New US midstream venture to focus on marine assets

A group of US midstream industry veterans has formed a new company to pursue underutilized logistical assets, with an initial focus on marine facilities along the US Gulf coast and in the midcontinent.

Tivoli Midstream will aim to acquire, construct and manage strategic terminals and storage logistics at petroleum hubs.

There are significant opportunities to acquire logistical assets for crude, refined products and petrochemicals amid the demand destruction spurred by the Covid-19 pandemic, said Tivoli chief executive Rance Fromme, who previously served as president of Oiltanking North America.

Looking broadly across the midstream space, Tivoli will focus initially on export-capable marine locations, Fromme said in an interview with Argus.

"We are focusing more on the coastal marine space, because it gives you more optionality," Fromme said.

Rising US crude and refined products exports have changed the nature and flows for key US infrastructure like pipelines and terminals over the past decade "in ways that people never thought possible at the time," Fromme said. "Sitting on a marine facility gives you that flexibility essentially no matter what happens in the market."

Houston-based Tivoli will look for marine opportunities along the Houston Ship Channel, as well as points to the east, Fromme said. Though the Houston Ship Channel is prone to vessel delays from fog, congestion and industrial accidents, "it is hard to be able to step away from it," Fromme said. "It is good to have a lot of opportunities and sitting on the Houston Ship Channel provides you with that."

Further to the east, the ongoing reversal of the 1.2mn b/d Capline crude pipeline to move south from Patoka, Illinois, to St James, Louisiana, could create opportunities, Fromme said. The reversed pipeline, which could offer light crude shipping in mid-2021 and heavy crude service in 2022, will likely boost the availability of Canadian heavy crude on the Louisiana Gulf coast, Fromme said.

It is unclear how much additional infrastructure will be needed to handle the extra supplies, Fromme said. Some of the extra crude could be exported from the Louisiana Offshore Oil Port (LOOP), currently the only US facility capable of fully loading very large crude carriers (VLCCs) directly.

"There will be additional barrels flowing into the Louisiana market," Fromme said. "It remains to be seen if existing infrastructure will be able to take advantage of that and export those barrels."

Another "big unknown" for coastal crude logistics is the status of the 530,000 b/d Dakota Access crude pipeline (DAPL), which faces a potential closure as part of an ongoing court case. If DAPL shuts and constrains the flow of Bakken crude to the US Gulf coast, crude-by-rail terminals in North Dakota will be "very much in vogue," Fromme said.

Tivoli could consider acquiring rail terminals in the Bakken or elsewhere, Fromme said. But its primary focus will be on export-capable facilities along the US Gulf coast because "it is where more logistics services and midstream services are needed," he said.

If and when US crude exports return to pre-pandemic levels, more infrastructure will be needed, Fromme said. Hub locations like Cushing, Oklahoma, and the US Gulf coast could once again see logistical bottlenecks because "there will not be enough infrastructure to move those barrels," he said.

Tivoli will be funded by its partner Energy Spectrum Capital, a Dallas-based private equity firm that invests in midstream assets.

By Chris Baltimore