September 1, 2015 – Platts
Prospect of new pipeline capacity in Louisiana rattles rail, barge operators
By: Joshua Mann
Louisiana could be the site of the next wave of pipeline expansions, which might be a boon for refiners there, but other midstream players could find themselves on the outside looking in, depending on the origin of the crude on the lines.
Southern Louisiana has long been a Gulf Coast toehold for crude-by-rail or crude-by-barge operators who can’t compete with the plethora of pipelines pointed at the Houston area. Especially with the take-or-pay structure that supports large pipeline projects, the more-expensive midstream options have to work their flexibility advantage to find markets, flourishing in places like the Atlantic and Pacific Coasts, where pipelines have yet to reach.
The Bayou Bridge pipeline, a joint venture between Energy Transfer Partners, Sunoco and Phillips 66, could be a major contender for those volumes, though. Bayou Bridge would extend from Nederland, Texas, to refiners along southern Louisiana as far east as St. James.
That pipeline will likely carry barrels originating in the Bakken off the upcoming Dakota Access and Energy Transfer Crude Oil pipelines, which will terminate in Nederland. Dakota Access is set to carry 450,000 b/d starting in the fourth quarter of 2016 from the Bakken to Patoka, Illinois, and ETCO will take it the rest of the way to Nederland.
If Bayou Bridge is able to supply refiners with Bakken crude oil, then rail shipments along the same route are “going to die,” RBN Energy’s Director of Energy Analytics Sandy Fielden said.
“There’s no place for that, because if you can get it there on a pipeline, you aren’t going to do it on rail,” Fielden said...
Read the full story here: http://blogs.platts.com/2015/09/01/pipeline-capacity-louisiana-rail-barge-operators/
...So why has it taken this long for pipelines to reach into Louisiana if the competition is going to be that easy? Fielden pointed to two things.
First, pipeline operators have up to this point been focused on the “low-hanging fruit,” Fielden said. That means the easy connections between somewhere that has a lot of production, like the Permian, to somewhere nearby with a lot of refiners, like the Houston area.
The shale revolution made for some obvious choices. The US used to get most of its supply from abroad, which meant that coastal refineries didn’t need supply from inland, but that has flipped, and crude oil imports in June averaged 6.874 million b/d, down from 10.744 million b/d at its peak in 2005. The low-hanging fruit at that time represented connections between the new production regions — the Bakken and the Permian — and the refineries on the Gulf Coast, so that’s where pipeline operators turned their attention first.
“You’ve got all these west-to-east pipelines coming online,” Fielden said. “Well, then that market gets saturated.”
