Oct 20 (Reuters) - Phillips 66 and Kinder Morgan ( KMI )
on Monday began soliciting shipper commitments for a
proposed pipeline system that will move fuel from the Texas
refining hub to bolster supplies in Arizona and California as a
spate of refinery closures stokes supply concerns.
If constructed, the new pipelines could help ease the strain
on West Coast fuel supply from the planned closures of Phillips
66's Los Angeles refinery by the end of this year and Valero
Energy's ( VLO ) Benicia refinery next year. Together, those
refineries produce about 20% of California's fuel requirements
and help meet the needs of neighboring states. The planned
closures have caused a scramble by regulators to find
alternative means of supply.
The system proposed by Phillips 66 and Kinder Morgan ( KMI ) will
include the construction of a new pipeline from Borger, Texas,
to Phoenix. The companies will also reverse the direction of
flows on an existing Kinder Morgan ( KMI ) pipeline that currently
delivers fuel from Colton, California, to Phoenix, they said in
a joint statement.
Flows will also be reversed on the Phillips 66-operated Gold
Pipeline, which currently delivers products from Borger, Texas,
to St. Louis, Missouri. Reversing it will help deliver more fuel
from Midwestern U.S. refineries into the proposed new pipeline
system from Borger to Arizona, called the Western Gateway
Pipeline, the companies said.
"This is potentially huge news for motorists in California,
Las Vegas, Arizona and great news for refiners in the Gulf,"
GasBuddy analyst Patrick De Haan said on social media platform
X. California drivers pay the highest gasoline prices in the
Lower 48 U.S. states and fuel prices were expected to rise
further from the planned refinery closures.
The new pipeline system could allow Gulf Coast refiners to
raise capacity to feed these pipelines, especially in
politically advantageous states, De Haan said.
Last month, Magellan Pipeline, a subsidiary of ONEOK ( OKE )
, also began gauging interest in a new pipeline system to
transport refined products from Houston and southern Oklahoma to
delivery locations in El Paso, Texas, and the Phoenix area.