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This Is It - Owners Commit to Capline Reversal, Diamond Expansion/Extension

Well, it’s finally going to happen! Without major fanfare, Plains All American and Marathon Petroleum announced earlier this month that they have sanctioned the reversal of the 40-inch-diameter Capline crude oil pipeline, a move that will enable light crude to flow south on that pipe from the Memphis area to St. James, LA, starting late next year and light and heavy crude to do the same from Patoka, IL, by early 2022. Also, Plains said it has committed to expanding the existing Diamond Pipeline between Cushing, OK, and Memphis, and extending that eastbound crude pipe from Memphis to a new interconnection with Capline. Light-crude service on the expanded, extended Diamond will commence in late 2020. Today, we review the newly sanctioned projects and their significance to U.S. and Canadian producers, Louisiana refiners and Gulf Coast exporters.

For a number of years now, the reversal of Capline — the U.S.’s largest northbound crude oil pipeline (purple line in Figure 1) — has seemed inevitable, but even things that are bound to happen can take time. Plus, there was that pesky matter of convincing all three of Capline’s co-owners — Plains (with a ~54% ownership interest), Marathon Petroleum Corp. (MPC; ~33%) and BP (~13%) — that reversing the line was the way to go. (Capline is operated by Marathon Pipe Line LLC, a wholly-owned subsidiary of MPLX, which itself is a master limited partnership formed by Marathon Petroleum in 2012.)

We’ve been blogging about a prospective Capline turnaround since 2012 (in Draggin' the Capline), when we noted that crude oil flows on the 632-mile pipeline had been declining precipitously, and were down to only 14% of the line’s 1.2-MMb/d capacity. The reason, as we said in Livin’ on the Edge, was that Midwest refineries connected to the Patoka hub in southern Illinois had gained access to the increasing volumes of crude available from Western Canada and the Bakken — they simply didn’t need Capline’s northbound flows as much as they used to. Another blow to Capline’s volumes came in December 2017, when Plains and Valero started up their 200-Mb/d Diamond Pipeline (dark-green line) from the Cushing hub to Valero’s 195-Mb/d Memphis refinery — Diamond eliminated the need for crude to move north to the refinery from St. James (LA) via Capline and a connecting pipe to the refinery (see our Memphis, Tennessee blog for more on that).

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