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Zydeco Holding Open Season For Crude Oil Replacement Line in Louisiana

Zydeco Pipeline Co. LLC, jointly owned by a unit of Royal Dutch Shell plc and its master limited partnership, is holding a nonbinding open season for capacity on a possible new crude oil pipeline in Louisiana.

The Houston-based company, jointly owned by Shell Midstream Partners LP (62.5% stake) and Shell Pipeline Co. LP (37.5%),  said it will gauge customer interest in firm transportation capacity for a larger pipeline that would replace an existing pipeline connecting its terminal in Houma to a market hub in St. James Parish. The current 18-inch diameter pipeline has capacity of 270,000 b/d.

"This new capacity would allow us to better serve our customers by providing a consistent and efficient route for transporting their crude while positioning Houma to grow into a more prominent terminal for increased onshore and offshore supply," said Shell Midstream Partners CEO John Hollowell.

Separately Monday, Zydeco said "shipper demand has exceeded capacity from Houma to St. James, resulting in proration of the line over the past one and a half years. Consistent shipper demand to access the St. James market from Texas and from offshore, together with forecasted increases in offshore production and domestic supply into Texas origins, indicate that the market will need additional capacity between Houma and St. James."

The nonbinding open season continues until 5:00 p.m. CST on Dec. 11. Zydeco said if enough interest is expressed in a new pipeline it may proceed with a binding open season. The company added that all firm capacity commitments on the new line would be subject to a small premium to the equivalent spot rate.

Pending regulatory approval by the Federal Energy Regulatory Commission, Zydeco expects to complete construction in early 2018.

The Zydeco system includes more than 350 miles of pipeline. Its pipeline running from Houston to Houma -- also known as the Ho-Ho system -- includes 20-inch diameter pipeline from Houston to Nederland and Port Neches, TX; 12-inch pipe from Nederland to Port Neches; 22-inch pipe from Port Neches to Erath and Houma, LA; 24-inch pipe from Houma to Clovelly, LA; and the aforementioned 18-inch pipe from Houma to St. James.

Shell Midstream Partners LP debuted as an MLP a year ago (see Daily GPIOct. 29, 2014).

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