Bloomberg News

Colonial Expanding Line 3 to Boost Fuel Supply to Northeast

March 12, 2012

Colonial Pipeline Co., which operates the largest link between U.S. Gulf Coast refiners and East Coast markets, said it will expand a line supplying fuel to New York Harbor.

The company plans to expand Line 3 by 125,000 barrels a day, Dave Doudna, the company’s director of business development and optimization, told reporters at an American Fuel & Petrochemical Manufacturers conference in San Diego. The first phase would boost capacity 60,000 barrels a day by mid-2013, with a second expansion of 65,000 barrels expected by 2014.

Colonial expanded its system three times in recent months as refinery closures on the East Coast boosted demand for fuel deliveries from plants along the Gulf. East Coast refiners have idled almost one-quarter of the region’s capacity, tightening fuel supplies as the summertime peak driving demand season approaches.

Completed projects raised the capacity of the system around New York Harbor by 80,000 barrels a day and plans announced today will increase it by 55,000 more, Doudna said. Capacity on Line 3 will be 950,000 barrels a day after the expansions, with half the capacity used for gasoline and the other half distillate, Doudna said.

New York Harbor is the storage and trading hub along the East Coast for physical petroleum products and the delivery point for New York Mercantile Exchange gasoline and heating oil futures contracts.

Northeast Supply

“The issue is getting fuel to the Northeast,” said Sander Cohan, a principal with Energy Security Analysis Inc. in Wakefield, Massachusetts. “That’s an area that’s always challenging during a normal summer and going to be more challenging with the recent refinery closures.”

Fuel production in the East Coast has fallen after Sunoco Inc. (SUN) shut its 178,000-barrel-a-day Marcus Hook, Pennsylvania, refinery and ConocoPhillips (COP) idled the 190,000-barrel-a-day Trainer plant. Sunoco plans to shut its 355,000-barrel-a-day Philadelphia refinery by July if it isn’t sold. Together the facilities can process more than 700,000 barrels a day of oil, or about 45 percent of the region’s refining capacity.

Colonial also plans to reconnect a line to Sunoco’s Eagle Point refinery, which was closed and converted to a terminal, as well as a connection to Buckeye Partners LP (BPL)’s line serving Malvern, Pennsylvania, according to the plans.

The company is considering additional assets, including the acquisition of storage tanks in the Gulf Coast and New York Harbor, Chief Executive Officer Tim Felt told reporters.

Colonial operates 5,500 miles of pipeline delivering gasoline, diesel, jet fuel and other refined products from Gulf Coast refineries to markets across the U.S. South and East Coast.

To contact the reporter on this story: Paul Burkhardt in New York at pburkhardt@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net


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