Tank inspections put squeeze on Cushing oil storage

By Bruce Nichols

HOUSTON, July 15 (Reuters) - Oil storage tank operators, faced with a regulatory deadline, have had to empty, inspect and in some cases repair crude oil tanks, putting a squeeze on already tight capacity at the crucial Cushing, Oklahoma, hub, people familiar with operations said Wednesday.

When repairs are required, a tank can be out of service for months, inspectors said, and with the Cushing delivery point for NYMEX oil futures already at high storage levels due to weak fuel demand, any loss of tankage can be problematic.

Not all tanks have been affected at the same time, but "what we have seen is a massive de-stocking of fuel in tanks. We believe these tanks are being refurbished to comply with new regulations," said a source familiar with operations.

"Some tanks have come out of that process and are full again. Others have not," the source said.

At issue is American Petroleum Institute Standard 653 adopted as a regulation by the U.S. Department of Transportation in 1999, said Patricia Klinger of the Pipeline and Hazardous Materials Safety Administration.

The 10-year deadline for a full out-of-service inspection of tanks arrived in May. That requires a tank to be emptied, cleaned, inspected and, if too much corrosion is found, repaired by installing new steel plates, officials said.

"You cannot get it done in a matter of days. Large tanks take weeks or months," said Greg McQuillan of inspection company Acuren Group Inc.

Exactly how much tankage has been affected is difficult to determine because tanks are held by multiple private entities. Not all companies have been affected in the same way. Companies were reluctant to comment on operations.