A long-awaited pipeline project aimed at reducing the glut of crude oil in storage at Cushing is nearing completion.
The reversal of the Seaway pipeline by Enterprise Products Partners LP and Enbridge Inc. could be done by the middle of this month, Enterprise CEO Michael A. Creel said in a statement this week.
“We are on schedule to complete construction and begin reversing the flow on the Seaway Crude Oil Pipeline from Cushing, Oklahoma, to the Texas Gulf Coast as early as May 17,” Creel said.
The line had been moving oil from the Houston area into the Cushing hub.
Enterprise and Enbridge are working to increase the amount of oil the pipeline can transport to about 400,000 barrels a day by adding pump stations and other modifications.
Another expansion project will more than double the pipeline's capacity to 850,000 barrels a day, with the construction of a parallel line in the existing right of way, the companies said in March. That move was based on the response of shippers willing to commit to long-term transportation contracts.
Oklahoma Independent Petroleum Association President Mike Terry said the reversal is good for state oil producers.
“Additional pipeline capacity taking crude oil from Cushing to refineries along the Gulf Coast is necessary to alleviate what has become a bottleneck for crude oil produced in the middle of the country,” Terry said.
“Increasing amounts of inbound crude from Canada and the northern United States has outpaced outgoing pipeline capacity, forcing more oil into storage at Cushing and glutting the local market. The result is Oklahoma Sweet and West Texas Intermediate, historically the benchmark for global crude oil prices, has become less valuable.”
That differential can be expensive for the companies that produce about 60 million barrels of oil a year in Oklahoma, he said.
“If Oklahoma oil is selling on average for $15 per barrel less than crude oil from other parts of the globe, the price differential costs Oklahoma oil producers and royalty owners approximately $2.5 million per day,” Terry said. “In one year, the state would lose $63 million in gross production taxes.
“It is important to note, the lower prices refineries have paid for Oklahoma crude oil has not translated to lower gasoline prices in the state and has had no benefit on Oklahoma consumers.”
Producers had been clamoring for the reversal of the Seaway pipeline to help move more oil out of Cushing, but former owner ConocoPhillips was not interested.
Enterprise bought a 50 percent interest in the pipeline in 2009, but the partnership didn't get any traction in its push to reverse the line until Canada-
Enterprise spokesman Rick Rainey said the line will help move oil from emerging North American basins, including Canada.
“At the time we decided to reverse it, the flows were nonexistent,” he said.
Seaway began operation in 1976 to move crude oil and natural gas, Rainey said. It has changed direction a couple of times based on market demands, proving its flexibility.
He said the reversal process is not too complicated. Crude oil was purged from the pipeline in March, then the line was cleaned out with nitrogen. From there, much of the work is mechanical, as valves along the 500-mile pipeline are turned around to accommodate the flow of crude oil from north to south.
“It's not going to involve constructing anything or adding any new equipment,” Rainey said.
He said multiple crews worked on about 30 valves along the pipeline. It only took about a day to prepare each one for reversal.
Workers also had to modify the pipeline at Cushing to accommodate the flow of oil out of the storage hub.
Rainey said Enbridge also plans to build a new storage terminal near Houston with room for up to 6 million barrels of oil, giving the partnership access to all of the major Gulf Coast refineries.