During last week’s monthly joint web chat for subscribers of The Energy Strategist and MLP Profits, readers asked a number of questions about the crude oil storage situation that is currently dragging down prices. Some wanted to know who might benefit from the growing inventories of stored crude.

One of my answers was that, since Cushing inventories are growing, the primary beneficiaries could be companies that transport oil in and out of the Oklahoma pipeline hub, as well as those that store oil there. The inevitable follow-up was, “Which companies would those be?”

While most of the larger oil pipeline companies and partnerships have connections in and out of Cushing, I wasn’t sure which, if any, had more outbound connections than inbound connections. I also hadn’t come across a comprehensive list of operators with storage capacity in Cushing. Let’s address that first.

According to a list compiled by the Tulsa World, the seven largest operators account for more than 95% of Cushing’s storage capacity. They are:

• Enbridge Energy Partners (NYSE: EEP) – 20.5 million barrels (mb) of storage

• Plains All American Pipeline (NYSE: PAA) – 20 mb

• Magellan Midstream Partners (NYSE: MMP) – 12 mb

• Rose Rock Midstream (NYSE: RRMS) – 7 mb

• Blueknight Energy Partners (NASDAQ: BKEP) – 6.6 mb

• NGL Energy Partners (NYSE: NGL) – 4.1 mb

• Enterprise Products Partners (NYSE: EPD) – 3.1 mb

• Others – 3 million barrels total

Of those, Blueknight Energy Partners is by far the smallest by market cap and therefore its Cushing business will likely have the largest effect on its earnings relative to the others on the list.

The list of operators with pipelines in and out of Cushing is far more extensive. I found a 2012 graphic by Bloomberg Businessweek that really helps picture the oil movements in and out of Cushing (although additional capacity has come online since this graphic; more on that below):


Source: Bloomberg Businessweek

As shown in the graphic, most of the major pipelines connected to Cushing are for crude flowing into the hub. The pipeline denoted “Keystone” is TransCanada’s (TSX, NYSE: TRP) phase 2 of the Keystone Pipeline system which is a 298-mile extension from Steele City, Nebraska to Cushing that expanded the capacity of the system to 591,000 barrels per day (bpd). This pipeline originates in Hardisty, Alberta. Phase 1 had connected 435,000 bpd of capacity from Hardisty to Steele City and on to refineries and hubs in Illinois.

The pipeline denoted “Basin” is the Basin Pipeline System, a 450,000 bpd pipeline from the Permian Basin which is primarily owned by Plains All American Pipeline.

“Flanagan” is Enbridge’s Flanagan South Pipeline — a 585,000 bpd crude oil pipeline that originates in Pontiac, Ill. and terminates in Cushing. The pipeline largely parallels Enbridge’s 193,300 bpd Spearhead crude oil pipeline running from Flanagan, Illinois to Cushing.

Most of the oil leaving Cushing is bound for the Texas Gulf Coast. “Seaway” is Seaway Crude Pipeline Company LLC, a 50/50 joint venture between Enterprise Products Partners and Enbridge (NYSE, TSX: ENB). In January 2013 Seaway’s capacity was increased by 250,000 bpd to a total of 400,000 bpd. In 2014 Seaway completed another pipeline along the same route that more than doubled the system’s capacity to 850,000 bpd.

“Gulf Coast project” is the southern leg of the Keystone pipeline, also called the Cushing Marketlink Project. This project has an initial capacity to transport 700,000 barrels of oil per day from Cushing to Gulf Coast refineries, and came online in January 2014. The eventual capacity of this pipeline is projected at 840,000 bpd, and between the Seaway and Keystone projects the outlet capacity from Cushing to the Gulf Coast has increased by more than 1.5 million bpd.

One final outgoing pipeline to note is Enbridge Energy Partners’ Ozark Pipeline, which is a 215,000 bpd pipeline connecting Cushing to refineries in Wood River, Illinois.

However, there appear to be no major operators with significantly (if any) more outbound capacity from Cushing than inbound capacity. Historically most of the outbound capacity has been via smaller pipelines serving refiners primarily in the mid-continent region. Over the past two or three years, however, more than 1.5 million bpd of outbound capacity has come online to move crude oil from Cushing to the Gulf Coast.

Enbridge appears to be the operator with the most Cushing-related business, while Blueknight Energy Partners is the purest play on Cushing storage. Perhaps not coincidentally, Blueknight is up 32% over the past 3 months.

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