Where the Crude Flows: Gulf Coast and Cushing

Researched by Industrial Info Resources (Sugar Land, Texas)--After a lull in announcements following the crude price drop at the end of 2014, crude pipeline project announcements are popping up left, right and center. Some of these announcements are for new pipe, others are modifications to existing plans. Of those existing ones, where is the crude going? How much is going where?

With more crude set to flow south from Canada via Enbridge Incorporated's (NYSE:ENB) (Calgary, Alberta) Mainline Enhancement project (dubbed the Alberta Clipper Capacity Expansion in Canada, and the Line 67 Expansion in the U.S.) and continuing need for takeaway capacity in domestic plays north of Cushing, Oklahoma, there is more crude set to come into Cushing between now and the end of 2016 than come out. We also can expect to see more than 1 million barrels per day (BBL/d) of new crude transmission capacity arrive at the Gulf Coast.

According to Industrial Info's data, 1.15 million BBL/d of new crude oil transmission capacity to the Gulf Coast is expected to be brought online between now and the end of 2016. The data also show that a further 400,000 BBL/d of capacity is expected to arrive in Cushing from the Denver-Julesburg (DJ) Basin, via two 200,000-BBL/d pipeline projects by Saddlehorn Pipeline and by NGL Energy Partners (NYSE;NGL) (Tulsa, Oklahoma). Saddlehorn is a joint venture between Magellan Midstream Partners LP (NYSE:MMP) (Tulsa, Oklahoma), Plains All American Pipeline LP (NYSE:PAA) (Houston), and a subsidiary of Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas).

The incoming capacity from these lines is only partially mitigated by Plains' Diamond Pipeline, which will take 200,000 BBL/d of crude oil from Cushing to a refinery in Memphis, Tennessee, and a Plains pipeline from Duncan, Oklahoma, to Longview, Texas, which will take another 40,000 to 80,000 BBL/d of crude that could have gone into or come from Cushing to the Shreveport, Louisiana, area via the planned Caddo pipeline from Longview to Shreveport.

With how the pipelines are stacking up, if all the projects above move forward as planned, another glut in Cushing is increasingly possible as more crude flows into the pipeline hub from Canada on top of domestic sources. However, storage capacity in the Gulf Coast itself is also set to increase by about 8 million barrels, thanks to some major expansion projects in the area, such as Enterprise Products Partners' (NYSE:EPD) (Houston) expansion of its ECHO terminal. This increased volume may help to alleviate the pressure at Cushing by providing an alternate storage hub for volumes being held due to price concerns.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, 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.