US pipeline companies scale back expansions

US midstream companies have reduced planned crude pipeline capacity expansions by more than 1.4mn b/d through deferrals or scale-backs in the wake of the collapse in oil prices and efforts to contain the Covid-19 pandemic.

Though at least four planned crude pipelines have been deferred or downscaled, other major projects are still in the works, including a 1mn-1.5mn b/d crude and condensate pipeline from the Permian basin to the US Gulf coast.

The US has seen a large midstream build in recent years, pushed by record production and growing demand for exporting US crude. But the collapse in oil prices and the plummet in demand related to the pandemic has put the brakes on the midstream frenzy.

Enterprise Products Partners, a key player in US crude exports, deferred its 450,000 b/d Midland-to-Echo 4 crude pipeline, as part of a $1.1bn drop in capital expenditures in 2020. The line was pushed back about six months and is now expected to start in the second half of 2021, the company said last week. The project is an expansion of Enterprise's system from the Permian to the Houston area.

Enterprise is also building a portion of an ExxonMobil-led 1mn-1.5mn b/d crude and condensate pipeline system. That joint venture (JV) project, known as Wink-to-Webster, involves seven companies, including Plains All American Pipeline and Marathon's midstream segment MPLX. The system will move crude from Wink and Midland in the Permian to multiple locations near Houston, including Webster and Baytown, with connectivity to Texas City and Beaumont. ExxonMobil has a 560,000 b/d refinery in Baytown and a 362,000 b/d refinery in Beaumont.

The most resilient

That Wink-to-Webster project is on schedule to be in service in the first half of 2021, anchored by long term contracts.

Two of the largest refiners in the Gulf coast will buy oil from the Wink-to-Webster line, Plains chief executive Willie Chiang said earlier this month on an earnings call. The project is "a good example of capital efficiency" and "probably the most resilient pipe out there," he said.

Another large midstream company, Energy Transfer, has downscaled the planned Ted Collins pipeline which will connect a terminal in the Houston Ship Channel to Nederland, Texas.

The Ted Collins line will now have a capacity of 275,000 b/d and will use some existing infrastructure to lower costs. The scaled-down project should enter service in the fourth quarter of 2021. The previous plan was for a new-build project with 500,000 b/d of capacity.

US refiner Phillips 66 paused two large crude projects — the Red Oak and Liberty pipelines — and will make a decision on whether to continue them later. Both were previously scheduled to start service in early 2021.

Red Oak, a JV with Plains, would transport crude from the Permian and Cushing, Oklahoma, to Texas ports. That project included leasing capacity on Plains' existing Sunrise pipeline system as well as new builds.

The Liberty pipeline, a JV with Bridger, would have moved 350,000 b/d of Rockies and Bakken production to Corpus Christi. Phillips 66 also postponed a final investment decision on the Ace pipeline project that would connect supply in St James, Louisiana, to refineries in the region.

Other large US pipeline projects remain on schedule even as companies slash spending after the collapse in crude prices which started in early March but hit a new low point on 20 April, when the Nymex WTI front month contract settled in negative territory.

Energy Transfer is moving forward on a plan to expand capacity of its 570,000 b/d Bakken crude pipeline system from North Dakota to the US Gulf coast. The company anticipates expanding the system to "somewhere in the range" of 750,000 b/d but the capacity could go higher depending on discussions with shippers, the company said on an 11 May earnings call.

Energy Transfer said previously that the expansion could nearly double capacity on the line to about 1.1mn b/d. Some of the incremental capacity should be available in the second quarter of 2021. The expansion project only involves adding pump stations, which is a fraction of the cost of building new lines.

The Bakken system includes the Dakota Access pipeline from the Bakken fields in North Dakota to Patoka, Illinois, and the connecting Energy Transfer Crude Oil pipeline to the US Gulf coast.

Three partners are moving forward with a plan to reverse the 1.2mn b/d Capline crude pipeline to move south from Patoka to St James. Marathon, BP and Plains plan to offer light crude shipping in mid-2021 and heavy crude service in 2022.

Plains is also moving forward with a planned expansion of the 200,000 b/d Diamond crude pipeline from Cushing to Memphis, Tennessee, and a 45-mile (72km) pipeline extension to connect it to Capline.

In addition, two large crude projects that cross the US-Canada border are still in the works but facing regulatory and legal delays.

TC Energy's 830,000 b/d Keystone XL pipeline from western Canada to the US midcontinent was dealt another blow last month when a US federal court vacated a key water crossing permit known as Nationwide Permit 12, sending it back to the US Army Corps of Engineers.

"The long-term potential delay with any of these kinds of very omnibus-type filings or motions to vacate a permit that broad could have up to a year delay on the ultimate project," said TC Energy senior vice president of liquids pipelines Bevin Wirzba on 1 May. But the company has been "mitigating those types of impacts," he said.

TC Energy is looking at alternatives in the event the permit is not reinstated, including pursuing different individual permits for some pipeline sections and avoiding certain routes.

Another Canadian company, Enbridge, is moving forward with a project to replace its Line 3 crude pipeline system from Alberta to Wisconsin. Line 3 has been running at 390,000 b/d in recent years, and will be restored to its original capacity of 760,000 b/d.

Minnesota regulators in February approved a revised environmental review for the Line 3 project, but more permits are needed before Enbridge can start US construction. The project is at risk of exceeding its $6.4bn (C$9bn) budget depending on the final in-service date, Enbridge said.

By Eunice Bridges

New crude pipelines