Kinder Morgan Energy Partners LP has announced plans for a pipeline carrying crude oil from Texas to California have been deferred because of a lack of interest from refineries.
The Freedom pipeline would have been a mix of converted natural gas pipelines and new construction, with a capacity to carry up to 277 000 bpd of oil. The company said the project would have meant an investment of approximately US$ 2 billion.
However, key refiners feared getting locked into long-term commitments to receive pipeline oil from West Texas. Valero Energy Corp and Tesoro Corp both preferred getting deliveries by rail, which gives them the flexibility to shop among crude oil supplies from different places including the Bakken oilfield in North Dakota.
Kinder Morgan Energy Partners said its project drew some interest but enough to warrant construction.
“We don’t believe in the concept of build it and they will come,” said the company’s President of West Region Gas Pipelines, Mark Kissel. “We stated at the outset that we would not move forward with the project without customer support, and we did not receive enough interest for us to commit to building the project at this time,” he added.
Kissel concluded that there is a possibility of reviving the pipeline should the market express more interest. But in the meantime, he said, the company will focus on delivering crude by rail at West Coast and Texas locations.
The pipeline, which was originally proposed in April, would have started in Midland, Texas, in the middle of the Permian Basin oilfield, gone through southern New Mexico and Arizona and split in Barstow, California.
Edited from various sources by Cecilia Rehn.
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