Midstream service providers, Enterprise Products Partners L.P (EPD) and Energy Transfer Partners L.P. (ETP) have scrapped their proposed joint venture (JV) to build a pipeline from Cushing, Oklahoma to Houston, Texas.
Both parties had already extended the open commitment season twice in order to give shippers more time to commit pipeline capacity. Despite creating significant shipper interest, the group was unsuccessful in securing sufficient terms for making the project commercially viable.
In April, Enterprise Products entered into a 50-50 JV deal with Energy Transfer to design and construct the 584-mile crude oil pipeline. It would have facilitated the U.S. Gulf Coast-area refining complex with more than 450,000 barrels per day of crude oil supplies that are currently locked at the Cushing hub and priced at a discount to imported crude oil on the Gulf Coast.
A bottleneck in shipping crude oil from Cushing to the Gulf Coast refineries has been formed due to insufficient pipeline capacity. Increasing U.S. and Canadian onshore production has created a surplus at Cushing, stranding supplies. Apart from higher output from the Midcontinent region, supplies from Canada are also on the rise. Additionally, the development of Bone Springs/Avalon, Bakken and Barnett shale plays are ramping up. The scrapped pipeline could have been a key outlet for the Gulf Coast market.
Enterprise highlighted that it will remain committed to developing a crude oil pipeline from Cushing to the Gulf Coast, and will continue to work with potential shippers to secure additional support for the project.
Enterprise Products Partners is a leading master limited partnership (MLP) engaged in providing a wide range of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGL) and crude oil.
Dallas, Texas-based Energy Transfer Partners is also an MLP engaged primarily in two businesses: the gathering, processing, storage and transportation of natural gas, and the distribution of propane.
We maintain our long-term Neutral recommendation on both partnership companies, which also hold Zacks #3 Rank (short-term Hold rating).
ENTERPRISE PROD (EPD): Free Stock Analysis Report
ENERGY TRAN PTR (ETP): Free Stock Analysis Report
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