More than 7mn bpd of crude oil pipeline capacity connects to the Cushing, OK, storage hub. Historically, most of those pipelines had a single point of origin and one destination. But, times have changed. To take advantage of booming production regions and burgeoning export markets, pipeline operators and shippers added numerous injection, offtake, and other pipeline interconnectivity points. Today, Cushing’s pipeline infrastructure resembles a convoluted spider's web.
Even though many of these offtake and injection points are not new within the last five years, the volumes and utilization rates of those linkages have evolved. Many of these interconnectivity changes have an impact on Cushing storage levels and the overall crude slate selected by refineries.
Genscape’s new remote sensing technique, TankFlow, uses a set of innovative image processing techniques and machine learning algorithms to measure those volumes. With TankFlow, Genscape provides subscribers with a nuanced, never-before-seen view into the Mid-Continent crude oil supply chain.
The Basin-Duncan Offtake Point
The Duncan, OK, station along Plains All American's 550,000 bpd Wichita Falls, TX,-to-Oklahoma Basin pipeline began operations around 2006. At the station, two 120,000-bbl crude oil storage tanks are used to divert crude from the Basin pipeline to CVR Refining's 70,000 bpd Wynnewood, OK, refinery, but these volumes are not typically reported to any state or federal agency. Using TankFlow, Genscape tracks the diversion of crude on a real-time basis, providing critical visibility into a key micro balance in the Mid-Continent region. Observations from TankFlow show that volumes diverted to the Wynnewood refinery began dropping significantly in mid-to-late 2018. The decline coincides with the refinery sourcing more South Central Oklahoma Oil Province (SCOOP) play crude from the Velocity Midstream Partners system, according to CVR's Q3 2018 earnings call in October 2018. Using TankFlow, Genscape subscribers would have observed this shift months in advance.
The Pony Express-Ponca City Offtake Point
Tallgrass Energy's 320,000 bpd Guernsey, WY, to Cushing Pony Express pipeline historically facilitated the transportation of crude from the Bakken, Denver Julesburg, and Powder River plays directly to Cushing. As of January 2018, the pipeline can divert crude to three separate refineries: Phillips 66 Ponca City, OK (203,000 bpd), Holly Frontier El Dorado, KS (138,000 bpd), and CHS McPherson, KS (86,000 bpd). The pipeline's Ponca City connection, which, along with El Dorado, is monitored by Genscape via TankFlow, can divert up to 100,000 bpd from the Pony Express mainline. Genscape monitors how much crude is siphoned at the refinery, thereby not reaching Cushing.
TankFlow also identifies displacement of other sources of feedstock. For example, in mid-2018, Genscape observed an increase in Permian crude sourced from Phillips 66's Wichita Falls-to-Ponca City, OK, Mainline to Phillips 66's Ponca City refinery. The pipeline averaged almost 18,000 bpd in July 2018, after not shipping a single barrel the month before. At the same time, the refinery began sourcing less from Pony Express, as the WTI-Midland/WTI-Cushing differential approached $17/bbl, thereby incentivizing the purchase of Permian crude over other slates.
We observed a similar dynamic in November 2018, when the refinery increased its feedstock from the OK Mainline by more than 140 percent in response to an influx of Permian crude hitting the Wichita Falls terminal. In November 2018, Plains' 500,000 bpd Sunrise Expansion pipeline, which terminates at Wichita Falls, become operational. Phillips 66’s OK Mainline, which originates at Wichita Falls, is just one of the Wichita Falls outlets to absorb the additional 250,000 bpd of feedstock from the Sunrise Expansion pipeline.
The Basin-Lindsay Injection Point
Oklahoma production is expected to increase to more than 620,000 bpd by June 2019, up from 450,000 bpd just two years earlier, according to Genscape's U.S. Crude Production Forecast. Oklahoma's SCOOP and Sooner Trend, Anadarko, Canadian and Kingfisher (STACK) plays, one of the engines of that growth, has expanded its crude transportation infrastructure required to get that crude to market . The Lindsay Station, now monitored by Genscape, is a prime example.
In 2014, as Oklahoma crude production surpassed 400,000 bpd, Plains built two 120,000-bbl crude oil storage tanks at the Lindsay Station in northwestern Garvin County, OK. The station is linked to Velocity Midstream's SCOOP and Merge oil infrastructure assets. With the capacity to inject approximately 80,000 bpd of SCOOP crude into the Basin pipeline for delivery to Cushing, the Lindsay Station quickly became a key connection point for Oklahoma producers and shippers.
Until now, injections at the Lindsey Station were a complete unknown. With Genscape's new visibility into injected volumes, subscribers can gain insight and transparency into the overall Cushing balance.
As operators continue to expand on existing crude oil transportation networks, traders, shippers, analysts, and other market participants need more transparency into the Mid-Continent crude balance and the micro balances that comprise it. The rise of Oklahoma production will bring new feeder and takeaway locations. Genscape is committed to expanding our sensor network to provide the monitoring and analysis needed to understand the Mid-Continent crude balance.