Pipeline Reversals Bring More Liquids to U.S. Gulf Coast

---

Researched by Industrial Info Resources (Sugar Land, Texas)--As refiners shut down operations on the East and West coasts, the refining hub along the Gulf Coast continues to expand. As such, the Gulf Coast is a great market for producers, creating a huge demand for pipeline access. There are many pipelines across Texas that carry crude oil from the eastern areas of the state to the western, and with the process of building a new pipeline being so time- and capital-intensive, many companies are opting to use the existing infrastructure and simply reverse the flow to carry crude into the refinery hub in east Texas. This influx of crude oil capacity means that Gulf Coast refiners can utilize more North American crude, rather than having to import from other producers, thus decreasing the U.S. reliance on foreign oil.

All of the pipeline reversals that are being tracked by Industrial Info are liquids pipelines carrying crude oil or natural gas liquids (NGLs) to or around the Gulf Coast. The longest such project, the Appalachia-to-Texas (ATEX) Ethane pipeline project managed by Enterprise Products Partners (NYSE:EPD) (Houston), is a combination of new-build pipe and reversal. The ATEX will carry Ethane from the Marcellus Shale to Texas via a new pipeline through Pennsylvania and Ohio, to join Enterprise''s to-be-reversed pipeline system that runs from Indiana to Missouri. This system will feed into a new-build line that goes through Arkansas and into Texas.

Among the Texas intrastate pipelines are the Longhorn Pipeline reversal under Magellan Midstream Partners LP (NYSE:MMP) (Tulsa, Oklahoma) that will carry crude from Crane to Houston upon completion, and the Permian Express reversal under Sunoco Logistics Partners LP (NYSE:SXL) (Sinking Spring, Pennsylvania) that will supply Sunoco''s Nederland Terminal with crude from Wichita Falls. Aside from the ATEX, the Gulf Coast can expect to be fed with Niobrara Shale crude oil through the Niobrara Falls project under NuStar Energy LP (NYSE:NS) (San Antonio, Texas), and Cushing sweet crude via Enterprise''s recently reversed Seaway crude pipeline.

An interesting outlier project that is not bringing crude into the Gulf Coast, but rather moving crude around the Gulf Coast, is the Houston-Houma (Ho-Ho) Pipeline reversal under Shell Pipeline, a subsidiary of Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands). The Ho-Ho line will transport crude oil from the Houston area to St. James, Louisiana, passing multiple third-party refineries and storage terminals along the way. The Texas portion of the pipeline from Houston to Port Arthur was recently been put into service, and work on the Louisiana portion is under way. With so many pipelines being reversed to bring crude oil into the Houston area, new takeaway capacity to move that crude to other refiners in the Gulf Coast region would not be unwelcome.

This increase in crude flow to Houston means several hundred thousand more barrels per day of crude oil will likely be shipped east out of the Permian Basin, when it was originally shipped in. This could prove a competitive stumbling block for Kinder Morgan Incorporated (NYSE:KMI) (Houston), which plans to convert its existing El Paso Natural Gas (EPNG) Line 2000 to crude oil. The EPNG Line 2000 conversion would source crude oil from the Permian and ship it out to California, where crude sells for much higher prices than on the Gulf Coast. However, with increased capacity going to Houston, Kinder Morgan will have to work harder to prove its Line 2000 to be the more economical option for west Texas producers.

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.