BP Midstream expects lower Q2 pipeline flows on coronavirus impact

BP Midstream reported first-quarter pipeline flow rates similar to the fourth quarter of 2019, but withdrew previous guidance and will no longer provide full-year guidance on pipeline flows due to extreme market uncertainties arising from the coronavirus pandemic, CEO Rip Zinsmeister said Friday.

"The world looked very different only a few months ago at the end of February when we reported our fourth quarter and full year 2019 results. Today, it's a much more challenging environment for everyone," he said on the first quarter results call.

During the first quarter, flow rates on BPMP's pipeline system averaged 1.7 million b/d of oil equivalent, roughly flat from the previous quarter, as Diamondback diluent volumes rose to meet peak winter demand period and BP2 volumes fell on pipeline restrictions from Enbridge.

BP Midstream, the sponsored master limited partnership of oil major BP, has both onshore and offshore pipeline and storage assets in the US, some of which are directly tied to supporting its parent company and its Whiting, Indiana, refinery – the largest in the Midwest.

The 475,000 b/d BP2 pipeline supplies crude to the 430,000 b/d refinery, which runs mostly heavy crude from Canada. This crude travels on the Enbridge system to nearby Griffin Terminal to the refinery on the BP2 pipeline. BP is increasing heavy crude processing capacity at the refinery by 25,000 b/d to 350,000 b/d by the end of 2020.

BP Midstream's 80,000 b/d River Rouge pipeline carries gasoline and diesel to River Rouge, Michigan, where it supplies to the greater Detroit area, where mandated stay-at-home orders to curb the coronavirus spread in a hard-hit area, have been enacted.

"We expect pipeline gross throughput in the second quarter to be slightly lower than the first quarter. For our onshore pipelines, we expect significantly lower throughput on River Rouge driven by refined product demand destruction as a result of COVID-19," said Craig Coburn, BP Midstreams's chief financial officer.

A seasonal drop in diluent flows on the 135,000 b/d Diamondback pipeline are expected in the second quarter, Coburn said, adding that BP Midstream expects that to be "partially offset by increasing diluent production at Whiting Refinery."

BP Midstream offshore assets are centered in the US Gulf of Mexico, and include stakes in major pipelines including Mars system, which can carry as much as 600,000 b/d of medium sour crude to US Gulf Coast refineries as well as to the Louisiana Offshore Oil Port for storage or export on a VLCC.

Mars system operator Shell Midstream said Thursday it had secured additional storage for Mars crude in LOOP caverns to meet the high demand for crude storage due to the contango market structure.