All Pipelines Lead To Patoka -- Illinois, That Is -- August 18, 2019

Wow, I love to blog.

Readers are so helpful.

A recent comment from a reader:

Capline is the big story. Helps everyone north of Cushing (Bakken, PRB/Nio, tar sands). Don't sleep on this. It's hyooge! 

The reader is exactly right. RBN Energy recently devoted a blog to the Capline. The RBN post will soon go behind a paywall. Archived.

Here's the graphic:

Another reader did not "understand" the Memphis connection. Of course, neither did I. But RBN Energy  did a full blog on that one, also.

Over the past few years, rising production in the Canadian oil sands and U.S. shale plays such as the Bakken, Permian and Eagle Ford has given refiners new options for sourcing their crude, causing changes in oil pipeline utilization and prompting the development of new pipelines — or the reversal of existing pipes.

A prime example of all this is playing out in Memphis, TN, where a Valero Energy refinery will be shifting from mostly U.S. Gulf Coast-sourced light crude to light crude that will flow in on the new Diamond Pipeline from the Cushing, OK, crude storage hub.

Valero’s change in crude sourcing will be yet another blow to the 1.2-MMb/d Capline Pipeline, which for decades has moved crude north from the Gulf Coast to Patoka, IL, and other points along the way, including western Tennessee.

Today [this was back in October 26, 2017], we look at the thinking and economics behind Valero’s plan and at the latest news on Capline.

We’ve looked at Capline and Diamond many times before here in the RBN blogosphere.

More than five years ago, we noted in the opening line of Draggin’ the Capline that “Crude oil wants to flow south to the U.S. Gulf” and that the utilization of the 1.2-MMb/d Capline Pipeline from the St. James, LA, crude oil hub to the Patoka hub (which is connected to more than 2 MMb/d of Midwest refining capacity) had fallen to only 14%.

This decline was largely because Midwest refineries had gained access to the increasing volume of crude available from western Canada and the Bakken. This low rate of Capline utilization raised questions about whether the pipeline’s flow should be reversed to help move Bakken and western Canadian crude south. (Capline is co-owned by Plains All American, with a ~54% stake; Marathon Petroleum, with ~33%; and BP, with ~13%.)

A couple of years later we discussed the plan by a joint venture of Plains All American and Valero Energy to build the 200-Mb/d Diamond Pipeline to transport crude from Plains’ Cushing storage terminal to Valero’s 195-Mb/d refinery in Memphis. When Diamond is completed later this year (2017), the crude flows from Cushing into Memphis are expected to largely displace crude that is now transported to the refinery from St. James via Capline and Valero Energy Partners’ Collierville Pipeline, a 52-mile-long, 210-Mb/d pipeline lateral from Capline (at Collierville, MS) to the Memphis refinery.

In other words, Diamond’s startup will put another nail in the coffin for a northbound-flowing Capline — a matter we discussed [previously].

The "thing" I take away from all this: the states (e.g., Minnesota, New York) that resist pipelines will find themselves behind the proverbial 8-ball in 2030. There will be winners and losers in Saudi American, but it's pretty much guaranteed that states that fight the energy revolution will be on the losing side. 

Patoka. Who would've guessed? The new Cushing? Probably not, but ...