May 2, 2013 / 9:41 PM / 5 years ago

UPDATE 1-Enterprise expanding SE Texas crude storage, distribution

* Expansion to add storage, pipelines to connect to refineries

* Project will boost refiner access to cheaper U.S., Canadian crude

By Kristen Hays

HOUSTON, May 2 (Reuters) - Enterprise Products Partners will expand its crude oil storage and distribution system serving Southeast Texas refineries, the pipeline and distribution company said on Thursday.

The expansion includes an additional 4 million barrels of crude oil storage capacity at its Enterprise Crude Houston Oil (ECHO) terminal on the Houston Ship Channel, as well as about 55 miles of 24-inch and 36-inch pipeline to connect the terminal with major refineries in the southeast Texas market.

Refineries in that area include Motiva Enterprises’ 600,000 barrels-per-day (bpd) refinery in Port Arthur; Exxon Mobil Corp’s 560,500 bpd Baytown and 344,500 bpd Beaumont plants; Marathon Petroleum Corp’s 451,000 bpd Galveston Bay refinery; and Valero Energy Corp’s 290,000 bpd Port Arthur and 225,000 bpd Texas City plants.

Exchange operator CME group Inc has said it would consider launching a new Gulf Coast crude futures contract after its West Texas Intermediate contract - the benchmark for U.S. crude - drew criticism for reflecting market conditions surrounding the landlocked Cushing, Oklahoma, delivery point.

Stocks at Cushing fell by 1.38 million barrels to 49.8 million barrels last week, but inventories in the Gulf Coast region soared by 7.7 million barrels, the largest weekly increase there since July 2010, according to the U.S. Energy Information Administration.

The expansion, which will push the ECHO terminal’s storage capacity past 6 million barrels, will be finished in phases, with the final phase done in the fourth quarter of 2014, the company said.

The ECHO terminal also will have access to Enterprise’ marine terminal at Morgan’s Point on the Houston Ship Channel.

Enterprise did not disclose the cost of the project.

The expansion comes amid booming U.S. and Canadian crude production that increasingly is replacing more expensive waterborne imports that traditionally supplied southeast Texas refineries, Enterprise said.

As production increasingly flows into that market from the Eagle Ford shale and Permian Basin in Texas, North Dakota’s Bakken shale, other midcontinent shale plays and Canada, “there will be a significant increase in crude oil bound for the Gulf Coast,” the company said. Those crudes arrive via rail, barge and pipeline, with more pipeline projects coming online.

Jim Teague, chief operating officer for Enterprise, said the company had received “strong interest” from customers to expedite development of more storage capacity and distribution capability as refiners increasingly tap those crudes, which are more profitable because of their discounts to global crudes priced off London’s Brent.

Other companies also have increased storage and distribution capacity along the U.S. Gulf Coast to accommodate that incoming supply, including Kinder Morgan Energy Partners, Plains All American and Sunoco Logistics Partners

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