Cushing Bottleneck Relief Projects: Too Little to Stem the Tide?

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Researched by Industrial Info Resources (Sugar Land, Texas)--The crude oil bottleneck in Cushing, Oklahoma, the self-proclaimed pipeline crossroads of the world, has had multiple large effects on the oil and gas markets, most notably in greatly reduced West Texas Intermediate (WTI) crude prices. The bottleneck has been forming for a number of years and has spurred the development of big-name projects to take Cushing crude southward to the army of refiners along the Gulf Coast. However, according to Industrial Info's data, new pipeline projects designed to bring more crude oil from the developing plays in the Bakken Shale and Canadian oil sands into Cushing will outstrip the new takeaway capacity development between now and 2014. Barring any alternative solutions, such as alternate pipe routes or economical shipping methods, the bottleneck may continue.

According to Industrial Info's project data, there are two major takeaway pipelines that are actively being developed. The Seaway I and II pipelines, which are owned and operated by Enterprise Product Partners (NYSE:EPD) (Houston, Texas) and Enbridge Incorporated (NYSE:ENB) (Calgary, Canada), and the Gulf Coast pipeline (formerly part of the Keystone Xl pipeline), which is owned and operated by TransCanada Corporation (NYSE:TRP) (Calgary, Canada), will represent a total of just more than 1.5 million barrels per day (BBL/d) of crude oil takeaway capacity. The Seaway pipeline is currently operational, transporting about 400,000 BBL/d from Cushing to Enterprise's Freeport Terminal in Freeport, Texas, and will be further expanding to handle up to 850,000 BBL/d by late 2014, according to Industrial Info's data. TransCanada's Gulf Coast pipeline is bound for Nederland, Texas, and is slated to be able to move about 700,000 BBL/d by mid-2013.

In contrast, Industrial Info is currently tracking active projects that represent nearly 2 million BBL/d of incoming capacity to Cushing from various carriers between now and late 2015. Of this total, more than 1.5 million BBL/d in new capacity are slated to come online between now and when the Seaway II pipeline is brought online in 2014. Some of this capacity is timed to come online with the Seaway II, including Enbridge's 600,000-BBL/d Flanagan South pipeline and TransCanada's 500,000-BBL/d Keysone XL pipeline, if it receives White House permission in time. However, the remainder is made up of many smaller projects, most not exceeding 200,000 BBL/d in size, that are bringing in crude oil from various plays, including the Mississippian Lime and the Woodford Shale, in addition to the larger Bakken-sourced pipelines.

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.