|Oil pipeline operators offer new discounts as demand drops - Bloomberg|
Oct. 5, 2020 10:58 PM ET|About: Kinder Morgan, Inc. (KMI)|By: Carl Surran, SA News Editor
U.S. oil pipeline operators are lowering fees to encourage Texas customers to keep using their networks to ship barrels to the Gulf Coast as the pandemic hits profits, Bloomberg reports.
Kinder Morgan (NYSE: KMI) is offering discounts of ~50% on the Eagle Ford pipeline for some existing customers, according to the report, which also says Magellan Midstream Partners (NYSE: MMP) is negotiating lower tariffs on the BridgeTex system for certain users, and Energy Transfer (NYSE: ET) plans a volume incentive program for those who qualify on its Permian Express 2 and 3 pipelines.
The discounts reflect efforts by pipeline companies to combat sluggish oil consumption and a drilling slowdown in areas such as the Permian Basin after they expanded capacity in recent years.
The lack of demand for pipeline capacity has reduced the premium for oil delivered to export hubs on the Gulf Coast to below $1/bbl - not enough to cover transport fees for most Permian pipelines - from ~$3/bbl at the start of the year.