October 2018, Vol. 245, No. 10

Projects

Projects

ETP, Magellan, Delek to Construct Permian-to-Gulf Coast Pipeline

ETP, Magellan Midstream, MPLX and Delek to Jointly Construct the “Permian Gulf Coast” or “PGC Pipeline” for Permian Basin crude oil takeaway

Energy Transfer Partners (ETP), Magellan Midstream Partners and Delek US Holdings, received sufficient commitments to proceed with plans to construct a 30-inch common carrier pipeline to transport crude oil from the Permian Basin to the Texas Gulf Coast region.

The 600-mile pipeline system is expected to be operational in mid-2020 with multiple Texas origins, including Wink, Crane and Midland. The pipeline system will transport crude oil to both Energy Transfer’s Nederland, Texas, terminal and Magellan’s East Houston terminal for delivery through their respective distribution systems.

The project is designed to increase the pipe diameter in order to expand based on additional commitments received during the upcoming open season. An open season for additional shipper volume commitments on the pipeline will be launched this week.

Lotus Midstream to Acquire Centurion Pipeline

Crude oil logistics provider Lotus Midstream entered into a definitive agreement to acquire the Centurion pipeline system and a Southeast New Mexico crude oil gathering system from Occidental Petroleum.

 The transaction is expected to close later in the third quarter of 2018, subject to customary closing conditions.

The Centurion pipeline system is an integrated network of about 3,000 miles of crude oil gathering and transportation pipelines that extend from southeast New Mexico across the Permian Basin of West Texas to Cushing, Okla. 

Integrated assets also include two crude oil storage terminals in the Midland, Texas, and Cushing market centers with a combined storage capacity of 7 MMbbls and more than 125 truck stations. 

The Southeast New Mexico gathering system includes more than 50 miles of crude oil gathering pipelines with connections to the Centurion pipeline system and a third-party intra-basin system and related infrastructure.

The acquisition is supported by long-term revenue commitments.

FERC Allows Construction on Mountain Valley Pipeline

The Federal Energy Regulatory Commission (FERC) cleared the way for construction to resume on the Mountain Valley natural gas pipeline, modifying a stop-work order that derailed the project in early August.

The FERC action authorizes construction of about 200 miles of the 300-mile project in West Virginia and Virginia.  In a letter, FERC cited an analysis by the U.S. Bureau of Land Management (BLM), which concluded that planned construction through Jefferson National Forest is the best available route.

Construction of Mountain Valley Pipeline (MVP) was halted after a U.S. appeals court ruled that certain aspects of federal agency approvals for the project had failed to comply with the National Environmental Policy Act, the Mineral Leasing Act and the National Forest Management Act.

Mountain Valley is one of several pipelines expected to enter service over the next year or two to connect growing output in the Marcellus and Utica shale basins in Pennsylvania, West Virginia and Ohio with customers in other parts of the United States and Canada.  It is designed to deliver up to 2 Bcf projected to cost $3.5 billion to $3.7 billion.

Flint Hills Resources Plans Ingleside Expansion

As part of its Ingleside terminal expansion, Flint Hills Resources plans to build connections to the recently announced crude pipelines coming from the Permian Basin.

The company will be expanding storage and outbound crude loading capacity at its storage terminal in Ingleside, Texas, to about 380,000 bpd.

In addition to pipeline expansion, the project consists of construction of four new crude storage tanks, 60,000 barrels per hour of loading capability, plus associated pumps and piping. The expected in-service date for the project is October 2019. When the project is completed, Ingleside will have a total crude storage capacity of 3.5-4.0 million barrels.

Currently, the Ingleside terminal uses two docks, including one that supports loading of Suezmax-size vessels. Flint Hills Resources is also evaluating a separate project that would allow it to load very large crude carrier (VLCC) vessels.

Malaysia Cancels China-backed Pipeline, Rail Projects

Malaysian Prime Minister Mahathir Mohamad said the Chinese-funded $20 billion natural gas pipeline and East Coast Rail Link (ECRL) project in Sabah will be canceled at least for the time being.

Mahathir made the comments while addressing the media in Beijing during his five-day trip to China. He said the projects, would be cancelled until such time as Malaysia can afford it.

Mahathir earlier vowed to discuss what he called “unfair” Chinese infrastructure deals authorized by his predecessor Najib Razak, whose near-decade long rule ended in electoral defeat in May.

The ECRL project was the centerpiece of China's infrastructure push in Malaysia but work has been suspended pending discussions over pricing and graft accusations.

