The Mother of All Pipeline Reversals

The Mother of All Pipeline Reversals

Nearly eight years ago, the 500-mile Seaway Pipeline became the nation’s first of its kind to reverse the direction crude oil traditionally flowed south to north. An historic moment without question, and the U.S. shale revolution no doubt played the starring role in that boardroom decision. Since then others like Lotus Midstream have mulled the prospect of changing flow course on its Centurion Pipeline, but the 633-mile, 40-inch Capline soon will eclipse the size and scope of any other oil pipeline reversal in American history.

Originating in St. James, La., on the Gulf Coast, the Capline terminates in Patoka, Ill., and bookmarks the nation’s longest and largest crude oil pipeline. With a capacity of 1.2 million BPD, Capline traditionally has supplied midwestern refineries with imported crude oil. But all that came to a screeching halt when the Bakken said, “Not so fast, cowboy” with its prolific oil shale production. Declining supply movement from the south quickly put the Capline in a virtual standstill, moving less than 14% of its total capacity—or about 16,000 BPD—headed north.

Time to regroup.

Capline partners Plains All American, Marathon and BP a year ago announced a binding open season for the pipeline’s reversal and, to date, the JV has completed purging on the mainline to remove contaminants from the pipe. But for a pipeline once considered a major artery for imports, the Capline faces serious competition with new pipeline onboards. Nevertheless, the Capline is expected to begin light crude service by the middle of next year and heavy crude service in 2022, boosting flows of Canadian and Mid-Continent crude oil flowing north to the La., Gulf Coast.

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‘Fullstream’ Ahead for Baker Hughes

‘Fullstream’ Ahead for Baker Hughes

​Perhaps no other oil and gas-related company offers a history steeped in Hollywood glamor, unfathomable riches, intrigue, drama, and reinvention than Baker Hughes. What yesteryear created with the partnership of Baker Oil Tool Company and Hughes Tool Company (which ultimately would be led by eccentric billionaire Howard Hughes), is stuff of legend. But one thing is clear. Among the world’s three oilfield services giants, Houston-based Baker Hughes has never stopped reinventing itself. And it’s paying off.

Baker Hughes

Baker Hughes Company is an international industrial service company and one of the world’s largest oil field services companies. The company provides the oil and gas industry with products and services for oil drilling, formation evaluation, completion, production and reservoir consulting.

www.bakerhughes.com

Fact is the oil patch has been less than kind to oilfield services companies over the last few years. Contraction in the industry and consolidation through “mergers of equals” have been a battle cry from Wall Street after stinging butt-whips in the E&P sector. The number of rigs to drill-baby-drill peaked in 2014 from 1,609 collapsing two years later to 325. Those numbers have slowly crawled up to 676 as of Jan. 24.

Two of the three oilfield services titans—Houston-based Halliburton and Schlumberger—took a serious belt-beating last year writing down more than $10 billion in losses. Baker Hughes, on the other hand, ended 2019 in the black. This, after waving bye-bye to its hydraulic fracturing products and services and putting its money on manufacturing turbines and LNG equipment, and developing digital oilfield and “clean energy” technologies for exploration and production both on- and offshore. Coming off its separation from GE, Baker Hughes now touts a new brand and a new descriptor as the “first and only fullstream energy services company.” Howard would be pleased.

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The Money Backers: Stonepeak

The Money Backers: Stonepeak

Stonepeak Infrastructure Partners spreads its wealth across a veritable Who’s Who in midstream operations. While not a pure-player in oil and gas, this N.Y.-based private equity firm positions itself as a hard-asset investor in energy, power and renewables, transportation, utilities, water and communications, managing more than $15 billion of investments. But in the midstream oil and gas realm, Stonepeak recently has made a grand staircase entrance that could make even Rhett Butler whisper “Whoa.

Stonepeak

Stonepeak is an independent asset manager focused on North American infrastructure investments in transportation, communication, water, midstream energy, power generation (including renewables) and utilities.

stonepeakpartners.com

Let’s take a look at the latest movers and shakers worthy of Stonepeak’s attention and capital starting in 2019.

Midland-based Oryx Midstream grabbed headlines and double-takes last year when Stonepeak outright purchased the company for $3.6 billion. Oryx is the largest privately held midstream crude operator in the Permian with 2.1 million Bbls of storage and 1,200 miles of in-service and under-construction pipelines that span eight counties in Texas and two in New Mexico.

