Crude oil marketing firm Republic Gathering & Marketing has signed a long-term deal with Palletized Trucking to move up to 600,000 barrels a month of crude oil from Eagle Ford wells in South Texas to pipelines.
The companies, both based in Houston, aim to bridge the gap between the rapid pace of new drilling and production in the shale play and the build-out of pipeline infrastructure to get the oil to market.
“The majority of the 600,000 barrels we expect to recover from the site by the end of this year are already spoken for and we needed to secure a way of getting this crude to market that we felt would be consistently reliable,” said Daniel Layton, CEO of Layton Corp., which owns Republic.
Hundreds of new wells are being drilled in the Eagle Ford shale this year as the high oil and natural gas liquids levels in much of the play make it attractive to E&P firms in light of high oil prices. While it’s in an area that has had oil and gas production in decades past, the new pace of drilling and production is growing faster than the pipeline capacity to take it away.
A number of new pipelines are being built or expanded in the area by companies including Plains, Kinder Morgan, Enterprise Products Partners and Harvest. But that work can’t keep up with the new exploration, thus the need for tankers.
Even once the pipelines are in place to carry product to refineries and other end users, there will still be some need for Palletized tankers, said Layton.
“In many cases you will still have to get the oil to injection stations,” he said, since the volume of crude and NGLs from many wells over time won’t be enough to justify building out gathering pipelines.
The deal between Republic and Palletized uses existing tanker trucks as well as the expansion of the tanker fleet, with roughly one new truck arriving per week, Layton said. Each truck can carry about 175 barrels. Depending on the distances traveled, the trucks make three to four deliveries per day, working around the clock. The goal is to have the capacity to move up to 600,000 barrels per month of product, Layton said.
Palletized is finishing a new trucking yard to serve the Eagle Ford region, Layton said, while his firm is considering investing in storage or other midstream assets to support growth in the area.
In addition to Republic, Layton has invested in Platinum Energy, an oil field services firm involved in pressure pumping services like those use in hydraulic fracturing.