New Permian Pipeline to Gulf Coast Ships First Crude

San Antonio-based EPIC Midstream Holdings Inc., began shipping crude oil on its 400,000 barrel per day pipeline from the Permian Basin to the U.S. Gulf Coast on Thursday. EPIC is the second pipeline operator this year to open a major line from the top U.S. oil field to the Corpus Christi, Texas, area.

Plains All American Pipeline LP’s 670,000 barrel per day Cactus II pipeline stated its initial operations this week. Both new pipelines will help alleviate a crude oil bottleneck that has weighed on prices in the Permian of West Texas and New Mexico for more than a year.

Terminal operator Moda Midstream LLC confirmed it would be accepting the Permian crude from the EPIC line at its facility in Ingleside, Texas, by Friday. Oil prices in Midland, the heart of the Permian shale field, rallied to 50 cents per barrel over U.S. crude futures.


Permian Crude Shipment Started on Cactus II Pipeline

Crude oil shipments started from Permian basin to the Buckeye Texas Partners oil hub in Corpus Christi through the new Cactus II pipeline system, Global commodities trader Trafigura AG said on Monday.

A long-term agreement between Trafigura and the pipeline operator, Plains All American Pipeline LP was signed last year to transport a total of 300,000 barrels per day of crude and condensate on the Cactus II pipeline, which has a capacity of 670,000 barrels per day.

The Cactus II pipeline is expected to alleviate a bottleneck that had depressed regional prices for more than a year. Also the pipeline is first of three large pipelines expected to start up this year from the Permian Basin and the biggest in the United States.


Commercial Service on Cactus II Pipeline Will Start Next Week

The new Cactus II crude oil pipeline, owned by Plains All-American, is mechanically complete and will begin commercial service next week, CEO Willie Chiang said. The pipeline will have the capacity to transport 670,000 barrels per day of crude oil from the Permian Basin to the Gulf Coast.

"As of today, the line is approximately 50% filled with crude, and we anticipate entering initial commercial service sometime next week," Chiang said during a conference call with investors to discuss the company's second-quarter financial results. "We expect to have direct Cactus II connectivity to Corpus (Christi) in service by the end of the first quarter 2020."

In-order to ease the bottlenecks that developed as a result of the fast-rising Permian Basin production, Cactus II is one of three new crude oil pipelines scheduled to enter service before the end of the year.

The other two pipelines scheduled for completion this year are the EPIC Crude Oil Pipeline from Orla, Texas, to Corpus Christi and Phillips 66 Gray Oak Pipeline.

According to Chiang, the company has also added new investors to its proposed Wink-to-Webster pipeline and expects to start operations on the project in the first quarter of 2021.


Cactus II Pipeline’s Unused Space Will Be Given to Committed Shippers

Unused space on Cactus II crude pipeline will be allocated to committed shippers if spot shipments fall below the 10% of capacity set aside for those shipments, Plains All American LP said on Wednesday.

A source familiar with the matter told Reuters last month that once the line fill is complete, full contractual volumes will be shipped by commodities merchant Trafigura. Last year a long-term agreement with Plains was signed by Trafigura to transport a total of 300,000 barrels per day of crude and condensate on the Cactus II pipeline from the Permian basin to the port of Corpus Christi.

Market sources have said that Plains has been scooping up crude barrels in recent weeks to fill the line ahead of the pipeline’s start up. Cactus II project is on track for initial service by the end of the third quarter of 2019, Plains said in June. The 670,000 barrel-per-day Cactus II oil pipeline system runs from the Permian basin to the Corpus Christi, Texas, area. 


Cactus II Oil Pipeline to Begin Line Fill in a Week

Plains All American Pipeline LP’s Cactus II oil pipeline system will commence line fill within a week, a source with direct knowledge of the matter said. The Cactus II has the capacity of 670,000 barrel per day and runs from Permian Basin to the Corpus Christi, Texas area.

Cactus II project is progressing on schedule for initial service by the end of the third quarter of 2019, the pipeline operator said last month. Commodities merchant Trafigura signed a long-term agreement with Plains last year to transport a total of 300,000 bpd of crude and condensate on the Cactus II pipeline.

“We have over 90% of the pipe in the ground and we’re working diligently toward completion,” a company executive said during its investor day about two weeks ago. Concho Resources Inc., and Anadarko Petroleum Corp are the other two shippers on the Cactus II line.


Plains Cactus II Crude Pipeline Rate Structure Receives Partial Approval

The rate structure and terms of service for Plains All American Pipeline LP’s Cactus II crude line recieved partial approval from U.S. energy regulators on Monday. The Cactus II crude pipeline runs from the Permian basin to the Corpus Christi, Texas area.

