Oiltanking Partners announces 1st phase of pipeline, crude storage expansion projects

Oiltanking Partners LP, announced expansion projects to construct two new crude oil pipelines in the Houston (TX) Ship Channel and approximately one million barrels of new crude oil storage capacity at the partnership's Houston terminaling facility. The $80-$85 million project is the first phase of anticipated infrastructure and storage capital expenditures to address additional customer demand at Oiltanking Houston.

The project includes the following scope:

*Reversal of an existing 24-inch pipeline that currently originates from Oiltanking Houston to multiple Houston Ship Channel refineries;

*Extension of the reversed 24-inch pipeline to connect to Genoa junction, located on the south side of the Houston Ship Channel;

*Construction of a new 30-inch pipeline from Oiltanking Houston along the Houston Ship Channel to the area refineries previously served by the 24-inch pipeline; and

*Construction of one million barrels of crude oil storage at the partnership's Houston terminaling facility.

Due to the expansion of crude oil supplies in the United States from domestic shale plays and Canadian oil sands, additional longhaul pipeline systems are either in development or under construction to transport crude oil to the Houston market and supply the Gulf Coast refineries. Additionally, other pipelines are being built or reversed to deliver crude oil from Cushing and West Texas to the Gulf Coast refineries and to alleviate the current over-supply situation in Cushing OK.

The new project provides connectivity to Genoa junction and has been designed to accommodate additional customer throughput volumes as growing crude oil supplies reach the Houston Ship Channel market. In addition, the partnership is poised to construct additional crude storage tankage to support the rising customer demand at Oiltanking Houston.

Carlin G Conner, president, CEO, and chairman, says, "Over the last three decades, Oiltanking Houston has built a premier crude oil distribution center by investing in pipeline connectivity, expansive deep waterfront, and substantial crude tankage. In anticipation of these new crude supplies being delivered to the Houston market, we are expanding and strengthening the premier crude oil distribution system in the Houston Ship Channel by connecting to these pipeline junctions and building additional tankage. Interest from both existing customers and new customers, including refiners, producers and marketers, reaffirms our expectation of strong increases in demand for new crude capacity.

The Partnership has obtained the required environmental and internal approvals to commence construction and expects to complete construction of the pipelines and approximately one million barrels of new crude oil storage capacity during the first quarter of 2013. The new storage capacity is in addition to the one million barrels of crude storage currently being constructed at the Houston terminaling facility. Once complete, the expansion will bring total active storage capacity across all products at the Partnership to approximately 18.8 million barrels. The partnership currently has low leverage levels, and as such, anticipates funding the entire project with debt.

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