Cactus Oil Pipeline to Begin Partial Operation Next Week

Cactus Oil Pipeline to Begin Partial Operation Next Week

  • Plains All American’s Cactus II pipeline that will carry crude oil from the Permian Basin to Corpus Christi in Texas will begin partial commercial operations next week, the company’s chief executive stated during the company’s second-quarter financial results, as quoted by Reuters.
  • Cactus II has a nameplate capacity of 670,000 barrels daily and is one of three pipelines in the oil industry in Texas and New Mexico.

Houston-based Plains has filled about half the crude line, which runs from the Permian Basin in West Texas to the U.S. Gulf Coast. It plans to start full operation by the first quarter of 2020, the CEO told investors on a conference call.

The Plains pipeline would be the first of three new lines beginning operations in the next few months that is expected to ease a bottleneck in West Texas that has weighed on regional oil prices. The pipeline will be able to connect to the Corpus Christi, Texas, area, which includes extensive crude export and storage terminals, by the end of September.

While production from the Permian shale rises, pipeline capacity has lagged behind, pressuring prices. The pipeline capacity shortage forced companies active in what many call the star of the shale patch to sell their crude at a painful discount, which has cost them both profits and market cap: Bloomberg calculated that over just two weeks last June, Permian drillers lost a combined U.S. $15.6 billion in market value, or over U.S. $1 billion per day, with some of the shares booking double-digit drops.

Plains All American announced its plans to build Cactus II in February 2018, saying it will have an initial capacity of 585,000 bpd. The company also said at the time, the pipeline had been fully committed at this amount in long-term contracts.