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Plains All American’s Cactus II pipeline that will carry crude oil from the Permian to Corpus Christi in Texas will begin partial commercial operation next week, the company’s chief executive during its second-quarter financial results, as quoted by Reuters.
Cactus II has a nameplate capacity of 670,000 barrels daily and is one of three pipelines the oil industry in Texas and New Mexico has been eagerly awaiting for a while now. While production from the Permian shale play rises, pipeline capacity has lagged behind, pressuring prices.
The pipeline capacity shortage forced companies active in what many call the star of the shale patch to sell their crude at a painful discount, which has cost them both profits and market cap: Bloomberg calculated that over just two weeks last June, Permian drillers lost a combined US$15.6 billion in market value, or over US$1 billion per day, with some of the shares booking double-digit drops.
Luckily for these producers, there are not a lot environmentalist groups in this part of the United States, so pipeline companies have been quick to step in and plan additional capacity.
Plains All American announced its plans to build Cactus II in February 2018, saying it will have an initial capacity of 585,000 bpd. The company also said at the time, the pipeline had been fully committed at this amount in long-term contracts.
There’s more: a JV between Phillips 66 and Andeavor could make its Gray Oak pipeline ship up to 1 million bpd of crude if it gets sufficient commitments from producers. The pipeline should be operational by the end of the year.
The EPIC pipeline, capable of shipping 500,000 bpd should also be operational by the end of 2019. Two large Permian players—Apache Corp. and Noble Energy—have already committed future flows taking up 30 percent of the pipeline.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.