August 2, 2019 / 5:41 PM / 2 months ago

Bidirectional service on Laurel Pipeline could boost Midwest refiners

NEW YORK (Reuters) - U.S. Midwest refiners will benefit from increased capability to send product to the U.S. East Coast, traders said, after Laurel Pipeline Company reached a settlement earlier this week that allows bidirectional service on its pipeline to start in October.

Shippers had been in a year-long dispute after Laurel, a pipeline that historically sent products like gasoline and diesel west towards Pittsburgh, said it would introduce bidirectional service on a portion of the line. Opponents argue that this would unfairly hurt isolated East Coast refiners who struggle to find additional markets for products.

The settlement now allows Midwest suppliers to access the eastern Pennsylvania market, with certain limits.

The agreement, filed for approval on Wednesday, guarantees shippers the availability of 1.2 million barrels per 10-day cycle of east-to-west capacity on Laurel, according to a joint petition for approval of settlement dated Wednesday. This assures that shippers will be able to transport a historically similar amount of products from the east to Pittsburgh, Laurel said in support of the petition, even as Laurel now ships products eastward as well.

The East Coast typically relies on local refineries, shipments from the Gulf Coast via Colonial Pipeline and imports from markets including Europe for fuel needs.

The agreement comes after Philadelphia Energy Solutions in late June confirmed that it will shut its 335,000 barrels-per-day Philadelphia-area refinery, the largest in the region and a key supplier of fuel in the Northeast after a major fire in June.

After PES said it would shut its refinery, imports have increased to fill the supply gap. East Coast refined product imports in July from Europe totaled 14.2 million barrels, the most since at least late 2015, according to Refinitiv Eikon trade data.

Complainants included retailers and wholesalers such as Giant Eagle Inc and Guttman Energy Inc as well as Delta Air Lines Inc subsidiary Monroe Energy LLC, which operates a Philadelphia-area refinery.

Refiners including Marathon Petroleum Corp and PBF Energy - which have facilities in Ohio - are expected to benefit most from the bidirectional service, analysts said.

With the new service, imports should decrease as Midwest refiners send product instead, said Todd Burford, research analyst in North America refining at Wood Mackenzie.

“Midwest refiners are going to be able to transport that fuel into the Pennsylvania area cheaper than the northwest European refiners are,” Burford said.

Reporting by Stephanie Kelly; Editing by Richard Chang

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