A new petroleum pipeline from Ohio would ease gasoline shortages in Western Pennsylvania and help stabilize prices at the pump, experts said Thursday.
Sunoco Logistics Partners L.P. plans to build about 160 miles of underground pipeline in Pennsylvania and Ohio, connecting the new lines with some existing ones, to transport refined oil products from the Midwest to eastern Ohio and the Pittsburgh region.
The move by the Philadelphia-based master limited partnership is “part of a national trend. We are seeing a lot of structural changes” designed to flow petroleum from expanding production areas and refineries to markets where demand exists, said Brian L. Milne, refined fuels editor for commodity information services provider Telvent DTN.
“We have a lot of pipelines in this country, but they are not going where they are needed right now,” he said.
Philadelphia-based Sunoco said its Allegheny Access pipeline will be able to deliver 85,000 barrels a day when it goes into operation in the first half of 2014, and it could scale up to 110,000 barrels of capacity.
New lines will be up to 12 inches in diameter and mostly will be built along existing rights of way, running parallel to current pipes when possible, Sunoco Logistics said.
Shippers provided sufficient commitments to use the pipeline in a recent “open season” to push the project forward, said the partnership, which also includes Inland Corp., which is 83 percent-owned by Sunoco Logistics. The cost was not disclosed.
Industry experts listed reasons to build the pipeline now:
—Crude oil from domestic regions such as North Dakota, now the second-largest U.S. oil producer after tripling output in the last three years, is as much as $40 a barrel cheaper than the imported crude that East Coast refiners process. That creates a price advantage.
—Several refineries on the East Coast and in the Caribbean have been idled in recent years, and because most of Pittsburgh’s supply traditionally has come from the East, the region has experienced volatile prices and some shortages.
—Expansions have been completed or are underway at several Midwest refineries, including BP’s facility in northwest Indiana and Marathon Oil’s in Detroit. With more capacity, refineries will be able to process domestic as well as Canadian crude oil.
“This essentially gives Pittsburgh the ability to source production from the Great Lakes, rather than just the East Coast,” Patrick DeHaan, senior petroleum analyst for GasBuddy.com, said, referring to the Allegheny Access project. “Whenever there is a pipeline added, it is sure to assist motorists.”
Gasoline averaged $3.80 a gallon in Western Pennsylvania this week, up 3.3 cents from last week and just under the $3.82 national average.
Delta Air Lines Inc. bought an idled ConocoPhillips refinery near Philadelphia this year in an effort to slash its fuel costs, and the air carrier said it may bring North Dakota oil in by train to process there instead of sourcing crude from overseas. Some units at the refinery will start running this weekend, Delta said.
Donald Bowers, manager of petroleum and transportation for Superior Petroleum Co. in Ross, said gasoline supplies were steadier than normal this summer.
But motorists still pay 5 to 20 cents a gallon more in the seven-county Pittsburgh region than in neighboring areas because of the requirement that stations sell specially blended gas in the summer.
“That pipeline can do nothing but help us. It means more supply, and that is a good thing,” Bowers said, adding that a Buckeye Partners L.P. subsidiary operates a former BP pipeline east to Pittsburgh that was unused until last summer.
Shares of Sunoco Logistics closed at $46.84, up 20 cents. The partnership owns 5,400 miles of crude oil pipelines and 2,500 miles of refined products lines in the Northeast, Midwest and Southwest.
Information from: Pittsburgh Tribune-Review, http://pghtrib.com