There’s been a lot of talk lately that the crude oil hub in Cushing, OK, is losing its luster — that it may not be as important as it once was. Folks point to the precipitous, months-long decline in crude inventories that started last fall, or to the fact that just about all of the planned oil pipelines out of the red-hot Permian are pointed toward Gulf Coast refineries and export docks, not central Oklahoma. Then you’ve got ICE and CME’s new WTI futures contracts, both deliverable in Houston — another challenge to Cushing. While Cushing’s role as the epicenter of crude storage and trading may be in flux, rumors of its demise have been greatly exaggerated, as evidenced by the long list of midstream projects under development to transport more crude to — and out of — the Oklahoma hub, and to add storage tanks there. Just yesterday (November 5), in fact, Magellan Midstream Partners and Navigator Energy Services announced plans for what would be the first new Cushing-to-Houston pipeline since 2014. Today, we continue our comprehensive review of the “Pipeline Crossroads of the World” with a look at the many capacity-expansion efforts now under way.
This is the sixth blog in our deep-dive review of the Cushing hub, which is located midway between Oklahoma City and Tulsa. In Part 1, we discussed why Cushing’s role in the crude oil market has been in flux in recent years — key factors being the surge in Permian production, the end to the ban on U.S. oil exports, and the resulting pull of crude to the Gulf Coast, with its concentration of refineries and export docks. Part 2 looked at the 94 MMbbl of crude oil storage at Cushing — where it’s located (mostly South Cushing, with a little at North Cushing), the companies that own the storage (with Plains All American, Enbridge and Magellan Midstream Partners leading the pack), and how much they each own. We also split the users of Cushing storage into six categories (producers, midstream companies, refiners, marketers, or some combination thereof) and explained how each group uses its storage in different ways (some purely operational, some purely commercial and the rest some mix of the two).
In Part 3, we focused on the pipelines that transport crude oil to the Cushing hub from Western Canada (Keystone, Flanagan South and Spearhead), the Bakken (Pony Express, with assists from Enbridge’s Mainline system), the Rockies (Pony Express, Saddlehorn/Grand Mesa and White Cliffs), the Permian (Basin and Centurion), and within Oklahoma itself (STACK, Glass Mountain and Mississippi Lime). Then, in Part 4, we looked at the pipes that transport crude oil from Cushing to U.S. refineries and export terminals. About half of existing pipeline capacity out of the central Oklahoma hub makes a beeline to the Gulf Coast on either Enterprise Products Partners and Enbridge’s jointly owned Seaway pipeline system or TransCanada’s Marketlink system. The other half of the pipeline capacity out of Cushing flows to inland refineries, the biggest of these pipes being the Ozark, Osage, Diamond, BP1 and Red River pipelines.