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Seaway pipeline is about ready to move oil out of Cushing

Enterprise Products Partners LP and Enbridge Inc. are almost finished with the reversal of the Seaway pipeline, which will be able to carry crude oil away from the glutted storage hub at Cushing.
BY JAY F. MARKS Published: May 4, 2012

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.

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