Reliance Industries Seeks Buyer for Eagle Ford JV Interest

Pioneer Natural Resources' Production Chart
Pioneer Natural Resources' Production Chart

India's Reliance Industries is looking for a buyer for its interest in a three-way joint Eagle Ford joint venture, according to Bloomberg, which cited "people familiar with the matter." The other players in the JV are Irving, Texas-based Pioneer Natural Resources Co. and a division of Mexico's Alfa SAB de CV - Newpek, LLC.

Mumbai-based Reliance entered the Eagle Ford in 2010 for $1.15-billion. The deal included a 45% interest in Pioneer's Eagle Ford acreage. Currently, Pioneer has ~230,000 gross acres across the play, and a 46% interest in the JV. Newpek, LLC has a 9% interest.

Read more:Reliance - Pioneer - Newpek Joint Venture

The assets included in the JV are in the heart of the Eagle Ford's condensate window. In June, Pioneer garnered headlines when it received permission from the U.S. Commerce Department (U.S. DoC) to export minimally processed condensate to foreign buyers. With the green light from the U.S. DoC, the assets have become even more attractive and more valuable. Total assets are valued at ~$4 billion, according to Bloomberg's sources.

Read more: Pioneer CEO Confirms Condensate Exports to Europe

Earlier this year, Pioneer tabled a deal to sell its interest in the Eagle Ford JV, but will likely consider another offer if the price is right. Newpek, LLC is also reportedly looking for a buyer, according to Bloomberg.

In the second quarter, Pioneer posted record net production in the Eagle Ford of 47 mboe/d. Pioneer, which is the operator for the assets, expects to place 125 wells online in 2014.

Double Eagle Pipeline Moving Eagle Ford Condensate to Corpus Christi

Double Eagle Pipeline - Eagle Ford Condensate System
Double Eagle Pipeline - Eagle Ford Condensate System

Double Eagle Pipeline, LLC, a joint venture between Kinder Morgan and Magellan Midstream, has started moving condensate to Corpus Christi.

The pipeline is part of a project that was started by Copano and Magellan, but is operated by Kinder Morgan who purchased Copano earlier in 2013.

Condensate is moving from a truck unloading facility in Three Rivers to Magellan's Corpus Christi Terminal. From the Corpus Terminal, condensate can reach local petrochemical plants, as well as water borne export options.

This leg is just a portion of what is a $150 million project that includes 140 miles of 12-inch pipelines. The system connects with other Kinder Morgan pipelines in the area as well.

The next leg of the pipeline from Gardendale (near Cotulla) to Three Rivers is expected to be online in the third quarter of 2013. Initial capacity is planned at 100,000 b/d, but the system can be expanded to handle 150,000 b/d.

The pipeline was supported by long-term commitments from Talisman and Statoil.

Kinder Morgan Expanding Its Eagle Ford Crude & Condensate Pipeline Into Karnes

Kinder Morgan Crude & Condensate Expansion into Karnes County
Kinder Morgan Crude & Condensate Expansion into Karnes County

Kinder Morgan is expanding its 300,000 b/d Eagle Ford crude & condensate pipeline (KMCC) 31 miles into Karnes County.

The expansion will extend the 178-mile pipeline from the DeWitt Station in DeWitt County, TX, to a Centeral Delivery Facility operated by ConocoPhillips near Helena in Karnes County.

Kinder Morgan will also build receipt tanks and a truck unloading facility. Construction will begin in July.

KMP Products Pipelines President Ron McClain stated “This expansion further assists our commitment to deliver up to 300,000 barrels per day of crude and condensate from the Eagle Ford Shale.”

The development is supported by long-term commitments from ConocoPhillips.

Reference the article Kinder Morgan Plans Second Condensate Facility at Galena Park for more details on the company's condensate processing facilities.

Kinder Morgan Plans Second Condensate Facility at Galena Park

Kinder Morgan Galena Park Terminal Photo
Kinder Morgan Galena Park Terminal Photo

Kinder Morgan has reached an expanded agreement with BP that will support the development of an additional 50,000 b/d condensate processing facility at Galena Park.

Kinder Morgan will invest an additional $170 million to add a second processing unit and add 700,000 barrels of storage at the site along the Houston Ship Channel. Total condensate processing capacity at the site will increase to 100,000 b/d.

“We are pleased to secure long-term contracts for all of the throughput capacity at our facility, and provide BP with the processing needed for Eagle Ford Shale production and other condensates,” said KMP Products Pipelines President Ron McClain. “Combined with our recently completed Kinder Morgan Crude Condensate (KMCC) pipeline, we are able to provide unparalleled connectivity to crude oil and clean products markets on the Texas Gulf Coast.”

