Timeline: Relief at Cushing's Pipeline Bottleneck Could Prove Temporary

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Researched by Industrial Info Resources (Sugar Land, Texas)--In 2012, there was significant growth in the Bakken formation in North Dakota, spurring a need to get the newly tapped crude oil to the major refining complexes on the Gulf Coast. The pipelines planned to transport that crude, almost without exception, pass through Cushing, Oklahoma, which is a major bottleneck in transport capacity.

Two high-profile pipeline projects could provide some relief from the Cushing bottleneck. However, according to Industrial Info's data, the relief may only last until the third quarter of 2014, as more incoming pipelines carrying crude from Canada, the Bakken, and other, smaller plays throughout the Great Plains are built and put into service. Furthermore, the two high-profile relief projects have related incoming capacity pipelines, which further diminish their ability to relieve the bottleneck.

One high-profile pipeline that would offer relief from the bottleneck is the Seaway I crude oil pipeline, jointly owned by Enterprise Products Partners (NYSE:EPD) (Houston), and Enbridge Incorporated (NYSE:ENB) (Calgary, Canada). Seaway I, which was put into service last December, currently can transport up to 400,000 barrels per day (BBL/d) from Cushing down to Freeport, Texas.

The next phase of the Seaway project, Seaway II, will increase the system's takeaway capacity to 850,000 BBL/d. Seaway II is slated to go into service in February 2014. In the interim, one year before Seaway II is placed in service, the Gulf Coast pipeline (formerly part of the Keystone XL pipeline), owned and operated by TransCanada Corporation (NYSE:TRP) (Calgary, Canada), will go into service, providing another 700,000 BBL/d of takeaway capacity.

The two largest incoming pipelines are directly related to the Gulf Coast and Seaway projects. The 600,000-BBL/d Flanagan South pipeline, owned and operated by Enbridge, transports crude to Cushing from Flanagan, Illinois. The Flanagan South pipeline is being planned to use a portion of Seaway's capacity to transport crude down to the Gulf Coast. Similarly, the Gulf Coast pipeline will be fed, in part, by TransCanada's 500,000-BBL/d Keystone XL pipeline. While these two incoming pipelines together do not outweigh the relief of their respective southern counterparts, smaller pipelines from the Woodford and Mississippian Lime formations, such as the 140,000-BBL/d Glass Mountain pipeline, owned by SemGroup Corporation (NYSE:SEMG) (Tulsa, Oklahoma) and Gavilon (Omaha, Nebraska), are pushing the amount of new incoming capacity over that of new outgoing capacity.

In May 2013, between the activation of the Seaway I pipeline and the Gulf Coast pipeline, Industrial Info shows roughly 175,000 BBL/d of capacity that is to be brought online, far less than the relief provided by Seaway I. After that, the Gulf Coast pipeline is to be brought online, increasing new takeaway capacity to 1.1 million BBL/d. This is expected to keep new takeaway ahead of new incoming capacity through September 2014, when both Seaway II and the Keystone XL are slated to be brought online. At that point, the 500,000-BBL/d Keystone cancels out the added takeaway of Seaway II and puts new incoming capacity at more than 1.58 million BBL/d, compared with 1.55 million BBL/d of new takeaway. This discrepancy is expected to be further exacerbated by the activation of the 220,000-BBL/d Pony Express pipeline, owned by a subsidiary of Kinder Morgan (NYSE:KMI) (Houston, Texas), two months later.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.