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Oneok moves to reverse pipeline flow due to U.S. propane squeeze

By: | at 06:35 PM | Channel(s): Intermodal  

U.S. energy company Oneok Partners LP moved on Friday to reverse the flow of a propane pipeline to help supplies reach a Kansas storage hub and ease a shortage of the heating fuel suffered by millions in the Midwest and Northeast.

The reversal may be a sign that the propane supply crisis caused by a record-breaking freeze and low inventories is no closer to being resolved.

On Thursday six governors asked Texas, home to the largest store of propane, to extend waivers on trucking restrictions. Wisconsin and Iowa said on Friday they had received federal funding to help low-income families with their propane bills.

In a filing to the Federal Energy Regulatory Commission, which oversees all U.S. interstate pipelines, Oneok adjusted a tariff notice for a Kansas-Oklahoma propane pipeline to notify shippers that the pipeline can be reversed.

The filing, a necessary regulatory step, will become effective Feb. 6. But Oneok did not say when exactly, or even whether, it would actually reverse the line. Company representatives did not immediately reply to questions.

The reversal would enable Oneok’s Medford, Oklahoma, facility to increase the volume of propane shipped into the Conway, Kansas, market, the company said.

Conway has the second-largest propane storage hub in the country, from which Midwestern and Northeastern states can source their supply.

PRICE SPIKES

Propane prices at the Conway Storage hub spiked last week to historic highs close to $5 a gallon. Prices have since halved although they remain far above the $1.75 traded earlier in the month before the freezing weather settled in.

Oneok earlier this week scrapped a fee it charged shippers if they stored propane on its North System in excess of their allotted amount, another filing showed, in an indication that a bottleneck of the product had built up in its system.

The charge was 7.5 cents a barrel a day. The 1,585-mile (2,551-km) North System running through the Midwest and around Chicago has a capacity of 134,000 barrels per day (bpd) although not all of that is propane, according to Oneok’s website.

On Friday, Iowa Governor Terry Branstad declared a state of disaster emergency and energy emergency that would last until March 2, having already issued two similar proclamations in December and January.

Some 30 states have made similar declarations which have tended to help the distribution of propane by lifting limits on the time truckers are allowed to spend on the road.

Residential propane prices in Iowa more than doubled since the start of the year to $4.70 a gallon on Jan. 27 from $2, according to Energy Information Administration statistics. That is the highest of any Midwest or Northeast state.

On Friday, propane at Conway traded at $2.57 a gallon after ranging between $2.45 and $3.50 on Thursday. February propane traded cheaper at $2.05 a barrel, which could indicate traders see the shortage disappearing soon but that prices could also rise on Monday when February becomes the front month.

At the Gulf Coast storage hub in Mont Belvieu, Texas, January propane traded at $1.55 a gallon after a small batch of 5,000 barrels swapped hands at $1.84. That compares with prices of $1.66 to $1.72 a gallon on Thursday.