UPDATE 2-Capline, biggest U.S. crude conduit, to study future options

Thu Oct 30, 2014 5:21pm EDT
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(Adds data on size relative to U.S. imports of Canadian crude)

NEW YORK Oct 30 (Reuters) - The 1.2-million-barrel-a-day Capline crude pipeline, the biggest in the mainland United States, is reviewing its future operations, its owners said on Thursday, as the North American oil boom upends the flow across the continent.

Shipping volumes on the pipeline, which runs south to north from the Gulf Coast to Illinois, have fallen steeply in recent years as Midwestern refiners tap into the growing supply of Canadian and North Dakota crude to replace costly imports via Capline.

Traders and analysts have speculated for several years that the line, which is operated by Marathon Petroleum Corp, could be reversed to carry Canadian crude to U.S. Gulf Coast refineries, allowing it to increase throughput.

A reversal of the Capline could fill a void left by the stalled Keystone XL pipeline. Changing the direction of the Capline would have significant impacts, potentially allowing cheap Canadian crude to further displace heavy crudes the United States imports from Latin America and the Middle East.

In recent months, Gulf Coast refiners have bought about 5 percent of the 2.75 million barrels per day of Canadian oil imported by the United States, U.S. government data show. Those refiners are hungry for more Canadian oil, and the Capline's capacity amounts to about 44 percent of existing U.S. imports of Canadian crude.

"This analysis is being conducted to address the expanding crude oil supply in North America and the significant changes in crude oil demand patterns," Marathon Petroleum said in a statement.

Marathon and co-owners Plains All American Pipeline LP and BP Plc said they planned to complete the study in the first quarter of 2015.

Marathon Chief Executive Officer Gary Heminger said in December that the company might consider reversing the pipeline, but that another pipeline would be needed to carry crude from south to north.

The owners also said they would consider connecting Capline to the proposed Diamond pipeline, which will run from the storage hub at Cushing, Oklahoma, to Valero Energy Corp's Memphis, Tennessee, refinery. That would provide an alternate source of crude for the Valero plant, a major user of the Capline.

The 632-mile 40-inch pipeline includes more than 10 million barrels of storage capacity and 16 mainline pumping stations. It originates at St. James, Louisiana, the delivery hub for Light Louisiana Sweet crude. (Reporting by Jessica Resnick-Ault; Editing by Lisa Von Ahn and Leslie Adler)