Plains All American Nears Completion of Diamond Pipeline, Progresses with Other Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Midstream operator Plains All American Pipeline LP (NYSE:PAA) (Houston, Texas) reported earnings were down in the recently passed third quarter, with the company's major Diamond Pipeline project wrapping up construction and several other projects underway. Plains reported third-quarter 2017 net income of $33 million, compared with $297 million in third-quarter 2016. The company reported a $6 million negative impact from Hurricane Harvey, which hit Texas in late August.

In a conference call, Chief Operating Officer Wilfred Chiang reported on the company's progress with its projects. The company's Diamond Pipeline is a joint venture with Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) that will run 440 miles from Cushing, Oklahoma, to Valero's refinery in Memphis, Tennessee. The pipeline will carry approximately 200,000 barrels per day (BBL/d) of domestic sweet crude. "Construction on the Diamond JV Pipeline was substantially completed in late October, and we're in the process of commissioning the pipeline," said Chiang. "We expect to begin commercial operation in December and to meaningfully ramp up volumes in the first quarter of 2018." The project has a total estimated cost of $900 million. Construction kicked off in the fourth quarter of 2016. For more information, see Industrial Info's project reports on the Oklahoma, Arkansas and Tennessee portions of the pipeline.

"Additionally, in July, we announced plans to expand our Permian-to-Cushing capacity by approximately 120,000 BBL/d by extending our Sunrise Pipeline System," said Chiang. "This project is moving full speed ahead and is expected to be completed early 2019, backed by producer support, and allows us to alleviate a constraint between Colorado City and Wichita Falls [both in Texas]. It also gives the ability to further increase our future capacity from the Permian to Cushing in a phased approach." The project, which has an estimated total investment value of $500 million, is expected to kick off in the first half of next year. The pipeline will include three loops: from Midland, Texas, to Colorado City, from Colorado City to Wichita Falls, and from Wichita Falls to Cushing.

Chiang said a possible project on the horizon was a reversal of the Capline Pipeline, which runs from St. James, Louisiana, to Patoka, Illinois. Chiang said that Marathon Petroleum Corporation (NYSE:MPC) (Findlay, Ohio), BP plc (NYSE:BP) (London, England) and Plains had launched a joint non-binding open season for oil movement from Patoka to St. James, "which could provide a key link for crude access to the U.S. Gulf Coast markets, as well as global export opportunities." For more information, see November 7, 2017, article - Enbridge's $27 Billion in Active Projects Fueled by Pipeline Overhauls, Windfarm Growth.

Chiang added that Plains had completed the construction of approximately 3 million barrels of storage at its terminals in Cushing, St. James and Patoka. The company intends to further expand its Cushing terminal by constructing two 200,000-barrel and two 380,000-barrel tanks to increase storage capacity of crude oil products. Construction is expected to begin this quarter and be completed next summer. For more information, see Industrial Info's project report.

Chiang said that excluding a non-recurring maintenance event in California, maintenance spending was expected to be $190 million to $210 million for the year.

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