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Capline Pipeline reversal fully online with extra Canadian crude capacity

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Capline Pipeline reversal fully online with extra Canadian crude capacity

Highlights

Capline has initial capacity of 200,000 b/d

Future growth requires reconfiguring pump stations

The reversed Capline Pipeline is fully online and has enough excess capacity to roughly double its current Canadian oil sands crude volumes.

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The Capline reversal project to send crude from Patoka, Illinois to St. James, Louisiana started interim service Dec. 18 and entered full service Jan. 1 with initial volumes of about 100,000 b/d. But the pipeline currently has capacity of about 200,000 b/d and excess capacity is available for both contracted and spot shipments, said Marathon Petroleum spokesman Jamal Kheiry.

"Currently, there is available space on the 200,000 b/d pipeline. When additional capacity is required based on market demand, existing pump stations can be reactivated," Kheiry said in a statement.

Capline is a 632-mile, 40-inch pipeline system that historically moved crude from the Louisiana Gulf Coast to Midwestern refiners. But, as demand has picked up for crude oil from Canada and the Bakken shale -- both for Gulf Coast refiners and export markets -- the decision was made to reverse the line and carry crude to the Louisiana Gulf Coast where it has easy access to refineries and LOOP.

Capline, which is owned by Marathon and Plains All American Pipeline, connects to Canada via Enbridge's Mainline pipeline system Enbridge's 300,000 b/d Southern Access Extension pipeline, which Enbridge eventually plans to increase to roughly 400,000 b/d through optimization efforts. TC Energy's Keystone Pipeline also stretches to Patoka.

However, Enbridge's expansion plans may be on hold after its Mainline contracting proposal was recently rejected by Canadian regulators. And how much crude flows into Patoka may limit the available volumes to move through Capline. Enbridge's contracting negotiations are expected to extend into 2023.

Marathon and Plains have said that Capline will start out shipping "100% Canadian crude" -- as opposed to lighter barrels from the Bakken Shale. Future growth will depend on demand, as well as on Patoka volumes, said Plains Chief Commercial Officer Jeremy Goebel in a November earnings call.

"I think there's a number of projects potentially restructuring how crude gets across the Canadian border and what markets it goes to," Goebel said. "And so, once there's clarity with Enbridge and its shippers and [TC Energy] and its shippers, I think we'll see how many barrels flow to Patoka and the potential to expand it. So we definitely think there's opportunities to increase from where it is today, but there needs to be certainty of which barrels end up in Patoka."

Kheiry declined further comment Jan. 7.

Capline has maximum potential capacity of 1.2 million b/d, but money would need to be spent on reconfiguring more pumping stations to get there over time.

Plains CEO Willie Chiang said in November that Capline will inevitably increase its capacity, but the timing remains a question mark, especially with Canadian crude production and global demand both on the rise. There just needs to be more volume certainty before Capline increases its capacity, which may take longer into 2022, he said.