Midcon products creeping slowly east: Buckeye

OREANDA-NEWS. August 08, 2016. Michigan and Ohio refined products will soon begin supplying central Pennsylvania but may take years to reach New Jersey and New York, midstream operator Buckeye Partners said today.

The company laid out plans to begin connecting terminals around Pittsburgh, Pennsylvania, into a complex similar to its still-growing crude and products network outside Chicago, Illinois. Buckeye will "in the next few months" begin an open season on a pipeline extension connecting midwest refiners to central Pennsylvania, with service to begin in 2018. The project would expand a Michigan-and-Ohio to western Pennsylvania pipeline scheduled to start up by the end of the year.

But Buckeye, operator of the only pipeline connecting western Pennsylvania to the New York Harbor market, sees further expansion to the east still years away, said Bob Malecky, president of domestic pipelines and terminals.

"We do not see the market going there in the near term," Malecky said. "It is something down the road that could be evaluated, however."

Midcontinent refiners feasting on cheap North American crude lack the markets of coastal peers. The inland refiners have limited export opportunities and few economic paths to seize new customers outside their traditional territory. Modified and newly constructed pipelines have granted southern midcontinent refiners access to Arkansas and Texas. Operators of the almost 700,000 b/d of refining capacity in Michigan and Ohio have pushed east into Cleveland and western Pennsylvania.

Buckeye had already seen products shipments into western Pennsylvania from the east coast affected by Sunoco's 85,000 b/d Allegheny Access pipeline from Ohio into the Pittsburgh market. The competition was more muted in the second quarter, but significant over the winter. Buckeye expects barrels to ebb and flow seasonally across that system.

"It has not been an overly material impact on our volumes and operations at the end of the day," Malecky said.

The company purchased a terminal outside of Pittsburgh earlier this week and plans to link it with an existing, nearby terminal. Buckeye did not identify the terminals or comment on whether, like Chicago, the complex would feature commodities other than refined products.

Buckeye reported a \\$140.5mn profit for the quarter, up from \\$91.6mn in the same quarter of 2015.