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Plains on track to begin partial service on Cactus II pipeline in Q3

By Devika Krishna Kumar

NEW YORK, May 8 (Reuters) - Plains All American said construction of its Cactus II pipeline from the Permian Basin to Corpus Christi, Texas, is on schedule, with partial service to Ingleside expected to be completed in the third quarter of 2019.

Full service to Corpus Christi on the Cactus II pipeline is expected by the first quarter of 2020, Chief Executive Officer Willie Chiang said during an earnings call late on Tuesday.

The Cactus II pipeline is expected to begin linefill by July, market sources have said.

Plains said its pipeline from the Delaware Basin, called the Wink-to-Webster project, is targeted to be placed into service in the first half of 2021. That pipeline is expected to have a capacity of more than 1 million barrels per day.

"We are at full speed ahead on progressing the project ... the pipe's been ordered," Chiang said, adding that discussions with additional potential shippers is ongoing.

Midstream companies have raced to add pipelines and storage terminals in the Permian Basin, the biggest oilfield in the country, as production has surged. A shale revolution has helped make the United States the biggest oil producer in the world, overtaking Saudi Arabia and Russia.

Since the beginning of 2018, Plains has added about 1.7 million bpd of new Permian Basin system capacity and it expects capacity to grow to over 2.2 million bpd by the end of this year.

Plains said it most recently placed about 500,000 bpd of gathering capacity upstream of Wink into service and about 670,000 bpd of intra-basin capacity from Wink to McCamey.

The rapid addition of pipelines in the region has led to swelling costs, leading some operators to revise price estimates upwards.

"We are seeing some cost pressure on both the material and labor side of the (Cactus II) project," Plains Chief Operating Officer Chris Chandler said.

Beyond the Permian, the company said the open season, where shippers bid up for space on a pipeline, for an expansion of the Diamond pipeline in the Midwest and a reversal of the Capline system was expected to close on Tuesday.

Capline currently runs from the Gulf Coast to refineries in the Midwest, and volumes on the system, once a major artery for imports and offshore crude used by Midwest refiners, have declined sharply as the shale boom pushed inland crude to the East Coast and Gulf Coast.

Plains said it has sanctioned the construction of 2.4 million barrels of new crude storage capacity at its St. James terminal under a long-term contract to be placed into service in the second half of 2020. (Reporting by Devika Krishna Kumar in New York Editing by Paul Simao)