Pipeline Reversal from Cushing to Gulf Coast is Complete

The first US pipeline to carry crude oil from the hub at Cushing, Oklahoma, to the US Gulf Coast will begin to be filled this weekend. The Seaway pipeline has been in operation since 1995, but until the recently completed flow reversal carried crude from the Gulf Coast to the Cushing hub. Seaway will be operated by 50/50 joint venture owned by Canada’s Enbridge Inc. (NYSE: ENB) and Enterprise Products Partners L.P. (NYSE: EPD).

The original capacity of the pipeline will be 150,000 barrels/day, with expansion planned to exceed 400,000 barrels/day by the first part of next year. If a “loop” or second, parallel pipeline is added, the total capacity of Seaway will reach 850,000 barrels/day by 2014. The Seaway pipeline is one of several proposed crude oil pipelines that would carry crude from North Dakota, Montana, and Alberta to the US Gulf Coast, where crude prices are higher.

Transcanada Corp. (NYSE: TRP) has filed a new proposal for its Keystone XL pipeline, while Oneok Inc. (NYSE: OKE) and Oneok Partners LP (NYSE: OKS) have proposed a 1,300 mile route from North Dakota to Cushing, while Enbridge Energy Partners LP (NYSE: EEP) and parent Enbridge are proposing new and reversed pipelines to move crude to Cushing.

Crude from the Bakken oil play and the Canadian oil sands sells at a steep discount to Brent crude, which sets the price benchmark on the Gulf Coast. Producers hope to boost the price they get for their crude if they can just get the black stuff to more liquid market. For consumers, closing the price differential will very likely mean higher prices.

Paul Ausick