Underlying a broad swath of southeastern Texas and adjacent to the prolific Eagle Ford shale formation, the Eaglebine/Woodbine crude oil resource play has garnered considerable excitement from the upstream community in recent years. Moving crude oil from the Eaglebine/Woodbine to the Texas Gulf Coast however, has not been without its challenges. Currently, only one pipeline – Sunoco Logistics Partners' 60,000 barrel-per-day (bpd) Eaglebine Express – links the oil field to coastal refineries.
"This is an area that has produced oil for a long time, however, there is very little pipeline infrastructure and barrels have to be trucked down to Gulf Coast markets at a considerable expense to area producers" said Brian Melton, vice president of pipeline marketing and business development for Blueknight Energy Partners, L.P.
Oklahoma City-based Blueknight, via its subsidiary Knight Warrior LLC, plans to make Eaglebine/Woodbine crude more accessible to Houston-area refineries as well as export markets via its $300 million Knight Warrior East Texas project. The 160-mile, 16-inch pipeline will ship up to 100,000 bpd of crude oil from Madison to Harris counties.
In late January, Knight Warrior announced that it has awarded contracts for engineering and design, land management and environmental services to Hatch Mott MacDonald, LLC, Contract Land Staff, LLC and Apex TITAN, Inc., respectively.
The Knight Warrior pipeline is schedule to start up in early-to-mid-2016 with an initial capacity of approximately 90-100,000 bpd; however, the pipeline is expandable to an ultimate capacity of 200,000 bpd, which will provide accommodation for future Eaglebine/Woodbine production growth.

Genscape chart
SOURCE: Blueknight Energy Partners, L.P.
Read on for more insights from Melton regarding what the Knight Warrior East Texas project could mean for the company, where the project stands in terms of permitting and how Knight Warrior is seeking to add veterans to its employee ranks.
DownstreamToday: How will this pipeline project be transformative for the company?
Brad Melton: We are currently a very small publicly traded master limited partnership that has historically produced earnings before interest, income taxes and depreciation and amortization expense (EBITDA) in the mid-$60 million range. If this project is successful, we expect to increase that amount by more than 40 percent. This would obviously be tremendous growth for us and would significantly benefit our public unitholders.
DownstreamToday: What will obtaining greater access to Eaglebine/Woodbine crude mean for Gulf Coast refiners?
Melton: The crude oil produced in this area is very high quality and in high demand by Gulf Coast refiners. Having a pipeline running through the Eaglebine/Woodbine area enables producers/marketers to better secure those barrels for the Gulf Coast refiners and provide a more reliable and more economic crude stream.
DownstreamToday: From your vantage point, what effect has the recent downturn in oil prices had on operations in the Eaglebine/Woodbine?
Melton: From what we have seen, read and heard so far, there has not been a significant impact. Our understanding from producers and marketers is that these barrels will continue to be economic to produce because of the Eaglebine/Woodbine's proximity to the Gulf Coast and their high demand by area refineries.
DownstreamToday: On an industrywide level, what impact is the downturn having on oil pipeline and storage companies?
Melton: Any time there is significant downward pressure on crude prices any volume-sensitive business may be impacted – that is, pipeline and truck-transported barrels. This results if producers make the decision to "shut-in" production and not sell their barrels. While recent crude price weakness is unlikely to shut-in significant amounts of existing oil production, it will impact producer’s future drilling budgets and activities to varying degrees depending on producer’s areas of operations and economics.
The storage business is more impacted by the shape of the crude market curve and less impacted by the absolute price. When the shape of the curve is in "contango," meaning the prompt month crude oil price per barrel is less than future months, marketers are incented to store barrels instead of selling the barrels. As a result, the storage business is positively impacted. The exact opposite is true when the shape of the curve is "backwardated," meaning the prompt month crude oil price per barrel is more than in future months. In this scenario, marketers are incented to deliver and sell their barrels as soon as possible, which results in a premium placed on transportation – pipeline and truck.
DownstreamToday: Do you have an anticipated timeline on when the pipeline's capacity could be expanded to 200,000 bpd?
Melton: We don't have a current estimate at this time. We plan to put the pipeline in service in early-to-mid-2016, and we constantly stay in touch with our customers and assess when their production needs warrant Blueknight spending additional monies to expand our Knight Warrior pipeline capacity. We do not need to spend significantly more capital to expand capacity.
DownstreamToday: Which planning, permitting and construction milestones have you already achieved, and which ones are outstanding?
Melton: We have awarded contracts for engineering design, surveying, permitting and land management and are currently in the process of obtaining construction estimates.
DownstreamToday: Mark Hurley, Blueknight's CEO, has gone on record saying that the company is dedicated to hiring veterans and that the Knight Warrior pipeline will actually provide monetary support to veterans. Would you please elaborate?
Melton: We have a number of veterans already working here at Blueknight, and we are committed to continue hiring veterans as we have opportunities. We have made and expect to make future contributions to charities that benefit veterans on behalf of the Knight Warrior Pipeline. Blueknight recently made our first corporate contribution to the Wounded Warrior Foundation which is an outstanding veteran-focused service organization.
DownstreamToday: Would you like to add any comments about the Knight Warrior project?
Melton: We are very excited about this project and want to acknowledge that there are a number of people here at Blueknight that have been working on this effort for more than a year. We are very thankful for all of their efforts and remain committed to moving this project forward as expeditiously as we can for our customers.