Spaghetti-Like Pipeline System Falls Short as Gulf Flows Lag

(Bloomberg) -- Harvey is putting a new spotlight on a spaghetti-like network of petroleum pipelines that run across the plains and fields of Texas, disrupting the ability of at least two major Gulf Coast conduits to send fuels north.

The 5,500-mile Colonial Pipeline, a top transporter of gasoline for the Northeast, has closed part of its line after "the pace of supply" fell from refiners damaged by the storm. Meanwhile, Explorer Pipeline Inc. shut its lines to Tulsa and Chicago citing similar issues.

Why is the pace of supply so important? You need fuel to push fuel. Pumps at the start of a pipe get things moving, and those at its end suck product out. But it’s simple momentum, so-called operating pressure, that keeps it moving in pipes that can run hundreds and even thousands of miles long. Without enough bulk at the back end, things come to a halt.

"It’s not as much running out of supply as the timing, the speed at which supply gets to market," said Buster Brown, Colonial Pipeline Co.’s director of scheduling. “The issue is the pace of supply we’re getting from the origins."

The pipeline challenges come as the industry works to recover from a storm that hit the Gulf Coast with Category 4 force on Aug. 25 near Corpus Christi, Texas, inundating the surrounding area with flooding rains. That surge, and the storm’s slow movement along the coast as a tropical storm, crippled refineries and hampered crude production throughout the region.

Texas accounts for about one-sixth of total pipeline mileage in the U.S., making it the largest system in the country, with most starting or ending on the Gulf Coast, where as many as 35 major refineries are located, according to a report by Lipow Oil Associates LLC in Houston. At least two dozen companies operate pipeline assets in Texas and Louisiana, the Association of Oil Pipe Lines, a Washington-based industry lobbying group, said.

Most pipeline operators in that region upgraded their systems over the past few years, as part of a concentrated push to withstand storms after Hurricanes Katrina and Rita hit the region in 2005 and Ike came in 2008, according to a 2016 study by the U.S. Energy Information Administration.

Alternate Centers

Those upgrades included new electrical systems with battery backup, as well as elevated control rooms and pump stations. In some cases, operators set up alternate control centers or office space away from storm-prone areas, the U.S. Department of Energy said in a separate report.

That helped them survive the flooding from Harvey. Now, the operators are hoping that efforts by Valero Energy Corp., Citgo Petroleum Corp., both said to be restarting their refineries near Corpus Christi, are the initial steps toward a regional revival. At the same time, the U.S. government is set to release 1 million barrels of oil from its Strategic Petroleum Reserve, the first emergency discharge in five years.

"While there are hurdles to putting things back, there has not been catastrophic damage" to Gulf Coast pipelines, said John Stoody, vice president of government and public relations at the pipe line association. Now, though, “we are seeing reduction in service, and it will take time to return."

Motiva Plant

Until that new supply kicks in, pipelines will struggle to keep the flow moving. Motiva Enterprises LLC’s Port Arthur plant in Texas, the largest U.S. refinery, remains shut due to flooding.

“In some storms, we have recovered pretty quickly,” said John Auers, executive vice president at energy consultant Turner Mason & Co., in a telephone interview. "However, this Harvey is an epic rain event, and right in the heart of the refining industry."

Colonial, which moves 1.3 million barrels a day of gasoline, said its lines are running east of Lake Charles, Louisiana, though operations are down in the Houston area.

"Deliveries will be intermittent and dependent on terminal and refinery supply," the company said in a statement. The operator is seeking to resume service from Houston on Sunday, the company said.

Explorer plans to resume service on its lines to Tulsa and Chicago on Saturday and Sunday, respectively, spokesman Dolin Argo said in an emailed statement on Thursday.

Lower Flows

Pipeline operators can reduce pressures to accommodate lower flows, but how low depends on the types of pumps and valves a line has, according to Stoody. A few can operate down to 20 percent, he said. If supply is below minimum levels, operators can collect supply into tanks until they have enough to flow a batch to its destination.

Other lines have also been slowed. Magellan Midstream Partners LP was able to restart one products line into Houston, the company said, but others remain suspended. It also began limited service on the Houston crude distribution system. But the company has also shut its Longhorn and BridgeTex crude pipes, stranding 675,000 barrels a day of oil.

Companies are working to assess the safety and potential damage of assets they’re able to access, according to Christi Craddick, chair of the Railroad Commission of Texas, which has regulatory authority over the state’s oil and gas industry. But in the coastal areas where Harvey did its worst, flooding is preventing operators from even being able to inspect some sites, she said.

"Until the water goes down and we can really go in make an assessment, I don’t think anybody knows yet what assets look like" in the areas hardest hit by Harvey, Craddick said in a telephone interview. "We don’t have a time line at this point."

--With assistance from Laura Blewitt

To contact the reporters on this story: Meenal Vamburkar in New York at mvamburkar@bloomberg.net, Sheela Tobben in New York at vtobben@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Joe Carroll