Plains All American Progresses Takeaway Growth in Permian, Elsewhere

Researched by Industrial Info Resources (Sugar Land, Texas)--Pipeline owner and operator Plains All American Pipeline LP (NYSE:PAA) (Houston, Texas) is doing its best to keep up with the growing production of crude oil coming from the Permian Basin and elsewhere in the U.S. The company is involved in several of its own and joint-venture growth projects and recently began service on a key pipeline to move oil out of the Permian, where takeaway capacity has been lacking.

In the company's recent third-quarter earnings conference call, Plains Chief Executive Officer Willie Chang said the company expects to spend $1.35 billion for its growth capital program in 2019 and gave an update on some of Plains' projects. Among the company's recently completed projects is the Cactus II crude oil pipeline in the Permian Basin, where Plains expects the end of 2020 to yield 300,000 to 400,000 barrels per day (BBL/d) more than at the end of 2019. Change said, "We placed the Cactus II pipeline into initial service in mid-August, and have established connectivity to Taft, Ingleside and Corpus Christi. The pipeline is mechanically complete, and has demonstrated its design capacity of 600,000 BBL/d and is currently meeting customer nominations for deliveries to these markets." Construction on the pipeline began in June 2018, with ITI International LLC (Houston) as the contractor. For more information, see Industrial Info's project reports on the Wink-McCamey segment and the McCamey-Corpus Christi/Ingleside segment.

But the company isn't done with expanding its takeaway capacity in the Permian and is at work on the Wink-to-Webster crude oil pipeline, which, like Cactus II, will move crude oil from the Permian to the Texas Gulf Coast. Chang said, "On Wink-to-Webster, we're advancing the project consistent with our expectations and expect the pipeline construction to begin before yearend." The pipeline will move 1 billion BBL/d. Chang said Plains had ordered the majority of long-lead equipment and was targeting an in-service date of early 2021. For more information, see Industrial Info's project report.

Outside of the Permian, Plains is involved in a joint venture project to convert a crude oil pipeline running from Colorado's DJ Basin to Cushing, Oklahoma, to carry natural gas liquids (NGLs). Plains is a joint-venture owner of the White Cliffs Pipeline with SemGroup Corporation (NYSE:SEMG) (Tulsa, Oklahoma). The pipeline will transport up to 90,000 BBL/d of NGLs. The project is expected to be completed by the end of next year. For more information, see Industrial Info's project reports on the Colorado, Kansas and Oklahoma portions of the pipeline.

Chang also said Plains is making progress on expansions of two crude oil pipelines that originate in Oklahoma. Both expansions are planned to kick off early next year. The Red River Pipeline extends from Cushing to Longview, Texas. Plains will increase the capacity from 150,000 BBL/d to 235,000 BBL/d through additional pumping capacity, which is expected to be completed in the first half of next year. For more information, see Industrial Info's project report.

Plains also will expand and extend the Diamond crude oil pipeline, which originates in Cushing. The project entails expanding the pipeline's capacity by 200,000 BBL/d to 400,000 BBL/d to connect to the Capline pipeline system. For more information, see Industrial Info's project report.

The Capline system is itself the object of a reversal project, which when completed will shift the direction of the pipeline flow to run from Patoka, Illinois, to Saint James, Louisiana. The pipeline is a joint venture of which Plains is the majority owner along with a Marathon Petroleum Corporation (NYSE:MPC) (Findlay, Ohio) subsidiary and BP Oil Pipeline Company, a subsidiary of BP plc (NYSE:BP) (London, England). The project is expected to begin soon, for completion in late 2020. For more information, see Industrial Info's project reports on the Illinois, Kentucky, Mississippi and Louisiana portions of the pipeline.

Plains' capital investments may be peaking. In a recent press release, Chang said, "Looking forward, we expect meaningful reductions in our growth capital program in 2021 and beyond as we prioritize further lowering our leverage and returning capital to investors."

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