Texas crude pipeline use shifts with times

The modest Amdel crude pipeline that stretches across Texas manages to tell the tale of the onshore crude revolution as well as anything.

The 27,000 b/d Energy Transfer Partners (ETP) line was idle when legacy company Sunoco Logistics bought it from US independent refiner Alon USA in 2006. The companies immediately entered into a 10-year agreement to run at least 15,000 b/d of crude — from Sunoco's huge coastal terminal at Nederland to Alon's 73,000 b/d Big Spring refinery in west Texas.

The deal, which called for Sunoco to expand the line to 40,000 b/d, was extendable by four additional 30-month periods, or another 10 full years.

"This transaction gives us increased flexibility in our ability to source crude oil," then-Alon chief executive Jeff Morris said.

The ensuing surge of Permian crude production might have made the deal obsolete by the time the first term ended in 2016, except that Amdel is reversible. Indeed, over time, the line like so many others has begun moving Permian crude toward the coast.

But Alon had other assets, now owned by Delek after their 2017 merger. The combined company also owns the 74,000 b/d refinery at Krotz Springs, Louisiana — and suddenly it had a contracted option to get price-advantaged west Texas crude to its gates.

In the last six months of 2017, Krotz Springs took nearly 36,000 b/d of West Texas Intermediate (WTI) crude off Amdel by way of barge from Nederland, compared with about 32,000 b/d of US Gulf coast crude, such as Light Louisiana Sweet (LLS).

So in the past dozen years, both the line and the refineries have had two different owners, different grades of crude have flowed on the line in different directions, all dictated by crude availability and economics.

It's a tiny pipeline in an era when companies are proposing seven-figure b/d systems to move compounding production from the Permian, but it is hugely important to one small refinery — and emblematic of the evolution of US Gulf coast crude shipping.