Cushing MarketLink oil pipeline moving forward; Wrangler under evaluation

TransCanada Corp. still plans to build its Cushing MarketLink crude oil pipeline between Cushing, Okla., and the Texas Gulf Coast, despite plans to reverse the Seaway pipeline to deliver crude along a similar route. Enbridge (US) Inc. and Enterprise Products Partners LP, meanwhile, are evaluating plans for the 800,000 b/d newbuild Wrangler pipeline in the wake of the reversal decision.

Enbridge bought ConocoPhillips’s share of Seaway earlier this week, joining with EPP in its ownership and jointly announcing that its flow would be reversed to deliver crude from Cushing to the Gulf Coast (OGJ Online, Nov. 16, 2011). Initial capacity of the reversed pipeline will be 150,000 b/d, but will reach 400,000 b/d by early 2013, according to EPP.

EPP also said the companies plan to expand Seaway beyond the 400,000 b/d mark, and will start an open season in January 2012 to gauge shipper interest in the additional capacity, believing the 400,000 b/d will be fully subscribed.

EPP stopped short, however, of saying it had cancelled the 800,000 b/d Wrangler pipeline outright, saying only that its “plans for bringing crude down form Cushing had obviously changed (OGJ Online, Sept. 29, 2011).”

TransCanada held a binding open season for its 150,000 b/d Cushing MarketLink pipeline earlier this year, and told OGJ that the Seaway reversal would not affect its plans to build the pipeline. TransCanada expects the pipeline to be in service by mid-2013.

The Canadian Association of Petroleum Producers estimated US demand for Western Canadian crude in 2015 as at least 380,000 b/d based on contractual commitments to TransCanada’s Keystone XL pipeline (OGJ Online, June 2, 2011). The Seaway reversal and construction of Cushing MarketLink will not only help meet some of this demand while Keystone XL awaits approval from the US Department of State (OGJ Online, Nov. 10, 2011), but will also make other crude volumes currently bottlenecked in the Midcontinent more readily available on the Gulf Coast.

Increased pipeline capacity into Cushing, and limited ability to move the arriving crude out, has resulted in more oil flowing into the Midcontinent than the refinery system there can handle, holding prices for West Texas Intermediate crude at persistent discounts to Brent and other comparable global crudes.

WTI’s discount to Brent reached less than $10/bbl in the wake of the announcement, from more than $25/bbl a few weeks ago (OGJ Online, Nov. 17, 2011).

Contact Christopher E. Smith at [email protected].