Enbridge, Phillips 66 in 3-yr Deal


Midstream service provider Enbridge Energy Partners, L.P. (EEP), through its affiliate − Enbridge Rail (North Dakota) LLC – has signed a three-year agreement with Phillips 66 (PSX) – one of the largest refiners in the U.S. Financial details of the agreement were not disclosed.

The deal entails the delivery of the Bakken crude oil to Phillips 66 refineries on the West and East coasts. The crude-by-rail shipments from an Enbridge terminal in Berthold, North Dakota, will commence in May and will expand to 35,000 to 45,000 barrels per day (:BPD) by November. Eventually, some crude could also be shipped to the Gulf Coast for processing.

This latest deal is part of the three accords that Phillips 66 signed with midstream companies to boost North American crude delivery to U.S. refineries. The other deals include the a five-year contract with Targa Resources Partners L.P. (NGLS) for speeding up the delivery of up to 30,000 BPD to Phillips’ Ferndale, Washington, refinery. Targa will provide rail-unloading and barge-loading services in Tacoma, Washington, for U.S. and Canadian crudes.

Also, Phillips 66 inked an agreement with Magellan Midstream Partners L.P. (MMP) to deliver about 20,000 BPD of crude from the Mississippian Lime shale play to Phillips’ Ponca City, Oklahoma, facility.

Coming back to Enbridge, its North Dakota Pipeline System remains connected with an 80,000 BPD Berthold rail facility in its Berthold Rail project. The facility, located near the Enbridge North Dakota Storage units, can hold up to three unit trains at a time. This project mainly aims to boost the take-away capacity from North Dakota, while facilitating the oil and gas producers and shippers to continue with their operations.

The aforesaid deals mainly emphasizes in substituting imported crude oil and West Texas Intermediate with less expensive crude oil from the Bakken, Mississippi Lime and other plays in the U.S. and Canada. Crudes produced in the U.S. shale regions and in Canada have been trading at considerable discounts compared with the barrels delivered in coastal regions as well as imported crudes. This helps oil and railroad companies to benefit financially to transport domestic crude to coastal regions, where they receive a premium price.

The units of Enbridge Energy Partners retain a Zacks Rank #3 (short-term Hold rating).

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