It appears history is repeating itself in the Permian basin as pipelines are reversed and converted in order to accommodate regional changes.
One example is the Kinder Morgan Freedom Pipeline LLC, which launched an open season in April to determine industry interest. The pipeline, which would be converted from gas to crude, would initially take up to 277,000 bbl. per day of crude oil from the Permian to Southern California refiners. About 740 miles of existing natural gas pipeline would be converted.
“As I look at the pipeline, history kind of repeats itself,” Gregory W. Ruben, Kinder Morgan’s vice president of business development, said during Hart Energy’s recent DUG Permian conference in Fort Worth, Texas. The pipeline was originally designed to move crude from the West Coast to McCain, Texas, but was converted in 1996 to natural gas.
“We have not seen very high utilization on our system along that corridor,” said Ruben. “This is an opportunity to do some things that will put the asset to better use.”
The pipeline gave Kinder Morgan an opportunity to provide an alternative to move volumes to the west, he added. It could also help mitigate congestion at some California ports, said Ruben.
“Now is the time [to build],” said Ruben. “This project is very compelling from an economic perspective for refiners and producers. It does give a very unique and positive economic alternative relative to continue to look solely to move your volumes to the east out of the Permian basin into the Gulf Coast refining complex.”
Construction on the Freedom line could begin in June 2015, with an in-service target date of late 2016.
Meanwhile, Magellan’s Longhorn pipeline reversal and conversion will ultimately have the capacity to ship up to 225,000 bbl. per day of crude from Crane, Texas to its East Houston terminal. Magellan is currently evaluating another potential Longhorn expansion of 70,000 bbl. per day, which would raise the line’s capacity to nearly 300,000 bbl. per day.
The $375 million capital expenditure project is expected to be fully operational in the third quarter.
“We’re kind of going back in history,” Scott Devers, director of crude oil transportation with Magellan Midstream Partners LP, told DUG Permian attendees. “A lot of these lines that we are looking at today to (convert) back to crude service were initially built for crude service.
“History is definitely repeating itself.”
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