* Five-year deal ended after one year
* Phillips 66 building own rail facility at Washington
* Company says will continue efforts to run cheaper crudes
By Kristen Hays
HOUSTON, Sept 11 Independent U.S. refiner
Phillips 66 has ended its five-year crude supply
contract with energy logistics company Targa Resources Partners
LP, the company said on Wednesday.
"Phillips 66 and Targa have reached a mutual agreement to
end a five-year contract that began in August 2012 to provide
rail unloading and barge loading services for crude oil at
Targa's Tacoma, Washington terminal," Phillips 66 said.
Phillips 66 said the companies determined that "it was not
feasible" to move forward with building the new infrastructure
at Tacoma needed to ramp up shipments.
The terminal had been able to accept some crude by rail on
mixed-freight trains, but needed to be expanded to offload up to
30,000 barrels per day from so-called unit trains, or those that
carry only crude.
Phillips 66 declined to elaborate further, and Targa did not
immediately return a call for comment.
The original deal, which was not announced until March 2013,
called for inland U.S. and Canadian heavy crude delivered via
rail to Targa's terminal to be loaded onto barges for delivery
to Phillips 66's 100,000 barrels-per-day (bpd) refinery in
Those crudes are cheaper than imports and Alaskan crude.
Phillips 66 is among many refiners with West Coast plants aiming
to tap cheaper crudes more readily available in other regions.
The Targa deal also had allowed for crude delivery via barge
to the refiner's 120,200 bpd San Francisco-area refinery in
Phillips 66 is planning to build an offloading facility at
Ferndale to increase current North American rail shipments of
20,000 bpd to 40,000 bpd, mostly from North Dakota's Bakken
shale oil play.
Phillips 66 did not explain the decision to end the deal
with Targa, which was supposed to ramp up offloading capability
to handle up to 30,000 bpd.
"We will continue to supply the Ferndale refinery with
advantaged crude oil, primarily from the Bakken region, via
alternate arrangements," the company said.
Phillips 66 has a deal with Enbridge Energy Partners
, announced alongside the Targa deal in March, to receive
40,000 bpd of Bakken crude. The shipments go to Ferndale as well
as its 238,000 bpd Bayway refinery in Linden, New Jersey and
potentially U.S. Gulf Coast plants.