Energy Transfer Asks For Permission To Turn Pipelines To Oil Storage

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Pipeline giant Energy Transfer will be asking the Texas Railroad Commission to allow it to idle two pipelines in Texas and turn them into storage for around 2 million barrels of oil, the company told Argus Media this week.

U.S. oil producers are struggling amid collapsing demand and oil prices while inventories across America are growing. Producers in Texas struggle to place their barrels with the U.S. Gulf Coast refineries, which are cutting crude processing rates in response to plunging fuel demand. The massive oil demand drop in the U.S. and overseas due to lockdowns in the COVID-19 pandemic has had U.S. oil producers scrambling to find storage for their produced barrels when no one wants more oil right now. 

Earlier this month, Enterprise Products Partners applied to open the northbound capacity of its Seaway pipeline, offering U.S. oil producers struggling to place their oil near the Gulf Coast to ship their barrels to the primary storage hub at Cushing, Oklahoma.    

“Given the current turmoil in the crude oil market, including impacts on both refinery and export demand, there is strong market interest to access the Cushing storage market,” the pipeline operator said in a filing with the U.S. Federal Energy Regulatory Commission (FERC), as carried by Reuters.  

But many analysts think that available storage in Cushing will fill up by the middle of May, or the end of May, at the latest, if demand doesn’t materially pick up by then. This is an unlikely scenario, considering the lockdowns and work from home policies in many states.

If Energy Transfer’s plan to idle two Texas pipelines for storage is approved, “After that it will be a matter of adding pumps to the lines, which we can easily achieve,” Energy Transfer told Argus this week.

“We estimate we can be ready by mid-May,” a spokeswoman for the company told Bloomberg in an email.  

By Tsvetana Paraskova for Oilprice.com