FERC Monday issued a favorable environmental assessment (EA) of Trunkline Gas Co.’s proposal to convert a multi-state natural gas pipeline to crude oil service for the Gulf Coast market.
“Approval of the proposed project, with appropriate mitigating measures, would not constitute a major federal action significantly affecting the quality of the human environment,” staff of the Federal Energy Regulatory Commission said in its EA of the Trunkline Mainline Abandonment Project [CP12-491].
The repurposing of natural gas transportation assets to oil service has been gathering pace in the industry as dry gas prices continue to languish and demand for oil transport capacity increases substantially.
Trunkline is seeking approval to abandon nearly 770 miles of looped mainline for conversion to oil service. Trunkline wants to abandon natural gas pipeline facilities that run through Illinois, Kentucky, Tennessee, Mississippi, Arkansas, Louisiana and Texas. About 45 miles of 24-inch diameter gas pipeline would be abandoned from Buna, TX, in Jasper County to Longville, LA, in Beauregard Parish, and another 725 miles of 30-inch diameter pipe would be abandoned from Longville to Tuscola, IL. The 770 miles of looped mainline transmission pipeline, along with 15,850 hp of compression, would be sold to an affiliate (Energy Transfer Equity LP) of parent company Energy Transfer LP (see Daily GPI, Aug. 30, 2012).
Energy Transfer officials said they expect to obtain FERC approval to abandon the gas pipeline by the third quarter. The converted oil pipeline, expected to cost about $1.5 billion, could be in service by the middle of 2014.
The Trunkline conversion would create the first pipeline transportation option to carry crude oil to the eastern Gulf Coast from the Midwest.
The eastern Gulf Coast market is highly attractive for Canadian and Bakken crude, but it is not currently accessible by pipeline. “This project will be another significant step toward our goal of optimizing the Energy Transfer asset base, while helping solve the critical logistics bottlenecks in North America by connecting enormous reserves of oil to the most attractive markets in the U.S., near St. James, LA,” said Energy Transfer Partners CEO Mackie McCrea earlier this year (see Daily GPI, Feb. 20).
In late 2012, McCrea told analysts that “some concerns that were brought up from some shippers” about the conversion of the gas pipeline had been “alleviated…and we are confident that we’ll receive the approval to abandon it sometime [in the] second to third quarter of 2013.”
If everything goes as planned, he said, “we expect to bring it [online] by the second quarter or the middle of 2014. Depending on the shippers that sign up, it could range anywhere from 400,000 b/d to 600,000 b/d, whether it’s light crude or heavy crude. But we do anticipate that because of early conversations, it will probably be more around the 400,000-420,000 b/d starting mid-2014.”
Trunkline sees a big market for crude products along the Gulf Coast once its gas pipeline is converted. The potential market with the oil conversion includes a 2.05 million b/d refinery market in the Beaumont and Port Arthur, TX, areas, as well around the Lake Charles, LA, area. Potential also exists in the 2.1 million b/d-plus refinery market in the St. James/Baton Rouge, LA, area, as well as the 1.3 million b/d-plus refinery market in the Houston area.
The proposal has triggered protests from end-users, including Michigan customers, because it would reduce Trunkline’s service into the state to a single natural gas pipeline from two lines. Trunkline maintains its single line will serve all firm customers (see Daily GPI, Sept. 17, 2012).
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