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Plains increases Permian crude takeaway with expansion of Cactus Pipeline

New York — Plains All American is expanding its Cactus Pipeline to 390,000 b/d, increasing takeaway capacity for Permian Basin crude into the port of Corpus Christi, Texas, the midstream company said Wednesday.

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Rising production of light, sweet Permian crude is at odds with the needs of US Gulf Coast refineries, which prefer heavier crude, making it a candidate for export. Increased takeaway capacity of Cactus also expands the crude's reach to local refineries.

The expansion is expected to be completed by the third quarter of 2017, the company said in a statement.

The 310-mile Cactus line currently carries 250,000 b/d of crude from McCamey, Texas, southeast to Gardendale, where it connects with the Eagle Ford Joint Venture pipeline. That pipeline is jointly owned by Plains and Enterprise Product Partners.

Crude output from the Permian Basin is forecast to rise by 53,000 b/d in February to 2.18 million b/d, Energy Information Administration data shows. Platts Analytics Bentek Energy projects volumes to rise by 244,000 b/d in 2017 to reach 2.27 million b/d, assuming a the rig activity stays constant.

"There is risk of [the rig count] moving higher with prices," said Jenna Delaney, Bentek senior analyst.

Current pipeline takeaway capacity from the Permian to the Gulf Coast is 750,000 b/d. The expansion of the Cactus combined with the startup of Enterprise's Midland-to-Sealy pipeline in mid-2018 will increase the region's pipeline away capacity by 440,000 b/d to 1.19 million b/d at that time.

Besides access to the Eagle Ford pipeline, crude oil delivered on the Cactus has access to dock facilities in Corpus Christi and neighboring Ingleside, facilitating export of the crude if the economics work to ship the crude out of the country.

Access to joint venture's dock facility in Corpus Christi and Ingleside, as well as dock capacity at other regional export facilities is available, including two 200,000 b/d Ingleside facilities owned by Occidental and Flint Hills, respectively.

Crude exports from the US Gulf Coast averaged 245,000 b/d in October, according to most recent data from the EIA. This is down from the 470,000 b/d peak export level in September. The spread between West Texas Intermediate and Brent futures prices narrowed to average $1.45/b in October from September's average spread of $2.02/b.

Some of the rising production of light, sweet crude oil from the Permian, Midland and San Juan basins of the Permian will push out imports of light, sweet crude by USGC refiners, replacing dwindling volumes of imports.

Imports of light, sweet crude into the USGC averaged 2.2 million barrels in 2015, down from 100 million barrels in 2012, EIA data shows.

At a disadvantage are land-locked Midland refiners, who have seen higher crude prices as takeaway capacity increases.

WTI at Midland averaged $53.38/b so far this year, putting it at 76 cent/b premium over WTI at Cushing, Oklahoma, the price point of the NYMEX crude futures contract, S&P Global Platts price assessment data showed. Last year, WTI Midland traded at an average 7 cent/barrel discount to Cushing barrels.

However, refiners in Corpus Christi and Three Rivers have benefited. The Eagle Ford JV Pipeline has a capacity of 660,000 b/d and serves the Three Rivers and Corpus Christi markets, which includes 835,000 b/d of refining capacity at four refineries.

--Janet McGurty,

--Edited by Richard Rubin,