California refinery closures spark pipeline race to West Coast

SEATTLE (Oil Monster): A race is on among energy companies to build a major fuel pipeline to the U.S. West Coast, a potentially lucrative prize as the planned closure of two California refineries threatens to send gasoline prices in the isolated market soaring.

Motorists in West Coast states have long paid some of the country's highest fuel prices due to limited regional production and minimal connectivity to the Gulf Coast refining hub. There are no pipelines delivering fuel to California from across the Rocky Mountains and only a few pipelines deliver to the West Coast from the Gulf Coast, according to the Energy Information Administration.

Phillips 66's Los Angeles plant began winding down operations in September and Valero Energy's Benicia refinery plans to close in April, threatening more price shocks for consumers but presenting an opportunity for pipeline operators.

Three groups have outlined different proposals to fill the near 280,000 barrel-per-day supply void the closures create. These include refiner HF Sinclair, a unit of pipeline operator ONEOK, and a partnership between refiner Phillips 66 and midstream-focused Kinder Morgan.

However, the first to reach a final investment decision may be the only one to secure a potential multi-billion-dollar windfall because multiple pipelines to the West Coast would eat into each other's margins, which are already limited due to the availability of waterborne imports to California.

"When you see multiple pipeline projects being proposed at the same time, typically only one of them gets done," said Skip York, chief energy strategist at Turner, Mason & Co.

Courtesy: www.reuters.com