Logistics moves on the Texas coast and North Dakota plains will give Phillips 66 refineries in Louisiana access to cheaper, higher quality crudes.
Over the past six months the US independent refiner, midstream and chemicals company has purchased a 7mn bl terminal in Beaumont, Texas, and signed on as a 25pc joint venture partner in at least 450,000 b/d of pipeline capacity from North Dakota into the Texas coast. Both projects are expected to grow as the company shifts from refining investment to focus on midstream and chemicals.
Phillips 66 has by necessity emerged as a midstream operator with plans to move Bakken barrels to almost every region of the country. Following development of the Dakota Access Pipeline and Energy Transfer Partners Crude Oil Pipeline (ETCOP), along with plans to expand Beaumont to 12mn bl, Phillips 66 will have infrastructure unloading Bakken on the US Atlantic, west and US Gulf coasts.
A heavy crude slate and access to nearby Permian Basin and Eagle Ford fields have slowed flows of Bakken barrels to the US Gulf coast. Phillips 66 has already invested in moving the crude east and west, where refiners have much stronger appetites for a light, sweet domestic alternative.
The company took its first unit train of the crude in August at a 70,000 b/d rail unloading rack at its 250,000 b/d Bayway refinery in Linden, New Jersey. It soon expects to commission a 30,000 b/d offloading rack at its 96,000 b/d refinery in Ferndale, Washington. Efforts to add rail in Santa Maria, California, for its 120,000 b/d San Francisco complex remain tied up in regulatory review. A 200,000 b/d rail loading facility in North Dakota to be completed by the end of next year will put Phillips 66 on both ends of railed Bakken movements.
But capacity on the US Atlantic and west coasts for Bakken barrels will run out. Better-yielding Bakken barrels will attract US Gulf coast interest as West Texas Intermediate drifts lighter, chief executive Greg Garland told Argus. Refiners in Louisiana, where Phillips 66 operates 502,000 b/d of refining capacity, have meanwhile lacked the same access to the growing light, sweet production.
"We've had a strategic objective to make our Louisiana refineries more competitive and get them more access to advantaged crudes," Garland said. "They've been disadvantaged versus the Texas refineries."
Phillips 66 is not alone targeting the eastern US Gulf coast refining center. Marathon Petroleum, BP and Plains All American today said they would study a potential reversal of the 1.2mn b/d Capline, which currently moves crude from St James, Louisiana, to Patoka, Illinois.
Marathon Petroleum chief executive Gary Heminger discussed heavy crude opportunities for that pipeline system. But a Bakken gateway would further pressure light, sweet prices, and provide another feedstock option for light Louisiana refineries such as Phillips 66's own 250,000 b/d Alliance refinery in Belle Chasse.
ETCOP, a joint venture pipeline in which Phillips 66 owns a 25pc stake, critically avoids a bottleneck in Cushing, Oklahoma, to provide a path for crude into Sunoco and Phillips 66 Texas terminals.
Pipeline and barge access at Beaumont can move Bakken or Texas crudes to US Gulf coast refineries, while Aframax tanker infrastructure could allow the facility to supplement deliveries to the US Atlantic coast.
"It's just a great distribution point, really, and we really like the fact that you've got access to many different types of transportation," president Tim Taylor said.
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