The regulators approved most conditions put forth by Plains. However they declined to approve a request for the option to hold another open season to solicit shipper commitments for up to 90 percent of the pipeline’s capacity upon the expiration or early termination of service agreements.

The 585,000 barrels per day Cactus II line is expected to begin service in the third quarter and will connect the Permian basin to the Gulf Coast.


Cactus II Pipeline Tariff Waiver Request Denied

A new request to remove import tariffs on steel for Plains All American's Cactus II crude oil pipeline system got rejected by the Trump administration.

The U.S. Commerce Department had already denied Cactus II's similar request last year, citing the same reason that the waiver request was not a "complete submission". The company requested to waive import tariffs on hundreds of miles of steel pipeline imported from Greece.

The 25% steel import tariff announced in March 2018. The department has rejected waivers for 517.6K metric tons of steel, while granted waivers for 153.7K metric tons of steel, Argus reports.

Although, majority of requests from the oil and gas industry to win exemptions was lost to Department of Commerce, the department lifted the tariff on pipeline that Cheniere had proposed to import from Canada for its planned 1.4 billion cubic feet per day Midship natural gas.


Partial Service on Plain’s Cactus II Pipeline Expected to Start in Q3

Cactus II pipeline construction from the Permian Basin to Corpus Christi, Texas, is on schedule, said Plains All American Chief Executive Officer Willie Chiang during an earnings call late on Tuesday. Also the partial service to Ingleside is expected to be completed in the third quarter of 2019.

“We are at full speed ahead on progressing the project ... the pipe’s been ordered,” Chiang said, adding that discussions with additional potential shippers is ongoing.

He added that the full service on the Cactus II pipeline is expected by the first quarter of 2020. Another pipeline from the Delaware Basin, called the Wink-to-Webster project, is targeted to be placed into service in the first half of 2021, which is expected to have a capacity of more than 1 million barrels per day.


Plains All American Hit with $40 Million Tax on Cactus II Steel Import

Plains All American Pipeline (PAA) has been hit with a $40 million tax because of steel tariffs that were enforced under the Trump administration.

The pipeline project will go forward, but Plains' COO has said that the financial impact is worrisome.

“We can’t let trade officials determine product specification for companies. It’s our pipeline, it’s our asset," Plains' COO said.

The COO also told Congress that the material needed to build oil and gas pipelines should be exempt from the steel tariff considering that it only makes up ~5% of the total volume of steel imports.

He also emphasized that steel orders already made should stand, tariff free, at least until U.S. manufacturers are able to build the capability and capacity to deliver timely materials to meet America’s energy production growth.  

The $40 million tax is for high-grade steel from Greece that would be used to build the 585,000 bbl/day Cactus II pipeline. The Cactus II pipeline was one of the main projects meant to alleviate the lack of pipeline capacity problem that the Permian faces.

Plains has already applied to receive exemptions, however the U.S. government denied an exclusion from the tariff.

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First Major Pipeline Company Denied Steel Tariff Exemption

The U.S. Administration rejected requests to exempt Plains All American Pipeline’s $1.1 billion Cactus II pipeline in the Permian from the 25-percent tariff on imported steel making Plains All American the first company to have such a rejection to a major project.

According to a Commerce Department decision, the request was denied because there were suitable products available from U.S. steel producers.

The Cactus II pipeline, which initially had a capacity of 585,000 bpd and extended from the Permian to the Corpus Christi/Ingleside area, is one of the major pipelines that was planned as a secure outlet for Permian oil to be alleviated helping capacity constraints. The project is targeted to be operational in the third quarter of 2019.

Originally, material for Plains All American Pipeline was ordered from a Greek producer in December of last year, before President Trump signed on tariffs being enforced on steel and aluminum imports to protect U.S. production and jobs.

Plains All American explained that only three steel mills in the world could manufacture all the material it needed, and none of them were U.S. companies.

Other U.S. companies such as Kinder Morgan, Shell, and Williams Cos have yet to receive news on similar requests, with the U.S. Commerce Department back logged on over 20,000 requests.

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Plains All American Pipeline to Start Construction on Cactus II Pipeline

Plains All American Pipeline has secured enough shipper commitment to start construction on its Cactus II Pipeline, the company said in a statement.

The pipeline will connect the Permian Basin with the crude oil export market in Corpus Christi.

Cactus II will be a combination of new and existing pipelines and will expand the system's crude capacity from 390,000 barrels per day to 575,000 barrels per day.

The pipeline company said it will also start a second open season for customers to commit shipment on the Cactus II system.

Cactus II is expected to be completed by late 2019.

Although Plains' original Cactus Pipeline is the only major oil pipeline connecting the Permian to Corpus Christi, several Permian-to-Corpus pipeline projects are underway, including some by major players like Phillips 66 and Enbridge.

Houston Chronicle