August 6, 2019 / 9:53 PM / 4 months ago

UPDATE 2-Plains All American to begin commercial service on Texas pipeline next week

(Adds details on quarterly earnings, tariffs, capital guidance)

HOUSTON, Aug 6 (Reuters) - U.S. pipeline operator Plains All American Pipeline LP expects to begin partial service on its 670,000-barrel-per-day (bpd) Cactus II pipeline next week, Chief Executive Willie Chiang said on Tuesday.

Houston-based Plains has filled about half the crude line, which runs from the Permian Basin in West Texas to the U.S. Gulf Coast. It plans to start full operation by the first quarter of 2020, Chiang told investors on a conference call.

The Plains pipeline would be the first of three new lines beginning operations in the next few months that is expected to ease a bottleneck in West Texas that has weighed on regional oil prices.

The pipeline will be able to connect to the Corpus Christi, Texas, area, which includes extensive crude export and storage terminals, by the end of September, Chiang said.

Plains also added new investors to its proposed Wink-to-Webster pipeline, which is expected to begin operations to the Houston area in early 2021. MPLX LP, Delek US Holdings Inc and Rattler Midstream LP joined the venture alongside Plains, which will own 16%, Exxon Mobil and Lotus Midstream.

Separately, Plains on Tuesday reported sharply higher quarterly profit of 54 cents per unit, topping IBES estimates from Refinitiv by 12 cents. It attributed the earnings to improved volumes on its Permian pipelines and favorable crude pricing in the Permian and Canada.

Revenue rose to $8.2 billion, compared with $8.1 billion in the same period a year ago.

The company expects to handle an average 6.8 million barrels per day (bpd) of crude and natural gas liquids in the United States this year. It increased its 2019 expansion capital guidance to $1.5 billion from $1.35 billion.

On Friday, Plains disclosed it will tack on a fee for shippers on the Cactus II pipeline of 5 cents per barrel to pay for the cost of the Trump administration’s sanctions on imported steel, which it has said would add $40 million in construction costs.

But Chiang said it would halt the surcharge and rebate the fee to shippers if an exemption request before the U.S. Department of Commerce was approved.

“We bought international, non-U.S. steel because the U.S. steel producers are not able to produce the pipe in the spec we wanted,” Chiang said. (Reporting by Collin Eaton in Houston Editing by Sandra Maler and Matthew Lewis)

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