July 31, 2014 / 10:51 PM / 3 years ago

Delta Air mulls pipeline from oil-rail terminal to Trainer refinery

NEW YORK, July 31 (Reuters) - Delta Air Lines Inc is exploring constructing a 5-mile pipeline to ship oil from a new crude-by-rail hub near Philadelphia to its Trainer refinery, a move that would allow it to scale back use of costly barges.

Currently, crude being railed into the Eddystone terminal makes its way to nearby refineries on the Delaware River via barges capable of carrying around 150,000 barrels, which adds around $1 per barrel of transport costs.

The project is in the discussion stage, said a spokesman for Delta. Its Monroe Energy subsidiary has been holding meetings with local community groups in recent weeks.

The proposed underground pipeline would transport some 65,000 barrels per day of crude from Eddystone, one of dozens of new terminals being built around the country to unload mile-long oil trains from North Dakota, to the 165,000 barrel per day (bpd) Trainer refinery.

The Eddystone terminal has throughput capacity of around 80,000 bpd and received its first train in May. It is currently operating at around 65,000 bpd. It could double capacity by the end of next year.

A pipeline, if built, would be Delta's latest effort to improve the economics and flexibility of the refinery it bought two years ago, making it easier to tap into the shale oil boom.

Earlier in July, Monroe Energy chartered a Jones Act ship for transporting domestic crude for the first time, allowing it to directly tap into Texas shale. It also this month signed a deal for midtream company Bridger LLC to supply it 65,000 bpd of North Dakota Bakken crude, largely by rail. (Reporting by Anna Louie Sussman, editing by Jonathan Leff and Cynthia Osterman)

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