Buckeye expands US midcon products push east

Market: Crude oil, Oil products
06/02/15

Buckeye Products Partners could develop pipelines connecting midcontinent refiners as far west as Illinois to the western Pennsylvania market, the company said today, offering an outlet for midcon refiners running at high rates.

The company last month launched an open season seeking binding requests for space on a products pipeline connecting Michigan and western Ohio to eastern Ohio and western Pennsylvania. Pipelines moving products through the region are consistently full, chief executive Clark Smith said.

Buckeye has also considered adding pipelines connecting Illinois and Indiana refineries to the same system. If approved, Chicago-area refiners thriving on discounted crudes delivered by cheaper pipelines could press east against refineries supplied by rail and water.

"Currently, Pittsburgh serves as a balancing point between supplies sourced from the Philadelphia and other east coast refineries versus the Ohio and other Midwest refineries," Smith said. "Increasing Buckeye's capacity in this corridor would provide customers access to multiple midwest supply markets and prime delivery locations in eastern Ohio and western Pennsylvania."

Midcontinent refiners have benefited from access to new production from North Dakota and Canada by pipeline, the cheapest method of transporting crude. Total finished products produced by refiners and blenders in Indiana, Illinois, Ohio, Kentucky, Michigan and Tennessee has increased steadily over the past five years. Refiners and blenders last July broke 3mn b/d for the first time in at least 25 years, according to the Energy Information Administration.

But the region lacks the US Gulf coast's export opportunities. Domestic gasoline demand has meanwhile flattened or fallen as driving habits change, biofuel claims market share and cars become more fuel efficient.

Sunoco recently started up its 85,000 b/d Allegheny Access pipeline system into the same eastern Ohio and western Pennsylvania market area, more than two years after completing an open season.

It's not clear how much threat greater midcontinent access to Pittsburgh poses to US Atlantic coast refiners. The midcontinent still lacks access to the east coast, and Buckeye's Laurel pipeline system, supplying Pennsylvania west of Philadelphia from the US Atlantic coast, rarely turns away shippers for lack of space.

The open season on Buckeye's proposed Michigan and Ohio expansion ends on 31 March. The midstream company gave no timeline for a decision on including Illinois and Indiana refiners, but said it would update in the near future.

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Buckeye expands US midcon products push east

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