U.S. oil projects slow as producers rein in spending

Last year, West Texas production overwhelmed existing pipelines beyond the region, dropping local prices and helping to launch nine projects that proposed to add 5.4 million barrels per day (bpd) through the first half of 2021. However, now, oil producers have curtailed exploration spending and the number of pipeline and storage terminal projects proposed to move shale to the U.S. Gulf Coast has declined.

According to the U.S. Energy Information Administration, there are eight proposed oil-export terminals for the U.S. Gulf Coast. If all eight were built, they would have capacity to export a combined 12.5 million bpd, more oil per day than the United States produced in the week ending March 15.

On Monday, Magellan Midstream Partners cut its capital spending outlook by USD $450 million over two years, saying the proposed Permian Gulf Coast pipeline was unlikely to proceed. The project would have carried up to 1 million bpd to the Gulf Coast but its proposed mid-2020 start lagged behind other projects and shale producers.

Magellan said despite canceling its Permian to Gulf Coast pipeline, it hopes to develop a smaller pipeline that would carry 350,000 bpd from West Texas to a point outside Corpus Christi in South Texas. Magellan spokesman Bruce Heine said, "The probability of its success is unknown at this time.

The same day that Magellan ended its project, Schlumberger NV's Chief Executive forecast North American onshore spending will decline more than 10 percent this year.

Kinder Morgan also exited an USD $800 million deep water terminal project off Freeport, Texas, selling its stake to project leader Enbridge, which continues to pursue the terminal. Kinder Morgan said the project no longer fit its strategic priorities.