U.S. pipeline companies are sweetening terms in a competition to keep producers using their lines as the industry downturn caused by the coronavirus pandemic means there is less oil to transport.30 Sep 2020 07:20PMNEW YORK: U.S. pipeline companies are sweetening terms in a competition to keep producers using their lines as the industry downturn caused by the coronavirus pandemic means there is less oil to transport.
"Assuming production has peaked, there's going to be a lot of under-utilized pipes. So guys are going to try and find creative ways to sell that," said John Zanner, senior strategist at Uplift Energy Strategy, which works with producers to market barrels. The kind of arrangement Magellan is offering is unique, Zanner said, adding that it might be challenging for the companies to agree on what would constitute the market conditions for shipping.
"Cutting rates on the older contracts will be necessary for the legacy pipelines to try to maintain their commitments and even then some shippers are likely to walk away or lower their commitment," said Kendrick Rhea, a senior manager at midstream data firm East Daley Capital Advisors.
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