Refined products pipelines

Late last month, HF Sinclair joined ONEOK, Phillips 66 and Kinder Morgan in planning pipeline projects to move more refined products to Western markets. It’s too soon to say how many of these projects will come to fruition, but what’s certain is that the effort to transport large volumes of products west from PADDs 2, 3 and 4 will significantly impact refinery economics across vast swaths of the U.S. In today’s RBN blog, we‘ll discuss the pipeline projects and how they will affect market dynamics.

A few days ago, HF Sinclair joined ONEOK, Phillips 66 and Kinder Morgan in planning pipeline projects to move more refined products to Western markets. It’s too soon to say how many of these projects will come to fruition, but what’s certain is that the effort to transport large volumes of products west from PADDs 2, 3 and 4 will significantly impact refinery economics across vast swaths of the U.S. In today’s RBN blog, we‘ll discuss the pipeline projects and how they will affect market dynamics.

Less than two months after ONEOK unveiled plans for a big new refined products pipeline from El Paso to the Phoenix area, Phillips 66 and Kinder Morgan have jointly proposed an even more extensive project of their own: the Western Gateway Pipeline — now the focus of a binding open season — would enable flows from the St. Louis area to Southern California. In today’s RBN blog, we’ll discuss the project and what’s driving the race to move more refined products west from PADDs 2 and 3 to PADD 5.

Neither midstream companies nor the folks who run them can be put into neat and simple categories. Each is unique. At the same time, however, there’s no doubt that some midstreamers take a more aggressive approach to developing projects, while others are more cautious. Each approach comes with risks: on one hand, the possibility of anticipating demand that doesn’t materialize; on the other, the risk of missed opportunities. In today’s RBN blog, we discuss the strategies of five leading midstreamers.

Strong demand for refined products (especially jet fuel) in Arizona and refinery closures in Southern California have spurred the development of a new refined products pipeline from West Texas to the Phoenix area. ONEOK, whose acquisition of Magellan Midstream Partners made it a player in refined products, has announced an open season for the proposed Sun Belt Connector pipeline, which would expand PADD 2 and PADD 3 refiners’ access to premium markets out West. In today’s RBN blog, we discuss ONEOK’s plan and how it could impact refined products markets. 

Refined product markets in the U.S. are constantly morphing. Over time, demand for gasoline and diesel rises or falls, refineries are shut down, and the price spread between products sold in neighboring regions widens or narrows. These changes can incentivize refiners and marketers to push into new areas — and encourage midstream companies to develop pipeline capacity to ease the flow of gasoline, diesel and jet fuel into newly attractive markets. Midstreamers have advanced a number of pipeline projects in the past few months to help move increasing volumes of products west across Texas to the Permian, the Great Plains and into the Rockies. In today’s RBN blog, we discuss these projects and what’s been driving their development.

Since the century turned, there’s been a big buildup in refining capacity in the U.S. Midwest, primarily to process the increasing volumes of heavy sour crude being piped in from Western Canada. Over the same period, refining capacity in the Mid-Atlantic region has declined by more than half, mostly for economic reasons — including the lack of pipeline access to favorably priced U.S. shale oil — but also due to events, such as the devastating June 2019 fire at Philadelphia Energy Solutions’ 330-Mb/d refinery in Philadelphia, which led the facility’s owner to shut it down. In addition to spurring more refined product imports to the Mid-Atlantic and increased flows to the region on Colonial Pipeline, the changing market dynamics prompted a push to increase pipeline flows of gasoline and diesel east from the Midwest to markets in Pennsylvania and beyond. In today’s RBN blog, we continue a review of the U.S.’s still-morphing refined product pipeline networks with a look at recently added capacity from PADD 2 to PADD 1.

Refinery closures. Shifting demand for gasoline, diesel and jet fuel. Yawning price differentials for refined products in neighboring regions. These and other factors have spurred an ongoing reworking of the extensive U.S. products pipeline network, which transports the fuels needed to power cars, SUVs, trucks, trains and airplanes — not to mention pumps in the oil patch, tractors and lawnmowers. New products pipelines are being built and existing pipelines are being repurposed, expanded or made bidirectional, typically to take advantage of opportunities that midstreamers, refiners and marketers see opening up. In today’s RBN blog, we begin a review of major pipelines that batch gasoline, diesel and jet fuel and look at the subtle and not-so-subtle changes being made to the U.S. refined products distribution network.

We all hope that by the time you read this the operators of the ransomware-impacted Colonial Pipeline will have been able to restore service to more of the 5,500-mile refined products delivery system — maybe even to all of it. In any case, the shutdown of the Houston-to-New-Jersey pipeline system on Friday both exposes the vulnerability of the North American pipeline grid to malevolent hackers and reveals how, by its very nature, that same grid offers at least some degree of redundancy and resiliency built into it. A lot of that ability to respond to a crisis, whether it be a pipeline leak or a hack by an Eastern European criminal group called DarkSide, involves what you might call “market-inspired workarounds” — alternative suppliers reacting to an anticipated supply void and potentially higher prices by jumping into action. Today, we look at what the ransomware attack on the U.S.’s largest gasoline, diesel, and jet fuel transportation system can teach us.

Many countries like to talk about energy independence, but Canada is one of the few to come close to that elusive goal. For many years, Western Canada has produced more than enough crude oil to satisfy the demand of refineries in the region. More recently, a combination of rising Western Canadian oil production, and new and reworked pipelines, has enabled many of Canada’s eastern refineries to increase their intake of Western Canadian barrels. In the few remaining cases where they can’t, imported barrels from the U.S. have filled the gap, leaving crude imports from overseas accounting for just 1% of the market. Not surprisingly, Canada is also a net exporter of refined products, with refiners in Western Canada, and especially Atlantic Canada, producing far more than the country’s demand. Today, we conclude our series on Canada’s refining sector with a look at its growing reliance on Western Canadian crude oil and its ability to meet most of Canada’s need for gasoline and distillates.