Project contractor, China Commun-ications Construction Co Ltd told Reuters that more than 1,800 of the 2,250 people hired for the ECRL project had been laid off since the suspension.

Chinese foreign ministry spokesman Lu Kang told a daily news briefing in Beijing that Mahathir had said during his visit that China's development was an opportunity for Malaysia.

Dixie Pipeline to Expand Capacity

Dixie Pipeline Company plans to expand the westbound transportation capacity of its pipeline system to Mont Belvieu, Texas. The project, which would involve the addition of pumping horsepower and related infrastructure, will increase capacity from 58,000 bpd to 90,000 bpd. The expansion is scheduled to come on-line in March 2019.

Dixie, an affiliate of Enterprise Products Partners, is undertaking this expansion in response to increased shipper demand for westbound transportation services to the Mont Belvieu market. The incremental capacity will be made available to all shippers under Dixie’s currently applicable tariffs.

ONEOK Plans 2nd Expansion of West Texas LPG System

Tulsa, Okla.-based ONEOK said it will invest $295 million to expand its West Texas LPG pipeline system, which provides natural gas liquids takeaway capacity for Permian Basin producers.

The expansion, to be completed in the first quarter of 2020, includes four new pump stations, upgrades to two existing pumps and pipeline looping that will boost the system’s mainline capacity 80,000 bpd. It is supported by long-term, dedicated NGL production from six third-party gas processing plants that are expected to produce up to 60,000 bpd.

It will be ONEOK's second expansion of the West Texas LPG system. The company expects to finish construction this month of a mainline expansion and 110,000 bpd lateral extension into the Delaware Basin.

The upcoming expansion will include infrastructure to connect with ONEOK's announced Arbuckle II Pipeline, which will transport up to 400,000 bpd from the company's Oklahoma supply basins and NGL gathering system to its storage and fractionation facilities at Mont Belvieu, Texas. The 530-mile Arbuckle II is also scheduled for completion in the first quarter of 2020.

ONEOK recently paid $195 million to Martin Midstream Partners for complete control of the West Texas LPG Pipeline, which includes 2,600 miles of NGL pipeline and provides transportation from nearly 40 Permian Basin processing plants to Mont Belvieu.

Court Quashes Canada’s Approval of Trans Mountain Pipeline

Canada’s Federal Court of Appeal quashed the approval of the 620-mile Trans Mountain pipeline expansion that would nearly triple the flow of oil from the Alberta oil sands to the Pacific Coast.

The decision means the country’s National Energy Board will have to redo its review of the pipeline. Prime Minister Justin Trudeau’s government approved Trans Mountain in 2016 and was so determined to see it built that it announced plans this spring to buy the pipeline.

It faces stiff environmental opposition from British Columbia’s provincial government and activists. Houston-based Kinder Morgan earlier halted essential spending on the project and said it would cancel it altogether if the national and provincial governments could not guarantee it.

In a written decision, the court said the energy board’s review was so flawed that the federal government could not rely on it to approve the pipeline. The court concluded the federal government failed in its duty to engage in meaningful consultations with First Nations before approving it.

“Meaningful consultation is not intended simply to allow indigenous peoples “to blow off steam,” the decision said.

The court decision is a blow to Trudeau, whose government is having a bad week after Canada was left out of new free trade deal with the U.S. and Mexico. Talks to include Canada are now taking place in Washington.

Kinder Morgan shareholders voted overwhelmingly to approve the $3.4 billion (C$4.5 billion) sale of the pipeline to the government shortly after the court decision was announced.

The pipeline would allow Canada to diversify oil markets and vastly increase exports to Asia, where it could command a higher price. Canada has the world’s third largest oil reserves, but 99% of its exports now go to refiners in the U.S., where limits on pipeline and refinery capacity mean Canadian oil sells at a discount.

Construction Contract Awarded for European Gas Pipeline

Gascade, a subsidiary of BASF and Gazprom, has awarded a construction contract for six lots of the European Gas Pipeline (EUGAL) to the joint venture between Bonatti and Max Streicher. The pipeline will be powered by the Nord Stream 2, the gas transport network that connects Siberia to the heart of Europe via the Baltic Sea.

The EUGAL route will cover 300 miles (480 km) and have a capacity of 55 billion cubic meters annually. The 56-inch pipeline is divided into 14 lots. The scope of the work awarded to the joint venture includes the construction of the southern part of the EUGAL route, reaching the town of Deutschneudorf, Germany, on the border with the Czech Republic.

The EUGAL will run parallel to the OPAL gas pipeline and enhance the distribution of gas in the heart of the European Continent. Delivery on the double line sections is expected by the end of 2020. P&GJ