Cochin Pipeline Reversal
The Cochin pipeline, owned by Kinder Morgan, has two propane terminals in Minnesota. The pipeline was placed in service in 1978 and stretches from Fort Saskatchewan in Alberta to Sarnia in Ontario. In doing so the line passes thru North Dakota, Minnesota, Iowa, Illinois, Indiana, Ohio and the corner of Michigan before returning to Canada.
The line was designed to transport light hydrocarbon liquids at a rate of 112,000 barrels per day. The construction was supported by long term 20 year ethylene shipping agreement from Fort Saskatchewan to Sarnia, but had space available for transport of propane to the US.
The line has seen varying usage over the past many years for Minnesota marketers depending upon crop drying, weather related needs and pricing differentials. In recent times the average daily draw on the line from the two Minnesota terminals at Benson and Mankato has totaled about 8,000 barrels per day. This equates to about 120,000,000 gallons of propane per year. In reality this draw happens on a sporadic basis with large amounts of product being drawn at peak times, and then the system going for days or weeks with little or no propane drawn at either terminal.
Reversing the line:
In the past couple of years, the emergence of the shale markets in the US has dramatically changed the North American and world supply
picture for many products and in particular, propane. The US is now a net exporter of propane and a pipeline bringing product in from Canada is of less importance in the big picture.
In contrast to that, Canadian processing of Oil Sands has created a huge demand for condensates (C5 or Pentane). Kinder Morgan recently completed an ‘open season’ bidding to gage interest from US shippers to ship condensates from the Chicago area northwest to Saskatchewan. The result was that KM received 10 year commitments in excess of 100,000 barrels per day. The economics of the current and predicted market for the coming years make reversing the line the best choice for Kinder Morgan and many US producers and shippers.
Timeline: The target in-service date for flowing product north on the line is July 1, 2014. Kinder Morgan plans to maintain propane service on the line until March of 2014. From April of 2013 thru March of 2014, KM will use ½ of the pump stations while shutting down the remainder. Those pump stations that will be shut down will be retrofitted and the flow reversed in preparation for the northern flow of product. The pumps left in service for propane south flow will be able to provide the line with 76,000 barrels per day of product.
Endgame: By the fall of 2014, Minnesota shippers and marketers will need to find alternative sources and possibly distribution points for 120,000,000 gallons of propane per year. It is too early to speculate on the ramifications of this change, or the possible answers. Most likely there will not be a single answer, but many. As this moves forward it will be important for marketers to have a good solid relationship with their suppliers and shippers. As more information becomes available, we will let you know.