Then there’s the Whistler Pipeline operated by Midland-based West Texas Gas, a public gas utility that services Texas and Okla. Stonepeak jumped into this project early on last June which will flow 2 BCFD of Permian natural gas via a 475-mile pipeline from Waha, Texas, to the Agua Dulce area near the Gulf Coast. Whistler is expected to go online in late 2021.

Other Stonepeak Midstream Investments Worthy of Mention

Stonepeak, in its 11 years of managing investment funds in the energy midstream sector, also has picked up a number of other oil and gas infrastructure gems over the last few years.

Richmond, Va.-based Dominion Midstream, a subsidiary of Dominion Resources, not only owns and operates natural gas terminaling, processing, storage, and transportation assets but also the Cove Point LNG export facility in the Chesapeake Bay, Md. The second largest LNG export facility in the U.S., Cove Point loaded its 100th vessel last November.

MPLX, a partnership with Marathon Petroleum, is one of the largest natural gas and NGL service providers in the U.S., processing more than 75% of total rich-gas production from the Marcellus and Utica.

Phillips 66, Targa, Plains All American Pipeline, and Sanchez Midstream also sit comfortably in Stonepeak’s portfolio—one that continues to ripen.

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A Sign of the Times for U.S. Natural Gas

A Sign of the Times for U.S. Natural Gas

After two years in suspended animation, the U.S.-Mexico-Canada Agreement (USMCA) will be signed on the dotted line Jan. 29. The deal appears a bellwether for cross-border energy trade and investments in critical oil and gas infrastructure between the U.S. and Mexico, no doubt accelerating midstream projects to bring more crude and natural gas to our southern neighbor.

Demand growth for natural gas in Mexico isn’t just on an adolescent spurt—it’s on sterioids—and projected to rise 27% by 2031. More than 65% of the country’s consumption depends on U.S. supply, making Mexico our largest customer with 3.4 Tcf of flows in the first half of last year alone and 90% of that gas pipelined. According to the EIA, natural gas and LNG exports to Mexico more than doubled in 2019 and are expected to double again by 2021.

No fewer than 10 natural gas pipelines are currently under construction in Mexico with two proposed LNG export facilities, including Sempra’s Costa Azul liquefaction project, itching to leave the drawing board. Kinder Morgan’s expansion of its 61-mile Sierrita Pipeline is expected to go online in April with an initial capacity of 523 MMCFD.

USMCA and energy reform in Mexico via the transition to gas-fired power plants; to address increased tourism; supply underserved areas; or climb aboard the LNG Export Express, offers the U.S. a tremendous opportunity to build more oil and gas border connections and provide a steady stream of energy for the long term.

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Company Spotlight:  Hess Midstream

Company Spotlight: Hess Midstream

ExxonMobil might have secured the title “Explorer of the Year” last month after making another ginormous oil discovery, but there’s another partner on the project soon making hay on a find estimated at 6 billion Bbls of crude—and the name is Hess. New York-based Hess Corporation also happens to be one of the largest oil, gas and water midstream players in the Bakken, where its subsidiary Hess Midstream exclusively focuses. And for good reason—Hess operates more than 800,000 net acres there, producing more than 156,000 BPD of oil.

Hess Midstream

Hess Midstream (NYSE: HESM) is a fee-based, growth-oriented midstream company that owns high-quality infrastructure located in the core of the Bakken.

www.hessmidstream.com

Between its exotic offshore E&P and joint venture projects in Guyana, Libya, Malaysia/Thailand, Denmark, and the Gulf of Mexico, Hess’ U.S. operations are limited to North Dakota’s Williston Basin. There, the company claims more drilling spacing units in the core of the Bakken play than any other operator. To move all that production, Hess Midstream continues to build upon its extensive integrated network, which includes oil and gas gathering, processing and storage, terminaling and export, and water management for both its own supplies and third parties.

In the sweet spot of the Bakken, Hess operates 1,200 miles of natural gas and NGL gathering pipelines; two gas processing plants; 400 miles of crude oil gathering pipe; a 385 MBPD crude oil terminal; and 250 miles of water-gathering pipelines. The company most recently announced a capacity expansion of its Tioga gas plant from 350 MMCFD to 500.

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