Enterprise line a Rocky proposition for local refiners
A recently announced NGL-to-refined products pipeline conversion could reshape fuel delivery throughout parts of the US Rocky Mountain region, with existing refinery operators in the region watching for the potential shift.
US midstream company Enterprise Products plans to convert a portion of its Mid-America Pipeline (MAPL) NGL system into a 60,000 b/d refined products system connecting US Gulf coast refineries to a series of product terminals throughout the southwest and Rocky Mountain areas. The company intends to offer more competition to west Texas and Rocky Mountain markets currently reliant on local refineries for a large share of product supply.
"The market's choices are limited today as they are captive to local production," Enterprise chief commercial officer Brent Secrest said last month. "This project will provide much-needed relief to high gasoline prices at the pump in West Texas and the Rockies corridor."
The MAPL system formed a rough V-shape emanating from a hub near Hobbs, New Mexico, to the Rocky Mountains on one side and the US midcontinent on the other. The new pipeline project, dubbed the Texas Western Pipeline System, would convert the MAPL Rockies line between Hobbs and Utah to move batch shipments of premium gasoline, regular grade gasoline, and diesel northward to the west Texas, New Mexico, Colorado and Utah markets.
The plan would also reverse the Chaparral NGL line currently running east from natural gas processing facilities in west Texas and New Mexico to Mont Belvieu, Texas, into a westbound route linked to US Gulf coast refineries on Enterprise's Southern Complex system.
Enterprise's plan is a bid to profit off differentials between US Gulf coast and Rocky Mountain-area products, as gasoline and diesel prices in the Rocky Mountain region are typically priced at a premium to those found in the refinery-rich US Gulf coast. Gasoline prices in the Rocky Mountain region averaged $4.23/USG in the week ending 9 May over the same period, compared to $4.01/USG in the Gulf coast. Rocky Mountain prices for diesel averaged $5.461/USG in the same period, compared to the $5.339/USG recorded in the Gulf coast.
The company's move to alter the MAPL Rockies line follows a recent slowdown in NGL volumes moved on the MAPL system, which also includes a northeast-bound portion running from Hobbs to the US midcontinent that is not involved in the Texas Western plan.
Refiners wary but skeptical
Refiners and fuel distributors with footholds in the Rocky Mountains have taken notice of the Enterprise plan. HF Sinclair, which owns three refineries and pipeline assets across Colorado, Utah and New Mexico, said earlier this month that it was watching the project "with interest" but has doubts about whether Enterprise will actually execute it.
"[Look] at the typical Gulf Coast differentials into these different regions, the seasonality of those diffs, the low volumes in those markets in terms of demand and the long-term shipping commitments that are required," said HF Sinclair president Tim Go on 9 May. "It is hard for us to see the economics of all that play out."
Despite HF Sinclair's skepticism, some analysts expect the project could eat into profits of Rocky-area refiners. US investment bank Tudor Pickering Holt said last month that the pipeline promises "a recipe for weaker Rockies and southwest [refining] margins going forward," with HF Sinclair likely to bear the brunt of increased competition due to its 35pc refining market share in the Rocky Mountain region.
Other major refineries in the Rocky Mountain region include Suncor's 103,000 b/d refinery in Commerce City, Colorado, as well as 66,000 b/d and 55,000 b/d refineries owned by Marathon Petroleum and Chevron, respectively, in Salt Lake City, Utah.
Enterprise would not build any new pipelines as part of the Texas Western project but will build four new products terminals, including two in New Mexico and one each in Colorado and West Texas. One of the terminals will be located in Jal, New Mexico, close to Delaware basin oil producers requiring diesel for drilling operations.
Enterprise expects to begin service on the Texas Western Pipeline System in the second half of 2023.
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