* Eagle North pipeline to link Valero refinery to Cushing
* Capacity may exceed 30,000 bpd -Reuters estimate
* Added offtake capacity at Cushing could boost WTI prices
By Robert Campbell
NEW YORK, Oct 5 A Valero refinery in Ardmore,
Oklahoma will soon be able to begin tapping into cheap crude
oil at the giant Cushing, Oklahoma storage hub, possibly easing
a bottleneck that has distorted benchmark U.S. oil prices for
Blueknight Energy Partners LP BKEP.PK expects to complete
its Eagle North pipeline reactivation project in the fourth
quarter, connecting Valero Energy Corp's (VLO.N) Ardmore
refinery with Cushing for the first time, a Blueknight
The partnership, controlled by global oil trading giant
Vitol [VITOLV.UL], declined to discuss the capacity or expected
throughput of the pipeline, citing competitive concerns and
An industry rule of thumb suggests the 8-inch pipeline
could carry up to 32,000 barrels per day of crude oil,
according to Reuters calculations.
U.S. West Texas Intermediate crude oil futures CLc1,
which have their delivery point at Cushing, have often traded
at a substantial discount North Sea Brent due to a shortage of
outbound pipeline capacity at Cushing.
The 90,000 bpd Ardmore refinery currently runs crude oil
produced in Oklahoma as well as oil brought up from the coast
of the Gulf of Mexico, Valero spokesman Bill Day said.
"Anything that boosts offtake from Cushing will likely have
an impact on the pricing structure of WTI but I'm not sure a
30,000 bpd line will offset the impact of all the Canadian
barrels coming in," said one U.S. crude oil trader.
Growing Canadian oil production and the reversal of
pipelines that once carried West Texas and Oklahoma crude oil
to the upper Midwest have been blamed for the glut at Cushing.
Any relief brought by Eagle North may be short-lived,
however, as new inbound pipeline connections to Cushing are
under construction and a proposed major outbound link announced
on Tuesday by Enbridge Inc (ENB.TO) (ENB.N) is probably years
away from beginning operations. [ID:nN05183843]
An extension of TransCanada Corp's (TRP.TO) Keystone
pipeline to Cushing is due to start operations in early 2011.
The Eagle North pipeline reactivation has been on hold for
several years due to the bankruptcy of SemGroup L.P., which
previously controlled Blueknight.
Vitol is helping to fund the project by prepaying $5.5
million in shipping fees on the pipeline under a throughput
agreement, Blueknight said in a filing with securities
regulators last month.
(Editing by David Gregorio)