As production continues to grow, this might not be the last condensate processing facility we see announced.

Condensate processing facilities split the liquid into its various components - light and heavy naptha, kerosene, diesel, and gas oil. The individual components are more easily marketed.

As of the first quarter of 2013, the Eagle Ford is estimated to be producing more than 800,000 b/d of liquids, but only a little more than 400,000 b/d is considered oil. The remaining balance is attributable to condensates and NGLs. The amount of condensate production varies by well across the play, but as much as 50% of liquids production is potentially viewed as condensate by midstream companies.

Paul Reed, Chief Executive of BP’s integrated supply and trading business, said, “BP is proud to build upon our strategic partnership with Kinder Morgan through an increased footprint in Galena Park. We believe that by accessing this additional throughput capacity we will be better placed to provide U.S. producers a full suite of services including access to the best homes for their crude and condensates. It will also enable BP to service our customers better and more efficiently manage their feedstock and product needs. BP remains committed to helping unlock additional U.S. domestic energy production.”

This announcement comes in addition to the company's previous commitment to build a $200 million processing facility at Galena Park. BP committed to supply 40,000 b/d of condensate and agreed to a long-term lease of 750,000 barrels of storage at the facility in the summer of 2012. You can read more in the article BP - Kinder Morgan Ink Long-Term Eagle Ford Processing Agreement. The first phase is expected to be in service by the first quarter of 2014.

Read the latest press release at

Eagle Ford Oil Prices Trade at a Premium to WTI - Condensate Weaker

Oil Drum
Oil Drum

Eagle Ford oil prices realize a nice premium to WTI and higher API condensates trade at a discount. One of the great advantages the Eagle Ford has over other shale plays is location, location, location. A short commute to the nation's petrochemical backbone means operators realize better oil prices than most areas of the U.S.

Eagle Ford Shale Oil Price Premium

Eagle Ford oil prices trade at a premium to WTI or a discount to LLS depending on who you talk to. Over the past two months, posted Eagle Ford prices have traded at a ~$6-8 premium to WTI and a ~$6 discount to LLS posted prices. That's after spending part of April and May at >$10 premium to WTI and almost parity with LLS.

Eagle Ford Condensate Prices Trade at a Discount to Crude Oil

In 2011, over 36% of reported liquids production from the Eagle Ford was considered condensate and as much as 50% of production today is estimated to be condensate. That's a significant portion of production, so it's important to understand its pricing. A recent article by RBN Energy provides more details in regards to condensate pricing.

....there are 3 principal markets for condensate: (a) sale as crude oil, (b) sale as diluent for heavy crude blending, and (c) processing in a splitter and sold as component products. Refiners find condensate less attractive as a crude oil blend because it produces less of the valuable middle distillate blends. The diluent market is attractive but requires shipment to Canada. Some of the Eagle Ford condensate is being shipped south to Corpus Christi by pipeline and then by barge up the Gulf Coast to St James LA and on up the Capline pipeline to Canada. Midstream players in the Eagle Ford are also developing condensate processing facilities. At the moment, however, we can see from Plains All American posted prices that refiners are paying less for Eagle Ford condensate than they do for crude and then applying a gravity adjustment factor to reduce the price they pay for condensate even further.

Using Plains All American posted crude oil and condensate prices, the RBN articles compares 60.1 API Eagle Ford condensate to crude with a 40-44.9 API:

The average posted condensate to crude discount this year was close to $17/Bbl.

You can read the full write up on crude and condensate prices at

The discount for condensate from crude is ~$12/bbl now, but it has stretched over $20 at times in the first two quarters of the year. Putting both the crude and condensate price pieces together we have a better picture of what operators are being paid in South Texas. Crude oil is more marketable and can easily displace imports at refineries. Add optimal location and it receives a premium to WTI. Condensate with an API of 60+ has more limited use and is trading at a discount to crude and WTI. Overall, with an assumed 50/50 split of crude and condensate production in South Texas, operators are still realizing prices better than WTI. Consider the major operators who can negotiate crude prices pegged to LLS and South Texas liquids are fetching an even better premium to WTI.

Share your experience or thoughts in the comment section below.

Important Notes:

Condensate has an API gravity of 50+ and falls between natural gas liquids and crude oil on the hydrocarbon spectrum. Condensate is largely produced at the wellhead, but some volumes are captured in gathering systems. 

WTI prices are currently trading at a discount to comparable international benchmarks (Brent). That is the opposite of the historical norm. Cushing, Oklahoma, is lacking adequate infrastructure need to move oil to the Gulf Coast and other demand centers. When that problem is alleviated, we'll likely see a shift in WTI prices, which will change the discussed relationship of WTI and Eagle Ford crude.