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Must-know: Occidental’s midstream and marketing segment

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Midstream and marketing segment

The performance of Occidental’s (OXY) marketing and trading businesses and its processing, as well as the company’s assets, affect the earnings of the company’s midstream and marketing segment. The marketing and trading businesses trade commodities and engage in storage activities. Commodity price changes affect these businesses.

Both the volumes that are processed and transported through the segment’s plants and pipelines, as well as the margins obtained on related services affect the processing and transportation businesses. Assets under this segment include gas plants and pipelines.

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Pipeline transportation

The Dolphin Pipeline contributes significantly to Occidental’s pipeline transportation results through Occidental’s 24.5% interest in Dolphin EnergyThe 230-mile, 48-inch in diameter natural gas pipeline transports dry natural gas from Qatar to the UAE and Oman, and has a capacity to transport up to 3.2 Bcf of natural gas per day.

Occidental also owns an oil common carrier pipeline and storage system with approximately 2,800 miles of pipelines from southeast New Mexico across the Permian Basin to Cushing, Oklahoma. The system has a current throughput capacity of about 616,000 barrels per day, and 5.8 million barrels of active storage.

The company also has a 25% stake in Plains All American’s (PAA) pipeline.

Major growth projects in this segment include the BridgeTex Pipeline construction with Magellan Midstream Partners (MMP). We’ll talk about this project later in this series.

MMP and PAA are important midstream MLP (or Master Limited Partnership) companies, and are a component of the Alerian MLP ETF (AMLP). OXY is a component of the Energy Select Sector SPDR ETF (XLE).

Gas processing plants and CO2 fields and facilities

Under this segment, Occidental processes wet gas to extract NGLs and other gas byproducts like CO2, and delivers dry gas to pipelines.

The company earns margins on the basis of the difference between the inlet costs of wet gas and market prices for NGLs. Major growth projects in this segment include the Al Hosn gas project in Abu Dhabi.

Occidental’s midstream and marketing operations complement and support its oil and gas and chemicals. The segment can effectively evaluate opportunities across the value chain and utilize its assets accordingly to provide services to other Occidental segments as well as third parties.

The following article talks about OXY’s capital spending strategy.

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