Plains All American Pipeline is grappling with a crude quality scare on its Permian-to-Corpus Christi system, raising questions for both refiners and exporters at the Gulf Coast’s busiest hub.
A notice seen by Reuters and dated September 11 warned shippers that crude exceeding 75 parts per million of mercaptans — sulfur compounds that can damage equipment and affect product quality — has been showing up at multiple origin points. Plains said beginning October 1 it will impose a $0.50 per barrel fee on off-spec deliveries across parts of its Gulf Coast network.
The issue could prove more than administrative. Corpus Christi exports over 2 million barrels per day, much of it Midland-quality crude moved on Plains’ long-haul pipelines. High mercaptan levels could push refiners to seek alternatives, at least temporarily, to Permian barrels delivered via Plains. The company, which controls stakes in pipelines moving roughly 2.1 million bpd out of the basin, is still investigating the cause of the contamination.
Crude quality problems aren’t new. Earlier this summer, Exxon briefly halted purchases of Mars crude after a batch was contaminated with zinc, forcing the Department of Energy to release barrels from the SPR to cover supply at Exxon’s Baton Rouge refinery. Mexico’s Pemex has also wrestled with excess salt and water content in its flagship Maya crude, drawing complaints from Gulf Coast refiners.
Midland WTI is the benchmark export grade, the barrel most global contracts are priced against. Any sustained quality problem would ripple far beyond Texas, and traders will be quick to judge whether Plains’ issue is a one-off or something bigger.
For now, the company insists its enforcement notice is routine and its system can handle off-spec barrels — for a price. But with global supply cushions thin and refiners sensitive to even minor quality deviations, the stakes are higher than they look on paper.
By Julianne Geiger for Oilprice.com
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