June 27, 2019 / 7:19 PM / 4 months ago

Exclusive: Plains' Cactus II oil pipeline to begin line fill in a week - source

NEW YORK (Reuters) - Plains All American Pipeline LP’s 670,000 barrel-per-day (bpd) Cactus II oil pipeline system from the Permian basin to the Corpus Christi, Texas area will commence line fill within a week, a source with direct knowledge of the matter said on Thursday.

Line fill refers to the process of filling oil in a new pipeline before commercial deliveries can begin.

Plains did not immediately respond to requests for comment.

The pipeline operator said this month the Cactus II project is progressing on schedule for initial service by the end of the third quarter of 2019.

“We have over 90% of the pipe in the ground and we’re working diligently toward completion,” a company executive said during its investor day about two weeks ago.

Once line fill is complete, commodities merchant Trafigura, one of the largest shippers on the line, will be shipping full contractual volumes, the source said.

Trafigura signed a long-term agreement with Plains last year to transport a total of 300,000 bpd of crude and condensate on the Cactus II pipeline from the Permian basin, the biggest oilfield in the U.S., to the port of Corpus Christi.

The trading house is one of the biggest exporters of U.S. crude and the deal with Plains will allow it deliver crude to U.S. Gulf Coast refiners, ship the oil to its condensate splitters and export terminal in Corpus Christi, which it co-owns with Buckeye Partners L.P (BPL.N).

Pipeline takeaway constraints had slowed production growth and weighed on oil prices in the Permian basin but midstream companies have announced several new projects, such as Cactus II, to help clear the transportation bottleneck.

A shale boom has helped propel the United States to the position of the biggest oil producer in the world and the Permian basin has accounted for a large part of output growth in recent years.

Exports of U.S. crude have surged to a record at nearly 4 million bpd after Washington lifted a ban in late 2015.

Other shippers on the Cactus II line include Concho Resources Inc and Anadarko Petroleum Corp , according to the companies.

Two other pipelines are also on track to begin service this year to transport Permian crude to the Gulf Coast.

“With the impending start-ups of Cactus II, EPIC, and Gray Oak, there will be about 2 million bpd of crude capacity delivering into Corpus Christi from the Permian, with the majority, if not all, of the incremental supply destined for international markets via the docks,” Barclays analysts said in a note.

Reporting by Devika Krishna Kumar in New York; Editing by Paul Simao and Marguerita Choy

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