Double E Pipeline Cancelled, Now WTI will be Cheap for Longer

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Double E Pipeline Cancelled, Now WTI will be Cheap for Longer

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abarrelfull wrote on 22 Aug 2011 08:29
Tags: energy-transfer enterprise pipeline usa

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I read some news that really shocked me over the weekend

Enterprise Products Partners L.P. (NYSE: EPD) today announced it will not be moving forward with a proposed joint venture with Energy Transfer Partners L.P. to develop and construct a 584-mile crude oil pipeline from Cushing, Oklahoma to Houston

We have an unprecedented spread between WTI and Brent, caused by a lack of transport infrastructure. If you could magically make a pipeline today, oil companies would happily pay $10 a barrel to shift their crude to the coast.

The Double E Pipeline Project, unlike its Keystone Pipeline rival can be completed pretty quickly, due to the use of existing pipelines for half of its length. It looks to me like the biggest no brainer in the history of pipelines. Yet it is not to be:

While the recently completed binding open commitment period generated significant shipper interest, agreements with the capacity and terms necessary to commercially support the project as planned were not sufficient.

Is there no appetite for risk in this business? Is there not a more entrepreneurial financing option? It would certainly be a project that I would be interested in, were I sufficiently endowed.

I had thought that this pipeline would go a long way towards solving the WTI problem in 2013. But now it seems we have to await Keystone, a project that faces problems on a much bigger scale.