Page 6 - NorthAmOil Week 50 2021

NorthAmOil PIPELINES & TRANSPORT NorthAmOil

US oil pipelines flowing

at around half capacity

US AROUND half of the US’ oil pipeline capac- however, with pipeline operators seeking to raise
ity is currently unused, as production remains them again as production keeps rising.
below pre-pandemic levels, despite rebounding According to Saxton, the pipeline with the
over the course of 2021. This follows a spree in highest utilisation rate in the Permian currently
pipeline construction between 2017 and 2020, is Phillips 66’s Gray Oak, at around 94%. The
especially in the Permian Basin, where output uncommitted tariff rate to ship on Gray Oak is
was booming over that period. about $2.97 per barrel, he said, compared with
Consultancy Wood Mackenzie has estimated the more than $4.00 per barrel on Magellan Mid-
that US pipeline capacity utilisation is at around stream Partners’ BridgeTex pipeline, which also
50%, down from around 60-70% two years ago. serves the Permian. The utilisation rate on the
The country’s production in early 2020 was BridgeTex is at around 70%.
around 13mn barrels per day of oil in early 2020, These figures illustrate how shippers are
but over the course of 2021, it has averaged 11mn flocking to pipelines offering lower rates if they The reduced rates
bpd. have multiple takeaway capacity options to
The trend is not surprising as pipeline opera- choose from. are not expected
tors frequently build more capacity than needed The high utilisation rate has allowed Phillips
during periods of booming production, and are 66 to more than offset reduced revenues from to last, however,
then left with spare capacity during downturns. offering a lower rate. In the third quarter of this
This has been exacerbated by the coronavirus year, the company’s midstream transportation with pipeline
(COVID-19) pandemic, which caused produc- pre-tax income rose by $30mn compared with operators
ers to rapidly scale back activity. Now, even with the second quarter. This was attributed in part
stronger oil prices and demand, producers are to Gray Oak, which is one of the largest pipe- seeking to raise
continuing to practise restraint rather than pur- lines in the Permian, with a capacity of 900,000
suing aggressive growth. bpd. them again as
As operators have struggled to fill their pipe- Meanwhile, Magellan reported a drop in
lines, competition to attract remaining volumes uncommitted shipments on the BridgeTex pipe- production keeps
has intensified. Some have responded by reduc- line, which contributed to a 5% year-on-year rising.
ing shipping rates. Reuters cited Wood Macken- decline in volumes in the third quarter and a
zie’s head of oil data, Ryan Saxton, as saying that decrease in revenue from crude transportation
overbuilt regions such as the Permian generally and terminals.
have lower uncommitted shipping rates than Last week, Magellan said it was exploring
they did before the pandemic. Meanwhile, in alternative uses for its Longhorn pipeline, which
basins with less pipeline capacity, operators have also serves the Permian, owing to “extremely
managed to raise rates, according to Saxton. low” margins from on spot shipments out of the
The reduced rates are not expected to last, basin. (See NorthAmOil Week 49)™

P6 www. NEWSBASE .com Week 50 16•December•2021