately 80 percent have either low or no royalty payments. That gives us a strong competitive advantage. In 2019, production in the Permian increased 44 percent over 2018. Forecasts call for continued double-digit growth. From 2015 to 2018, development and production costs decreased by approximately 40 percent, and well performance continues to improve.  Production in the Permian Basin in Texas and New Mexico increased 29 percent over the prior year to 574,000 barrels of Condensate & Oil Volumes. http://www.chevron.com/

 

  • Cimarex operations are focused in the Delaware Basin where the company has a strong land position with multiple horizontal drilling opportunities in the Wolfcamp Shale, Bone Spring Sands and Avalon Shale.  Condensate & Oil production averaged 89.8 thousand barrels (MBbls) per day, up 13 percent from the same period a year ago and down two percent sequentially.  Total company production volumes for the quarter averaged 276.6 thousand barrels of oil equivalent (MBOE) per day. http://www.cimarex.com/

 

  • Devon 2020 daily Condensate & Oil production was approximately 300,000 barrels of oil, more than 125,000 barrels of natural gas liquids and about 920 million cubic feet of natural gas.  Devon to amass “a dominant position in the Permian Delaware “of 400,000 net acres of stacked pay in the economic core of the basin that accounts for about 60% of our pro forma production. The operating scale of our consolidated Delaware footprint provides a multi-decade inventory of high-return opportunities at our current activity level.” Production 59,000 barrels of Condensate & Oil Volumes http://www.devonenergy.com/

Conclusion

The growth of oil condensate in the western Delaware sub-basin of the Permian and the remote nature of the area is a great opportunity for trucking companies to increase revenue.  Companies like Devon Energy amass dominant position in the Permian Delaware and it will take years to build infrastructure creating opportunity for the tucking industry.

It’s what we know. Just Ask!

Source: Patrick Hinds