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Page added on August 6, 2017

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Good ideas, big plans – all they need is money

Business

You’ve got to start somewhere.

Two companies, with relatively little experience, have embarked on ambitious projects to build separately a pipeline and refinery in West Texas, hoping to tap into booming oil production in the Permian Basin.

Permico Energia, a Houston startup, says it plans to build a $2 billion pipeline system to transport natural gas liquids, a by-product of oil drilling used in chemical manufacturing, from the Permian Basin to processing plants and port access near Corpus Christi. MMEX Resources Corp., an oil exploration and production company, said it wants to get into the refining businesses and build the first new refinery in the U.S. in 40 years.

Both proposals have been greeted with skepticism, which Jack Hanks, the MMEX chief executive, acknowledged. MMEX’s stock is trading at less that one cent a share in the over the counter market.

“We’ve had a lot of people ask the same question,” Hanks said in an interview. “ ’Well, wait a minute, how are you going to build a $500 million project when you don’t have any money?’ ”

The short answer: Find investors and lenders.

Permico co-founder and CEO Jeff Beicker said the company has found interest among potential customers and has funding commitments from unnamed South Korean investment banks and pension funds, which, he said, have committed about $800 million. Japan’s Sumitomo Mitsui Bank Corp. is the lead bank providing loans, Beicker said.

“We have enjoyed a positive reception from both sides of the pipe and are currently negotiating long-term producer and industrial partner contracts,” Beicker added.

The company’s name is Spanish for “Permian.” The proposed 510-mile pipeline system also would connect to South Texas’ Eagle Ford Shale as it makes its way to Corpus Christi. The project would include a processing plant to break natural gas liquids into its component products, ethane, propane and butane.

Permico said construction is tentatively slated to start by the end of June 2018 and go into service in 2020.

Beicker is a longtime energy veteran of companies like Marlin Midstream and Royal Dutch Shell. One of his co-founders, John Porter, was the global head of energy infrastructure for the CBRE commercial real estate firm.

Hanks has an extensive background in energy, primarily in oil and gas production and mining. He’s run a refinery, but never built one.

But he said he sees an opportunity with all the crude coming out of the Permian Basin and growing demand of gasoline in Mexico, which has opened its energy markets to foreign companies. Gulf Coast refineries are built primarily to refine heavier oil from Latin America and Canada, rather than the lighter crude from Texas oil fields.

MMEX said recently that it had closed on land near Fort Stockton, in West Texas, for a distillation unit to produce 10,000 barrels per day of diesel and similar products, the first phase of the $450 million project. The second phase will encompass a refinery to produce 50,000 barrels a day of gasoline. Hanks called the land deal “a major milestone” for the project.

“We’re making great progress,” said Hanks. “But I’ve got to put the pieces in place. It’s not like flipping the switch.”

Chron



One Comment on "Good ideas, big plans – all they need is money"

  1. twocats on Sun, 6th Aug 2017 8:01 am 

    Terrible ideas, small-minded plan – they’ll get the money.

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