US pipeline companies scale back expansions

A perfect storm of Covid-19 and the oil price collapse has taken the heat out of a midstream boom, writes Eunice Bridges

US midstream companies have reduced planned crude pipeline capacity expansions by more than 1.4mn b/d through deferrals or scale-backs in the wake of the collapse in oil prices and efforts to contain Covid-19.

There has been a large midstream build-up in the US in recent years, pushed by record production and growing demand to export US crude. But the collapse in oil prices and the pandemic-related plummet in demand have put the brakes on the midstream boom. At least four planned pipelines have been deferred or scaled back (see table). The largest setback is Enterprise Products Partners deferring its 450,000 b/d Midland-to-Echo 4 line — an expansion of Enterprise's system from the Permian basin to the Houston area — as part of a $1.1bn drop in capital expenditure in 2020. The line has been pushed back by about six months and is now expected to start up in the second half of 2021, the company says.

Energy Transfer has scaled down the planned Ted Collins pipeline that will connect a terminal in the Houston Ship Channel to Nederland, Texas. The revised project is for capacity of 275,000 b/d, and it will use some existing infrastructure to lower costs. The previous plan was for a 500,000 b/d newbuild. The scaled-down project is expected to enter service in the fourth quarter of 2021.

US refiner Phillips 66 has paused two large crude pipeline projects — Red Oak and Liberty — and will make a decision on whether to continue them later. Both were previously scheduled to start service in early 2021. Red Oak, a joint venture with Plains, would carry crude from the Permian and Cushing, Oklahoma, to Texas ports. Liberty, a joint venture with Bridger, would have moved 350,000 b/d of Rockies and Bakken production to Cushing. Phillips 66 has also postponed a final investment decision on the Ace pipeline project to connect supply in St James, Louisiana, to refineries in the region.

Other large US pipeline projects remain on schedule, even as companies slash spending because of the collapse in crude prices since early March. Energy Transfer is moving forward with a plan to expand its 570,000 b/d Bakken system from North Dakota to the US Gulf coast. The firm envisages expansion to 750,000 b/d — just by adding pumping stations, at a fraction of the cost of building new lines — but could target 1.1mn b/d, depending on discussions with shippers.

Keystone cops it again?

While US midstream expansions face financial pressures and cutbacks, Canadian firm TC Energy's totemic 830,000 b/d Keystone XL pipeline from western Canada to the US midcontinent faces the potential revival of a political challenge and continuing legal delays. The beleaguered project was dealt another blow last month when a US federal court vacated a key water-crossing permit, sending it back to the US Army Corps of Engineers. But the outcome of the US election in November could present an insuperable barrier if presumptive Democratic presidential nominee Joe Biden wins the White House.

Biden, as vice-president in the previous administration, opposed the project, and will "stop it for good by rescinding the Keystone XL pipeline permit", his campaign policy director Stef Feldman says. Former president Barack Obama blocked Keystone XL in 2015 after years of review, citing environmental concerns. The project was revived in 2017, with a cross-border permit from the administration of President Donald Trump. The Biden campaign says rejecting Keystone XL is more important now because of the urgency of combating climate change. "No other pipeline project in the history of the industry has been studied more than Keystone XL, and every study has concluded it can be built safely and in an environmentally sound manner," TC Energy says.

New crude pipelines