Ho-Ho pipeline slow to start but pickup anticipated- traders

By Catherine Ngai

NEW YORK, July 22 (Reuters) - Royal Dutch Shell (Xetra: A0ET6Q - news) 's Houston-to-Houma pipeline meant to relieve bottlenecks in the country's oil hub has been plagued by mechanical issues that have led the line to run below capacity though traders said on Tuesday volumes are expected to increase.

The most recent data from the Louisiana Department of Natural Resources shows that the pipeline had a throughput of barely one-third of its capacity in each of the first four months of the year.

The market expects volumes to more than double in coming months as a result of increased shipper access and resolution of the mechanical issues.

Shell (LSE: RDSB.L - news) does not comment on flow rates to protect shipper confidentiality, said company spokeswoman Destin Singleton.

The line, known as the Ho-Ho, previously flowed from Houma to Houston, connecting the Louisiana Offshore Oil Port and Gulf Coast producers to Houston's refineries. As domestic crude production from shale surged, a need to bring crude from Texas to oil refineries in Louisiana grew, so the pipeline was reversed.

The 360,000-barrel-per-day (bpd) reversed pipeline came online in December at a time when the market needed relief from a supply bottleneck that plagued the Houston area.

But, in April, throughput was 108,607 bpd, according to a Reuters calculation, while March figures showed a throughput of 113,448 bpd in March. In February, the figure was 97,297 bpd, the Louisiana DNR's data showed.

According to two traders, not all shippers were "activated" at the time when the pipeline was started last year. A new batch of shippers should have started shipping in May, which should double the throughput rates significantly.

The pipeline has faced its fair share of operational issues in the past, including a pipeline shutdown in March following a puncture and subsequent leak near Port Neches, Texas.

The Ho-Ho system was also shut for planned maintenance earlier this year, barely a month after Shell reversed the line's flow and began commercial service.

The Ho-Ho pipeline system also includes a 500,000 bpd line from Houma to the Louisiana Offshore Oil Port's (LOOP) Clovelly hub in Louisiana, and a 300,000-bpd segment from Houma to St. James, Louisiana. (Reporting By Catherine Ngai; Editing by Jessica Resnick-Ault; Editing by Diane Craft)