* Freedom Pipeline failed to solicit enough shipper support
* Companies more interested in cheaper Canadian crude
* Similar Questar Pipeline project still under review
By Kristen Hays
HOUSTON, May 31 Kinder Morgan Energy Partners LP
shelved a $2 billion plan to convert a natural gas
pipeline to carry cheap West Texas crude to Southern California,
citing lack of shipper interest.
"We don't believe in the concept of build it and they will
come," Mark Kissel, a Kinder Morgan executive, said on Friday.
"We stated at the outset that we would not move forward with the
project without customer support."
The Freedom Pipeline project involved converting a 740-mile
(1,191 km) natural gas pipeline to move crude oil from the
Permian Basin to refiners in Southern California that otherwise
rely on pricey imports.
However, the company said it did not garner enough shipper
interest to justify the investment.
Greg Garland, chief executive of U.S. independent refiner
Phillips 66, said earlier this month that his company
had little interest in tapping light sweet Permian crude
delivered via the Freedom Pipeline.
Phillips 66 operates a 139,000 barrel-per-day (bpd) Los
Angeles-area refinery and a 120,200 bpd San Francisco-area
plant. Both refineries - like others in California - are
configured to run heavy California crude. They can run light
sweet, but they process heavy crude more efficiently.
"I think we're more interested in trying to move heavy
Canadian crude down to California to process in our refineries,"
Refiners increasingly use railroads or a combination of rail
and barge to transport Canadian heavy crude, which is cheaper
than inland U.S. crude.
Alon USA Energy and Valero Energy Corp are
seeking permits to build rail offloading facilities at some of
their California facilities. California refiners also can ship
Canadian crude south via barge or tanker to unload at their
docks, already in place to receive imports.
Another company is considering converting a natural gas
pipeline to move inland crude to California. Late last year
Questar Pipeline initiated a review of possibly converting its
underused natural gas Southern Trails pipeline to move crude
from Texas and New Mexico to Southern California, starting in
Earlier this month Questar CEO Ron Jibson told analysts the
company was in its second round of proposals and expected to
decide by mid-2013 whether to move forward.