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Cushing oil price loses benchmark status

The Oklahoma oil patch may have lost some influence in world markets — at least on paper.
by Adam Wilmoth Published: December 14, 2012

“That should cure itself over the next two years or so with pipeline infrastructure growth,” he said. “That should break the logjam at Cushing and allow that huge amount in storage to finally get to the Gulf Coast refineries.”

The southern leg of TransCanada's Keystone pipeline, which is under construction, promises to move more oil from Cushing to the Gulf Coast beginning in late 2013 or in early 2014. Seaway's expansion along a similar route is expected to open in the first quarter of 2013.

Tulsa-based Magellan Midstream Partners is working to help relieve the strain in Cushing by reversing a pipeline that will allow producers in the Permian Basin in west Texas to send their oil directly to the Houston area, bypassing Cushing altogether.

In the meantime, producers now will use international prices when looking at production and reserves.

The change likely will not affect sales or profits. But it could make reserves in the ground look better because at higher prices, producers can afford to recover more of the oil and natural gas held deep below ground.

“If you're calculating your reserves with Brent prices, it will look like you have more reserves because you will hit your economic limit later,” said Rand Phipps, who is chairman of the Mid-Continent Oil and Gas Association and chief operating officer at Oklahoma City-based Mustang Fuel Corp.

by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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