Delek Logistics Develops Acid Gas Injection at Libby Gas Complex, Acquires Gravity Water Midstream

Delek Logistics Partners (DKL) began to develop permitted acid gas injection (AGI) capabilities at the Libby 2 gas processing plant, currently under construction. The company also announced:

• An acquisition of Gravity Water Midstream for $285 million, broken down across $200 million in cash and $85 million in DKL units.
• Secured approximately 34 million acres in the Midland Basin.

“We are committed to executing our strategy of being the preferred oil, gas and water midstream services provider in the Permian Basin,” said Avigal Soreq, President at DKL. “DKL continues to provide yield and growth in the midstream sector. The announcements today are a testament to the growth opportunities we are seeing in and around our existing assets.”

Acid Gas Injection

Two AGI well permits and one amine unit, which is currently under construction, will enable sour natural gas treating. The project will grant new and current customers full access to six benches in the Delaware Basin without encountering hydrogen sulfide and CO₂, laying the foundation for Libby complex expansion and adding economic value. AGI capabilities will come online in latter-half 2025.

Libby gas complex; image credit: ZAP Engineering and Construction

Gravity Water Midstream

This acquisition, and a previous purchase of H2O Midstream, supplements DKL’s integrated crude and produced water gathering and disposal services in the Midland Basin. DKL plans to close the transaction in Q1 2025.

Acreage in Midland Basin

The additional 34,000 acres follows the previously secured 50,000 acreage dedication in the Midland Basin, improving DKL’s overall economics and presents opportunities for future cross-commodity offerings. With these acreage acquisitions, DKL’s total dedication rises to approximately 400,000 acres and is supported by the Delek Permian Gathering System in west Texas.

Other Basin Acquisitions

In May 2024, ExxonMobil Corp. finalized its merger acquisition of Pioneer Natural Resources, adding to the company’s significant development potential in the Permian basin. Following the acquisition, the merged company owns more than 1.4 million net acres in the Delaware and Midland basins with approximately 16 billion barrels of oil equivalent resources.

Based on 2023 volumes, ExxonMobil’s production in the Permian basin will more than double to 1.3 million barrels of oil equivalent per day (MOEBD). Based on initial estimates, it is expected to increase to approximately 2 MOEBD in 2027. The merger combines PNR’s differentiated Permian inventory and basin experience with ExxonMobil’s technologies, financial resources, and project execution. These combined aspects are expected to produce double-digit returns through efficient, increased resource recovery with a lower environmental impact.

And in July, Energy Transfer and Sunoco entered a joint venture to combine respective crude oil and produced water-gathering assets in the Permian Basin. Energy Transfer will operate the joint venture and add its Permian crude oil and water gathering assets and operations, while Sunoco will contribute its crude oil gathering assets.

Energy Transfer’s long-haul crude pipeline network—excluded from the joint venture—transports crude oil from the Permian Basin to Nederland, Houston, and Cushing. The joint venture will operate more than 5,000 miles of crude oil and water gathering pipelines with a crude oil storage capacity over 11 million barrels. Suncoco will hold a 32.5% interest and Energy Transfer will hold a 67.5% interest in the joint venture.