Plains All American’s crude oil pipelines linking the Permian shale basin to the Corpus Christi export hub in Texas are facing quality issues related to high mercaptans, or naturally-occurring sulfur compounds, according to sources familiar with the matter and a notice seen by Reuters.
Starting October 1, Plains will charge a half-dollar fee on every barrel that fails to meet mercaptan specifications on some of its pipelines in the Gulf Coast region, according to a notice to shippers seen by Reuters and two of the sources.
The sources requested anonymity to discuss confidential information. Plains did not immediately respond to a request for comment.
The quality issues could force Gulf Coast refiners, especially those in the Corpus Christi region in South Texas, to seek alternatives for the Midland crude oil produced in the Permian and delivered by the impacted Plains pipelines, one of the sources said.
Plains is still trying to identify the cause of the contamination, so it is too early to tell if the issues will impact U.S. crude exports, one of the sources said. Over 2 million bpd of crude oil is exported from Corpus Christi, according to the port’s website.
Plains owns interests in a number of long-haul pipelines that move about 2.1 million bpd of crude oil out of the Permian Basin to Corpus Christi and to the Cushing, Oklahoma storage hub, according to its public filings.
(Reporting by Shariq Khan, Nicole Jao and Georgina McCartney; Editing by Emelia Sithole-Matarise, Liz Hampton and Franklin Paul)