Plains All American announces new Permian Basin pipeline

Plains All American Pipeline has announced plans to build a 310-mile, 20-inch pipeline to move crude oil across West Texas, capitalizing on the renewed burst of exploration and production in the Permian Basin.

Brad Leone, a spokesman for Plains, said Monday that the company has not yet announced a start date for construction of the Cactus Pipeline, but crude oil is expected to begin flowing in the first quarter of 2015.

It will move both sweet and sour crude from McCamey to Gardendale.

Plains said its total investment in the project will be as much as $375 million.

The pipeline’s initial capacity will be approximately 200,000 barrels per day, although that could increase if demand warrants.

“That’s a sizeable quantity,” said John M. White, an analyst with Triple Double Advisors in Houston. “It’s another piece of the West Texas, South Texas, Gulf Coast crude oil infrastructure build out.”

Plains All American Pipeline and other midstream companies have been expanding rapidly through acquisitions and construction to keep pace with growing production in the country’s booming shale plays.

CactusPipeline 2The pipeline will move crude from the Permian to the Plains All American-Enterprise Products Partners Eagle Ford Joint Venture Pipeline, which serves the Three Rivers and Corpus Christi markets.

That venture can also serve the Houston-area market through a connection to the Enterprise South Texas Crude Oil Pipeline, according to the Plains announcement.

White noted that as the Permian Basin once again becomes an increasingly prolific source of domestic crude oil production, it makes sense to bypass the bottleneck at the traditional terminal at Cushing, Okla.

“Instead, they’re taking it directly to Gardendale in the Eagle Ford,” he said. “This makes much more sense from a cost standpoint and a logistical standpoint.”

From Gardendale, the crude can be shipped to refineries along the Gulf.

Plains All American said it has entered into a letter of intent with a third party for a long-term commitment for a majority of the pipeline capacity and is in discussions with other potential shippers for the remaining capacity.

Leone declined to identify the third party.

The company has been aggressively investing in new projects as part of its plan for growth.

A publicly traded master limited partnership based in Houston, Plains All American Pipeline is involved in transporting, storing, terminaling and marketing crude oil and refined products, as well as processing, transporting, fractionating, storing and marketing natural gas liquids.

In December it announced a $500 million deal with Houston-based U.S. Development Group to buy crude oil rail terminals in three of the nation’s most active shale plays: the Eagle Ford in South Texas, the Bakken in North Dakota, and the Niobrara in Colorado, along with an existing unloading terminal in St. James, La., and one under development in Bakersfield, Calif.