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Shell Midstream cuts costs as demand destruction hits U.S. pipeline flows

Fri, 31st Jul 2020 18:50

By Laila Kearney

NEW YORK, July 31 (Reuters) - Shell Midstream Partners
said on Friday it would cut staffing and trim projects
to save $10 million this year and up to $40 million next year as
volumes on some pipelines fall.

The Houston-based affiliate of Royal Dutch Shell
transported 20% fewer barrels on its Zydeco oil pipeline while
volumes on its Eastern Corridor pipeline fell nearly 23% during
the second quarter, officials said on an earnings call on
Friday.

Lower volumes on the two were due to "the continuing effects
of COVID-19, along with a few shallow-water producer
curtailments," Shawn Carsten, its finance chief, said.

Measures to stem the spread of the novel coronavirus have
slashed as much as 30% off global fuel demand, leading refiners
to cut crude runs and producers to shut wells.

Despite the diminished pipeline volumes, the company's
second-quarter revenue was relatively flat at $120 million
compared with $121 million for the prior three months.

Volume losses were partially offset by the contributions
from deals involving the Mattox crude pipeline and other storage
and pipeline acquisitions this year, officials said.

The company said expense cuts could lead to roughly $10
million in lower costs this year and between $30 million and $40
million in 2021.

It is still moving ahead with plans to expand its Mars crude
pipeline and expects it to come online in 2021.

Shell does not want to comment on the specifics of expected
added capacity or what it would spend on the project on the
163-mile (262-km) Mars pipeline system. It currently transports
up to 600,000 barrels per day from the Mississippi Canyon-area
production platforms in the U.S. Gulf of Mexico to storage
caverns in Clovelly, Louisiana.

Second-quarter volumes on the Mars pipeline declined 7% to
501,000 barrels per day (bpd) compared with 537,000 the prior
quarter, the company said.
(Reporting by Laila Kearney
Editing by Marguerita Choy)

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