Southern California oil pipeline system undergoing rapid change

The terrain of the Southern California oil pipeline system is rapidly changing again in response to increased oil production inland and a lack of pipeline capacity to handle it.

All that should change when the new Pacific Pipeline System Inc. (PPSI) route is finished later this year, increasing throughput capacity to Los Angeles-area refineries via its $165 million, 132-mile, 20-in. insulated crude oil pipeline designed to carry 130,000 b/d, mostly San Joaquin Valley (SJV) and Offshore California crudes (OGJ, May 5, 1997, p. 54, and Oct. 14, 1996, p. 32).

Although the offshore stream has declined (see related story, p. 26), SJV output has increased enough in recent years that ARCO Pipe Line Co.'s Line No. 63 is running at capacity-averaging just over 100,000 b/d-and has been prorating throughput since February.

ARCO was poised to compete with PPSI, but in September the companies decided instead to merge their Southern California operations. Once the California Public Utilities Commission (CPUC) approves it, a new company called Pacific Pipeline System LLC will be formed, with a combined average throughput capacity of 235,000 b/d of light and heavy crudes.

The merger was taken "for operational flexibility and efficiencies," explained Paul Langland, spokesman for ARCO Products Co. It was attractive in the wake of what Langland called "a model joint venture" in the Texas-Oklahoma pipeline circuit, involving ARCO's 20-in. Cushing, Okla., crude oil line and Phillips Petroleum Co.'s 30-in. Texas Seaways Pipeline, which was converted from gas to oil. Both lines are now run by jointly owned Seaways Pipeline Co.

Other developments

In other recent Southern California crude oil transportation developments:

Early last year, All-American Pipe Line Co. (AAPL) announced an agreement "to team up with ARCO to compete with the Pacific Pipeline," said Jordan Janak of AAPL. That deal entailed reversing ARCO's Line No. 90 to handle SJV crude, instead of the declining Alaskan North Slope crude it transported from Los Angeles eastward until early this year. But the accord was never consummated, Janak said, "because we couldn't get any commitments from producers." The new ARCO-PPSI merger "really doesn't affect AAPL," Janak said, especially since it has its own agreement with PPSI to take oil gathered from both offshore and onshore sources at a connection at Emidio, Calif. AAPL's 300,000 b/d capacity line begins at Santa Barbara, Calif., currently transporting an average 100,000 b/d of California Outer Continental Shelf crude via interconnects to Los Angeles-area refineries and an average 100,000 b/d of SJV crude for transport in roughly equal batches to Los Angeles and West Texas.
AAPL was acquired by Plains Resources Inc., Houston, along with related gathering and trading assets from Goodyear Tire & Rubber Co. for $420 million in cash earlier this year (OGJ, Mar. 30, 1998, p. 39). Plains believes it can find markets for SJV crude in the Midcontinent region via its terminal in Oklahoma, said the firm's business development manager, Allen Herbert.
Instead of reversing Line No. 90 for crude oil, ARCO sold the pipeline (and associated lines, Nos. 91 and 92) in June for $40 million to Questar Pipeline Co., which intends to reverse the flow, but for natural gas instead. The system extends 700 miles from Long Beach to New Mexico's Paradox basin. Questar is currently refurbishing the line and expects capacity to be 130 MMcfd.
ARCO's Line 1, down since the 1994 Northridge, Calif., earthquake, still has active portions in San Joaquin Valley, primarily used as gathering lines. Instead of reactivating the leg extending to Los Angeles, the company is analyzing its use for fiber optics instead of oil.
Unocal Corp. built a unit-train terminal at Mojave, Calif., to transport SJV crude to Los Angeles-area refineries a few years ago, but has since sold all its California refining and marketing assets to Tosco Refining Co. Now Tosco is taking OCS and SJV crude from AAPL to its Carson, Calif., refinery via the Mojave train at an average of 40,000 b/d. The company has yet to make a decision on using the PPSI line instead.
An agreement to place oil tanker routes at least 50 miles off the California coast to reduce risks of spills near certain marine sanctuaries was signed last summer.
In May, Mobil Corp. began shipping about 10,000 b/d of oil by railroad from Monterey County to Los Angeles, ending the company's nearly 50 years of using tankers instead. The move was prompted by Chevron Corp.'s plans to close its Estero marine terminal in San Luis Obispo County when the PPSI line is finished and move its 48,000 b/d Central Valley crude via pipeline instead of tankers. Chevron will be trading that oil with Equilon Enterprises LLC (a refining/marketing joint venture of Shell Oil Co., Texaco Inc., and Saudi Aramco) for Equilon's Midway/Sunset and Kern Valley crudes for transporting via Equilon's system to PPSI and on to the Los Angeles area. Local jurisdictions hope Mobil will give up its train transportation and follow Chevron'slead, shipping crude in pipelines. It could use the Chevron pipeline from Estero to Kern County, but if not, Chevron is weighing other uses for the route.
Plans are under way by cable television companies to turn Chevron's Estero terminal into a central fiber optic landing site-using Chevron's pipelines and rights-of-way-entailing six new buildings for switching and translation services.