Cushing-to-Houston pipeline to move Bakken, Midcon, Permian oil

By Luke Geiver | April 01, 2019

A Cushing-to-Houston light oil pipeline project pitched to help Bakken and Midcontinent producers send crude to the Texas Gulf Coast could expand to take additional barrels from the Permian. Magellan Midstream Partners LP and Navigator Energy Services have been holding an open season call for a 300,000 barrel per day pipeline project that would move shale oil sent to Cushing onto refineries or an export site in Houston since early 2019.

The partnership recently announced a plan to extend the open season until May 31 to allow for the possibility of adding an oil origination point in Midland, Texas. According to Magellan and Navigator, several potential shippers have requested the evaluation of adding a Midland origin point to the pipeline to help move barrels from the Permian. The Midland origin could be accomplished in part through Voyager’s use of an existing Magellan pipeline that may be idled in the near future as part of Magellan’s announced West Texas refined products pipeline expansions project, Magellan said. Voyager would have the ability to use an existing Magellan terminal in Frost to construct assets needed to connect to the Cushing-to-Houston segment.

Magellan owns a 50 percent stake in Seabrook Logistics LLC, a gulf coast export site that will be used to send shale oil from the Bakken, Midcontinent and now potentially the Permian to locations like South Korea.

In the past several months, takeaway constraints in the Permian have made oil prices from the region trade at a lower price compared to oil moved through Cushing. However, a recent update from the U.S. Energy Information Administration shows that the price disparity has been eased to additional pipeline capacity from the Permian to Houston. “WTI Midland prices still trade lower than Houston crude prices,” EIA said, “suggesting that the region still faces some takeaway constraints in shipping Permian crude oil to the U.S. Gulf Coast. Most recently,” EIA said on March 26, “the difference has been about $7 per barrel, which is less of a discount that in the middle of 2018.”

Navigator Energy’s main focus is on the Midcontinent shale plays of the SCOOP and STACK. The company owns and operates at 250-mile oil gathering network.