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ExxonMobil in Permian midstream deal

US supermajor enters long-term agreement with Lucid Energy

ExxonMobil has entered a long-term agreement with midstream player Lucid Energy group for natural gas gathering and processing services in the prolific Permian basin.

Under the deal, the supermajor's shale-focused subsidiary XTO will deliver natural gas production from a portion of its leasehold position in south-east New Mexico to Lucid’s South Carlsbad gas gathering and processing system.

"The agreement provides XTO with firm processing capacity and enables deliveries of gas and natural gas liquids to ExxonMobil’s downstream and chemical manufacturing sites on the US Gulf Coast," according to a release.

Lucid’s system in the northern Delaware sub-basin of the Permian currently consists of more than 2000 miles of pipeline over five counties in New Mexico and Texas.

The agreement comes as production of oil and associated gas continues to boom amid limited takeaway capacity in the Permian, forcing some producers to flare excess natural gas.

Lucid also said it had started development of its next large cryogenic processing plant at its Red Hills Natural Gas Processing Complex in Lea County, New Mexico. The Red Hills V plant will have the capacity to process an additional 230 million cubic feet of natural gas per day and will bring Lucid's total processing capacity in the northern Delaware basin to 1.2 billion cfd.

Commissioning is expected in the second quarter of 2020 and will follow start-up of the 230 million cfd Red Hills IV plant in October of this year.

"Lucid’s assets are strategically positioned for XTO’s development plans and complement what its affiliates are planning for midstream infrastructure within the basin and out of the basin to the downstream markets," Lucid chief executive Mike Latchem said.

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