Vaquero Midstream LLC Vice President of Business Development Kirk Blackim characterizes the Permian Basin as the "gift that just keeps on giving." Specifically the Delaware Basin, he added, is "extremely dynamic."
Kirk Blackim, VP of Business Development for Vaquero Midstream LLC.
"We're going to see a lot of infrastructure built in the Permian Basin and the markets over the next two to three years," he said.
Blackim shared with delegates to the Permian Midstream Takeaway Capacity and Infrastructure Congress held recently in Houston that Vaquero is "very strategically located in the Delaware Basin portion of the greater Permian Basin."
"Unlike a lot of the competitors that we have in the basin, we took a little bit of a contrarian approach," Blackim said, discussing updates on new pipelines and infrastructure projects coming on line in 2019.
"Rather than building our processing facilities up in the basin and then building residue and natural gas liquids (NGL) connections to get to the market hubs, we actually built our processing facilities within about 5 miles of Waha proper (a pipeline hub in Texas' north Pecos County), and then built a higher-pressure, rich gas-gathering system up into the basin," Blackim said.
The main trunk line in this connecting pipeline system, he explained, measures 30 inches for the first 25 miles.
"It was constructed that way to get through the really congested area in Waha where, in some cases, we'd have over a hundred lines crossing within a mile-long segment of property," he said.
Once outside that area, the pipe was reduced to 24 inches to build into the basin. "The laterals coming off of it are mostly 12 and 16 inches," Blackim said. "So it's all fairly large-diameter, high-pressure lines."
Blackim said the shale boom is the reason why companies are building with bigger pipes.
"That's the difference in the way we develop things today," he said. "We used to drill wells that might produce a million cubic feet. Now we have a single well producing six to 10 million a day, and it's not uncommon to have eight or 10 of those come on at the same time. It means we're building bigger diameter and having to operate at higher pressures to be cost effective in making it work."
Vaquero currently has 4 million a day in processing capacity, on line and operating, Blackim said, and is expanding an additional 200 million cubic feet in 2019.
"Power is a big issue in this area," Blackim said, noting Vaquero further distinguishes itself "by being an independent party and not being fully integrated."
"We don't have oil or NGL lines or re-fractionators," he said. "We focus on gathering and processing within the Delaware Basin and delivering to markets at Waha."
Blackim categorized the company's approach as being "agnostic" in terms of where its producers' product goes.
"As a result, we actually have six residue connections for our natural gas, and we're probably going to be adding one or potentially two more within the next 12-24 months," he said.
Future expectations
Blackim predicts the industry will see material improvement in gas take-away in 2019 "and even more in 2020."
Overall, "meaningful natural gas takeaway" is poised to come in late 2020, 2021 and/or 2022, he said, "if the market supports it."
"We know we're going to get to it," he added. "The question is, to what degree? If the market's there to support it, there's no question in my mind that those pipes will get built."
The bottom line, Blackim observed, is that 2019 is going to be "a tough year" not only for residue take-away but also for NGL transportation and fractionation.
"We'll figure out a way to get through it, and hopefully 2020 will be much better," he concluded.
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