(Reuters) – Plains All American Pipeline LP said two West Texas crude pipeline projects would begin partial operations slightly ahead of their original schedules as bottlenecks in the region depress prices to the weakest level in four years.
One of the two, the Sunrise expansion project, is expected to go into partial service in the fourth quarter this year while the Cactus II line will begin partial service in the third quarter of 2019, the company said on a conference call late on Tuesday.
The Sunrise extension will add about 500,000 bpd of capacity from Midland to Colorado City and Wichita Falls, Texas, and provide connections to the oil-storage hub of Cushing, Oklahoma.
Full service on the 670,000 barrels per day (bpd) Cactus II line from the Permian basin to Corpus Christi is targeted for April 2020. By late this year, a portion of the line, from Wink, to McCamey, Texas, will begin partial service, the company said.
“We expect continued growth across our gathering and intrabasin pipeline systems (in the Permian) and to operate at or near capacity on our takeaway pipelines throughout the second half of the year,” said Greg Armstrong, Plains chief executive.
The company also is developing projects in Canada that would increase oil gathering for existing systems and boost utilization on its Rainbow pipeline system that serves western Canada. It also is considering a project that could add volumes to its Wascana system.
These projects are in the early phases of development and would likely take 12 to 24 months to bring into service, Plains said.
The Permian basin in West Texas and western Canada has been grappling with takeaway constraints as oil production in the region has outpaced pipeline capacity.
Prices in Midland, Texas, sank to a $17 discount to benchmark futures last week while Western Canada Select oil last week traded at $34.15 per barrel lower than West Texas Intermediate light oil, the biggest differential since November 2013.
Plains said it is evaluating increasing takeaway capacity out of Cushing, the delivery point for U.S. crude futures, by expanding capacity on existing pipelines.
Inventories at the storage hub have plunged, dropping to the lowest since October 2014 last week. [EIA/S]
Plains said its joint venture Diamond pipeline out of Cushing could be expanded upto 200,000 bpd and the company could expand capacity on its Midway pipeline system as well.
Reporting by Devika Krishna Kumar in New York; Editing by Tom Brown