By Sumit Saha and Shariq Khan
(Reuters) -Phillips 66 and Kinder Morgan 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 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 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 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, 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.
(Reporting by Sumit Saha in Bengaluru and Shariq Khan in New York; Editing by Matthew Lewis)
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