Downstream energy company,
Phillips 66
(
PSX
) has struck a five-year deal with
Global Partners L.P.
(
GLP
) for 50,000 barrels per day (BPD) or 91 million barrels of North
Dakota crude oil that is to be delivered by rail to its Bayway
refinery in New Jersey.
Per the contract, Phillips 66 will utilize Global Partners' rail
transloading, logistics and transportation system to carry crude
oil from the Bakken region in North Dakota to Phillips 66's New
Jersey refinery. The cost of the transaction, which is expected
to close in the first quarter of this year, was not disclosed.
Growing oil production from the Bakken oil field has doubled
during the last two years and most of the pipelines transport oil
from West Canada and North Dakota to the Gulf Coast. This leaves
the East Coast refiners dependent on railcars to ship domestic
oil.
In 2012, the company already made expansions to deliver more
shale crude to its refineries by truck, rail, barge, ocean-going
vessels, and pipelines. Management also asserted that Phillips 66
is the first company to ship shale crude to the East Coast.
The energy market in the East Coast region is considered the
biggest in the country. According to the U.S. Energy Information
Administration, in October 2012, 4.6 million BPD of gasoline,
diesel and other petroleum products were sold.
With the advent of new drilling techniques, oil and gas
production has increased to a considerable amount but logistics
and construction issues have slowed down new pipeline projects.
Hence, the rail companies benefit from their capability to employ
their existing means to connect.
In 2012, Phillips 66 purchased 2,000 rail cars to provide
domestic crude oil to its refineries. Another refiner
Tesoro Corporation
(
TSO
) built a 10,000-car "pipeline on rails" to transport crude oil
from the Bakken field to its refinery in Anacortes, Washington.
Phillips 66, an independent publicly traded company, was formed
after the spin-off of the refining/sales business of
ConocoPhillips
(
COP
) in May 2012. The move has resulted in the creation of the
largest refining company in the U.S. and the largest exploration
and production player based on oil and gas reserves.
Phillips 66 currently retains a Zacks Rank #2, which translates
into a short-term Buy rating.
CONOCOPHILLIPS (COP): Free Stock Analysis
Report
GLOBAL PARTNERS (GLP): Free Stock Analysis
Report
PHILLIPS 66 (PSX): Free Stock Analysis Report
TESORO CORP (TSO): Free Stock Analysis Report
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