A planned refined products lateral linking Valero's Parkway Pipeline to the Colonial Pipeline might enhance Valero's connectivity to the Northeast, but the Colonial mainline consistently operates at capacity, which means the project will not actually bring extra barrels to the US Atlantic Coast, sources said Wednesday.
Valero bought the other 50% in the 110,000 b/d Parkway refined products line from Kinder Morgan it did not own, and is executing an agreement to build a lateral establishing a connection to feed products to Colonial near Parkway's terminus at Collins, Mississippi, it said in a statement Tuesday.
Parkway originates at Valero's 215,000 b/d St. Charles refinery in Norco, Louisiana.
But Collins is the last terminal to which Colonial's volume allocations apply. Because demand for Colonial space is so high, the company limits the volumes that shippers can move by allocating reduced space near the line's origin. That means that if Valero injects more supply into the Colonial system in Collins, it or someone else has to inject that much less elsewhere, meaning the northeastern US does not get any more supply than it otherwise would have.
The "capacity of the mainline remains the same," a diesel trader said. "It may just mean a different source at Collins for Valero than how they are getting barrels to Collins now."
The lateral does provide direct pipeline access from the St. Charles refinery to the Colonial mainline, which gives Valero better access to Northeastern markets for the gasoline and distillates it refines there.
Neither Colonial nor Valero could be reached for comment.
