Pipeline reversal significant opportunity: Marathon

Growing midcontinent refining access into traditionally east coast markets will better balance the landlocked region, Marathon Petroleum said today.

The US independent refiner did not comment on volumes but said it planned to participate in Buckeye Partners' planned reversal of a portion of its Laurel pipeline in Pennsylvania and adjustments to pipeline operations in Ohio and Michigan.

The ability to move refined products past Ohio's eastern border into central Pennsylvania will help midcontinent refiners manage winter doldrums in demand and ultimately lead to access to the larger Philadelphia and coastal market, executives said.

"First, we're looking to Altoona, but yes, eventually, I would see it going all the way to the east coast," Heminger said, referring to a central Pennsylvania town near the Laurel reversal project.

Marathon operates 662,000 b/d of midcontinent refining capacity — almost 30pc of that in Ohio and Michigan. Buckeye last week said it secured sufficient 10-year commitments to support the Laurel pipeline project, which the midstream operator expects to bring online in 2018. The project follows Sunoco Logistics' 85,000 b/d Allegheny Access pipeline, which started moving products from Ohio to the Pittsburgh market in early 2015.

New US pipeline construction has become increasingly fraught, attracting protests and regulatory slowdowns. Marathon Petroleum took a $267mn impairment during the third quarter from its investment in the Sandpiper Pipeline, a project connecting midcontinent Bakken oil fields to Superior, Wisconsin, that withered under intense regulatory scrutiny in Minnesota.

Buckeye can reach Philadelphia without building new pipeline segments by continued reversals of its Laurel pipeline. But the midstream operator sees demand for that still years away.

Midcontinent refiners, faced with winter throughput reductions to balance to lower demand, have crept past the edges of their traditional markets. Midstream companies have added access into Arkansas and northern Texas as refiners strain against their geographic limits.

Even reaching halfway to the coast would help balance the midcontinent, senior vice president Mike Palmer said.

"We've been looking at a number opportunities, but reversing Laurel, such that Pittsburgh becomes a primarily pipeline-supplied-from-the-midwest market, is certainly big for us and we would participate in that," Palmer said.

Thinning products margins, especially for asphalt, sharply reduced earnings during the quarter compared to last year, the company said.

Marathon Petroleum reported a $145mn profit for the quarter, down from $948mn in 2015.