Executive Summary: Rigs: The total US rig count increased by 8 during the week of January 2 to 550. Infrastructure: Energy Transfer (ET) and South Bow (SOBO) have launched an open season to solicit commitments for a joint tariff on a new project called the Big Sky Pipeline System. Storage: East Daley expects a 6.5 MMbbl injection into commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending February 14.
Rigs:
The total US rig count increased by 8 during the week of January 2 to 550. Liquids-driven basins increased by 5 W-o-W to 460.
- Anadarko (+3): Red Rocks Oil & Gas Operating, J.W. Resources Inc, Wavetech Helium Inc.
- Permian (+2):
- Delaware (+1): Admiral Permian Resources
- Midland (+1): Permian Resources, LLC
- Bakken (+1): Continental Resources
- DJ (-1): Civitas Resources
Infrastructure:
Energy Transfer (ET) and South Bow (SOBO) have launched an open season to solicit commitments for a joint tariff on a new project called the Big Sky Pipeline System. The project will likely use their existing pipeline systems and require new pipe to transport Western Canadian Sedimentary Basin (WCSB) crude oil from Hardisty, AB to Patoka, IL and the ET terminal in Nederland, TX.
WCSB oil production continues to ramp, and the growth puts Canadian shippers at risk of constraints moving barrels to market. On its 4Q24 earnings call on February 14, ENB said the Mainline has been in apportionment since November ’24, which East Daley expects to continue. ENB seeks to expand the Mainline in 4Q26, and to that end is expanding its northbound Southern Lights Pipeline carrying condensate to support blending with additional heavy, sour WCSB volumes.
East Daley’s Crude Hub Model shows why more egress is needed for WCSB barrels. We estimate West Coast demand is ~80% utilized, while SOBO’s Keystone Pipeline System runs effectively full at ~99% utilization.
ET and SOBO have provided no details on a project timeline or capacity. East Daley suspects Big Sky Pipeline will take advantage of existing Keystone infrastructure out of Hardisty, then require new pipe to connect to ET’s Dakota Access Pipeline (DAPL) in Stanley, ND. WCSB volumes would need to be batched on DAPL with the Bakken’s light, sweet production as Canadian volumes reach PADD 2 (Midwest) refiners in Patoka and export capability in Nederland via the Energy Transfer Crude Oil Pipeline (ETCOP). SOBO likely has steel left over from its canceled Keystone XL project, which would significantly reduce project costs.
The joint open season and potential for a joint venture between ET and SOBO is synergistic. SOBO is highly levered with a 5.52x net debt-to-EBIDTA ratio, according to East Daley’s Financial Blueprint, and the limited free cash flow requires the company to partner on additional projects. ET on the other hand has deep pockets, generating $3.1B in free cash flow available to equity in FY24.
The Big Sky Pipeline System offers needed future WCSB egress between two leading crude oil pipeline operators. The open season is scheduled to close March 31, 2025.
Storage:
East Daley expects a 6.5 MMbbl injection into commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending February 14. We expect total US stocks, including the SPR, will close at 830 MMbbl.
The US natural gas pipeline sample, a proxy for change in oil production, decreased 0.31% W-o-W across all liquids-focused basins. Samples increased 9.6% in the Gulf of Mexico, 3.67% in the Eagle Ford, and decreased 6.87% in the Williston Basin and 1.19% in the Permian Basin. The Rockies and the Gulf of Mexico have a high correlation between gas volumes and crude oil volumes, whereas the Permian and Eagle Ford basins correlation is less than 45%.
We expect US crude production to be 13.5 MMb/d. According to US bill of lading data, US crude imports increased by 150 Mb/d W-o-W to 6.45 MMb/d. More than 60% of the supply originated from Canadian pipelines and vessels into the US, with the remainder largely coming from vessels carrying crude from Mexico and Venezuela.
As of February 14, there was ~790 Mb/d of refining capacity offline, including downtime for planned and unplanned maintenance. EDA expects gross crude input into refineries to stay steady, coming in at 15.4 MMb/d.
Vessel traffic monitored by EDA along the Gulf Coast stayed steady W-o-W. There were 23 vessels loaded for the week ending February 14 and 23 the prior week. EDA expects US exports to be 3.7 MMb/d.
The SPR awarded contracts for 6.0 MMbbl to be delivered To Choctaw February – May and 2.475 to be delivered to Bryan Mount Jan – March 2025. The SPR has 395 MMbbl in storage as of February 7, 2025.
Regulatory and Tariffs:
Presented by ARBO
Tariffs:
Plains Pipeline, L.P. The incentive rate was increased from Carr, CO to Platteville, CO. FERC No 155.9.0 IS25-226 (filed January 31, 2025) Effective March 1, 2025.
Chevron Pipe Line Company An additional terminal fee was added at Empire Terminal associated with the implementation of b-directional flow on the Hilcorp BOA Pipeline at the terminal. FERC No 114738.0 IS25-212 (filed January 29, 2025) Effective March 1, 2025.
The above information is provided by ARBO’s Oil Pipeline Tariff Monitor. For more information on regulatory proceedings or tariff rates, please contact please contact Corey Brill via email at corey@goarbo.com or phone at 202-505-5296. https://www.goarbo.com/
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