20-03-2013

Phillips 66 signs crude logistics agreements to increase access to secure, advantaged crude

As an energy manufacturing company, Phillips 66 is helping to shape the energy revolution in the U.S. by increasing supplies of cost-advantaged North American crude oil to its U.S. refineries. Phillips 66 has reached agreements with several logistics providers for rail loading and terminaling services and a pipeline project, all of which support a rapidly changing domestic energy landscape and energy security.

“We are aggressively pursuing increased access to advantaged crudes in North America by partnering with leading third-party transportation providers and better leveraging our own system capabilities,” said Greg Garland, Phillips 66 chairman and chief executive officer. “Increasing our utilization of those advantaged crudes should allow us to capture significant value in our Refining and Marketing businesses.”

Details of the agreements include:
* Enbridge Energy Partners, L.P. subsidiary Enbridge Rail (North Dakota) LLC has agreed to a three-year deal for railcar loading of Bakken shale crude at Enbridge’s Berthold, N.D., terminal beginning in May 2013, with volumes ramping up to 35,000 to 40,000 barrels per day (BPD) by November. The crude oil will be delivered to Phillips 66 refineries on the West and East Coasts, and the company may also pursue opportunities to send it to its Gulf Coast refineries.

* Targa Resources Partners LP has agreed to provide rail unloading and barge loading services in Tacoma, Wash., The five-year agreement, which began in late 2012, allows advantaged U.S. or Canadian crude oil to be unloaded from railcars at Targa’s Tacoma terminal and transloaded onto barges for delivery to the Phillips 66 Ferndale, Wash., refinery. The facility also allows for delivery into the San Francisco, Calif., refinery, where crude imported from outside of North America could be replaced. Currently, the terminal is capable of receiving manifest rail (individual cars), but as volumes ramp up it will transition to unit train capability this summer. At full volume, the delivery capability is estimated to be approximately 30,000 BPD.

* Magellan Midstream Partners, L.P. has signed an agreement to transport advantaged crude on Magellan’s pipelines near Phillips 66’s refinery in Ponca City, Okla. The project will replace West Texas Intermediate crude from Cushing, Okla., with virgin crude from the nearby Mississippian Lime play. Small volumes are expected to be delivered to the refinery by late 2013, with approximately 20,000 BPD anticipated by the project’s completion date in January 2014.  Phillips 66 is also investing in its own transportation assets in Oklahoma to transport an additional 40,000 BPD of Mississippian Lime crude to the Ponca City Refinery, and at the refinery to accept crude from the Magellan project.

Phillips 66’s general manager, Crude & International Supply Glenn Simpson, whose group led the way on arranging the agreements, added, “These business partners give us another important link to increasing access to advantaged crudes, which continues to be a top priority for the Phillips 66 team for the foreseeable future.”