Plains All American Pipeline LP is taking preliminary steps to shut down its California-to-Texas crude oil pipeline. The partnership is looking to sell the pipeline's 5.2 million bbl of crude oil line fill, for which it expects to earn $100 million, net of associated costs.
Plains bought the 1,233-mile, 30-in. All American Pipeline from Goodyear Tire & Rubber Co. last year, along with some associated gathering assets (OGJ, Mar. 30, 1998, p. 39). The line was designed to carry crude oil from California's Outer Continental Shelf to refiners in California and Texas.
The pipeline operators later looked at shipping Alaska North Slope crude in the line, as well as oil produced in California's San Joaquin Valley. But the biggest Alaska producers have affiliated West Coast refineries that process their ANS output, and demand for heavy, sour San Joaquin Valley crude for processing in US Gulf Coast refineries has not been sufficient to make that option viable.
As a result, the pipeline has been little more than a financial drain on its owners since it was first filled in 1987. Designed to handle 300,000 b/d of crude, the line has been operating at much lower throughput rates. Estimates of recent operating rates range from 40,000 b/d to 80,000 b/d.
The 5.2 million bbl of oil to be sold constitutes the line fill in the segment from Emidio, Calif., to McCamey, Tex. Plains will begin selling the crude in December and expects the sales to be complete by the end of the first quarter.
The partnership will use the proceeds to reduce debt.
"The line will initially be kept in a state of readiness to serve any third-party shippers that elect to transport crude oil on this segment of the line, subject to their providing the required 5.2 million bbl of crude oil line fill," said Plains. This is considered unlikely, however, as Plains has been the sole shipper on this segment of the pipeline since it acquired it from Goodyear.
Plains All American Inc. Pres. Harry Pefanis has said that, if no other shippers step forward to supply the line fill, Plains will consider other uses for the pipeline, such as shipping refined products or laying fiber optic cables.