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Zydeco Pipeline: A Shell Midstream Partners Key Asset

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Zydeco pipeline

Shell Midstream Partners (SHLX) has a 42% ownership interest in the Zydeco pipeline, and Shell Pipeline Company, or SPLC, owns the remaining 57% interest. Zydeco was formerly called the Ho-Ho pipeline.

The Zydeco pipeline is about 350 miles long. According to SHLX’s 10-K (annual report), an expansion that’s expected to be completed before the end of 2015 will give the pipeline a mainline capacity of 375,000 bpd (barrels per day). Current capacity is approximately 360,000 bpd.

The pipeline originally carried crude from Louisiana to Texas. But in 2013, the company reversed the flow to carry crude from Eagle Ford and Bakken, providing cheaper crude access to Gulf Coast refiners.

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Four main segments

Zydeco consists of four main segments:

  1. Houston, Texas to Port Neches, Texas  – 250,000 bpd capacity
  2. Port Neches, Texas to Houma, Louisiana – 360,000 bpd capacity
  3. Houma, Louisiana to Clovelly, Louisiana – 400,000 bpd capacity
  4. Houma, Louisiana to St. James, Louisiana – 260,000 bpd capacity

Zydeco includes storage tankages in Port Neches, Texas, as well as Erath and Houma, Louisiana. There’s a dock in Houma too. Zydeco also features a 16-inch pipeline that indirectly connects to the offshore Boxer pipeline system.

According to SHLX’s 10-K, “Zydeco pipeline system provides a critical outlet to alleviate current transportation bottlenecks for crude oil produced in multiple basins throughout North America, a large portion of which is transported to and stored in the Houston area, to access major refining centers along the Gulf Coast.”

Gulf Coast refiners include Valero Energy (VLO), Tesoro (TSO), and Phillips 66 (PSX). Combined, these companies make up ~5% of the iShares Global Energy ETF (IXC).

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