Three Crude-Oil Pipeline Projects Could Loosen Glut in Cushing, Oklahoma

---

Researched by Industrial Info Resources (Sugar Land, Texas)--The bottleneck in Cushing, Oklahoma, has shown signs of loosening recently, with new crude-oil rail transportation options and increased pipeline takeaway capacity. Three major pipeline projects are approaching milestones, and each has the potential to have a large impact on the situation in Cushing.

The Seaway II pipeline, partly owned and operated by Enterprise Products Partners (NYSE:EPD) (Houston), is set to provide an additional 450,000 barrels per day (BBL/d) of takeaway capacity from Cushing. This pipeline will be brought online around the same time as Enterprise's partner in the Seaway venture, Enbridge Incorporated (NYSE:ENB) (Calgary, Alberta), brings online its own Flanagan South crude oil pipeline, which will be capable of bringing 600,000 BBL/d into Cushing from the Chicago area. Before either of these pipelines goes online, the Gulf Coast pipeline (formerly part of the Keystone XL pipeline), owned and operated by TransCanada Corporation (NYSE:TRP) (Calgary) will go into service, providing 700,000 BBL/d of takeaway capacity.

The Gulf Coast pipeline is rapidly approaching its in-service date. The pipeline itself has been laid and is waiting for the pump stations to be brought online in order to begin operations. Industrial Info data shows that facility-related work on the Gulf Coast pipeline should be completed in September 2013. Something to watch in the future: this pipeline is expandable to 830,000 BBL/d, although no plans to do so have yet surfaced.

Construction on the Seaway II pipeline is anticipated to begin soon. Contractors are short-listed and should receive their awards any day. In the interim, Enterprise has its hands full with the planned pump additions and pipeline lateral to Houston from its Jones Creek terminal at the end of the Seaway lines. Those projects should see completion by the end of the year, providing Jones Creek with alternative shipping options and thus stabilizing the flow rates on Seaway I.

Lastly, work is scheduled to begin on the Flanagan South Pipeline in just two weeks. Pipeline construction contractors have been awarded, and facility-construction contractors are expected to be awarded within the week. This pipeline likely will feed into the Seaway system when it is completed in late 2014. While the addition of the Flanagan South spells a net increase in incoming oil for Cushing when compared with the 450,000-BBL/d Seaway II, increased use of rail transportation and the completion of the Gulf Coast pipeline before Flanagan South should help to mitigate the imbalance and further reduce the glut at Cushing.

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.