Marathon Traders Gain E.Coast foothold with Hess Deal

posted by Joseph Keefe
Thursday, May 22, 2014

Marathon Petroleum Corp is poised to expand its growing Midwest and Gulf Coast fuel trading operation to the East Coast with Thursday's deal to buy Hess Corp's retail network and transport contracts.

The purchase will give Marathon control of Hess's gasoline stations and access to pipelines, including the capacity to ship approximately 40,000 barrels per day on the sought-after Colonial Pipeline from the Gulf Coast to the East Coast, according to the companies. The $2.9 billion deal is expected to close late in the third quarter.

Chief Executive Officer Gary Heminger said the deal will "further leverage" the company's refining and logistics assets, "providing an outlet for an incremental 200,000 (barrels per day) of assured sales from our refining system."

That likely means opening up new trading opportunities. Marathon's nearest refinery is nearly 500 miles east of New York City in Canton, Ohio, with few major pipelines in between. Shipping fuel north from its Texas and Louisiana plants should offer new opportunities for enterprising traders.

"Marathon is not seen as a big, active, trader, so it will be interesting to see if that changes," said Robert Campbell, a New York-based analyst at consulting company, Energy Aspects.

The purchase would allow Marathon to complement its diesel export business, bringing gasoline into New York Harbor as it sends distillate to Europe, he said.

Marathon has shipped about 3.3 million barrels of distillate fuels out of the country in the past 12 months, sending shipments to destinations including Mexico, Panama, El Salvador, the Netherlands, and the Philippines, according to data compiled by Reuters. Marathon's exports trail those of integrated global oil companies like Shell and BP, and merchant traders like Vitol and Trafigura.

"Marathon will probably look at bringing blended product from the Bahamas into Florida and also move product out of the Midwest into Pennsylvania and PADD 1," Campbell said.

A massive oil storage facility in the Bahamas may offer the chance for traders to use lower-cost ships to transport fuels to the East Coast from the Gulf Coast, where Marathon operates two major refineries. Shippers may use lower-cost foreign ships to transport oil through the Bahamas, bypassing regulations that require special ships for use between U.S. ports.

The deal will not include the nearly 40 million barrels worth of petroleum product storage terminals up and down the Eastern seaboard that Hess sold last year to Buckeye Partners LP for $850 million.

It is not clear how the lack of company-owned storage terminals may affect Marathon's trading plans, although many owners - including Buckeye - typically lease out their tanks since they don't own their own retail outlets.

Marathon didn't immediately respond to requests for comment.


The purchase of Hess's network will unite the fourth and fifth largest U.S. gasoline retailers, making it the largest company-owned and -operated chain in the nation by revenue.

With a major position on the East Coast, Marathon could also become an important player in the New York Harbor market, where benchmark U.S. gasoline and diesel prices are set.

Marathon doesn't trade "much" now, but that's likely to pick up when they take over retail outlets, said an East Coast-based products broker.

Hess has long been a major importer of gasoline and other fuels into the East Coast until a year ago, when it scaled back by about 75 percent on a monthly basis, according to data from the Energy Information Administration.

In 2012 it imported 19.8 million barrels of products to the region; by contrast Marathon imported just 84,000 barrels.

But Marathon has become a growing force in both Midwest and Gulf Coast markets since spinning off from oil producer Marathon Oil Corp in 2011. Marathon purchased the 475,000-barrel-a-day Texas City refinery from BP Plc in 2012, along with four marketing terminals and contracts to supply 1,200 retail sites in the U.S. Southeast.

This year Marathon increased its stake in the 1,830-mile Explorer Pipeline to 25 percent. Explorer transports diesel, fuel oil and jet fuel from the Gulf Coast to the Midwest.

It also boasts 64 company-owned and -operated light product terminals, two part-owned and non-operated and 60 third-party light product terminals across the Midwest and Southeast, plus 200 owned or leased barges that mainly transit the Ohio River, according to its website. It also owns 170 transport trucks and 2,165 owned or leased railcars. Last year it also sold 74,000 bpd of ethanol blended into gasoline, it says.


By Jessica Resnick-Ault

Maritime Reporter June 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds


Globecomm to Provide VSAT for PBJV Barge

Purpose-built accommodation and pipe-lay barge on charter to Petronas equipped with VSAT and L-Band services. Globecomm Maritime has been awarded a contract

VSTEP Wins Mexican Navy Simulator Contract

The Mexican Navy selected VSTEP to supply a Class A NAUTIS Full Mission Bridge (FMB) Simulator and 24 NAUTIS desktop trainer stations for the Naval Academy in Veracruz.

Floating Production: $1.2b Speculative FLNG Ordered

The floating production business continues to be very strong, particularly in the LNG gas processing sector.  Last month saw a speculatively ordered floating liquefaction plant – a $1.


Company Fined for Oil Spill Near Anacortes

Ecology issues $112,500 penalty for sunken vessel.   American Gold Seafoods faces a $112,500 penalty for an oil spill caused by the accidental sinking of its vessel,

London Shipping Professionals Weigh in for SPNL Report

The Shipping Professional Network London (SPNL) has  released their full Future London report, an initiative that gathered the views and opinions of London’s young

Update: U.S. to Seize Kurdish Oil from Tanker off Texas

U.S. authorities are set to seize a cargo of oil from Iraqi Kurdistan anchored off the Texas coast after a judge approved a request from Baghdad, raising the stakes


Thome Awarded for Green Efforts in Long Beach

Thome Ship Management has been awarded a Green Environmental Achievement Award by the Port of Long Beach, California, for high standards in performance during 2013.

200th Airbus A320 Shipset Loaded for China

The 200th shipset for Airbus’s A-320 final assembly line (FAL) in Tianjin, China, was loaded on to the containership COSCO Hope at HHLA’s Container Terminal Tollerort

Update: U.S. to Seize Kurdish Oil from Tanker off Texas

U.S. authorities are set to seize a cargo of oil from Iraqi Kurdistan anchored off the Texas coast after a judge approved a request from Baghdad, raising the stakes


Petroecuador Tenders to Buy 3.84m bbls of Naphtha

State-run oil company Petroecuador has launched tenders to buy a total volume of 3.84 million barrels of naphtha for delivery in the coming month at Esmeraldas,

Company Fined for Oil Spill Near Anacortes

Ecology issues $112,500 penalty for sunken vessel.   American Gold Seafoods faces a $112,500 penalty for an oil spill caused by the accidental sinking of its vessel,

Russia, China May Develop Floating Nuclear Power Plants

Russia and the world's top energy user China may jointly develop six floating nuclear power plants (NPPs), Russia's nuclear export body said on Tuesday, a further

Fuels & Lubes

Business is Brisk at Posidonia in Athens

In early June, the shipping community met in Athens, Greece for Posidonia 2014. While the focus in Athens tends to be skewed more toward the night life and after hour parties,

U.S. Marshalls Ordered to Seize Kurdish Oil Cargo off Texas

Acting on a request from the central government in Iraq, a U.S. judge has signed an order telling the U.S. Marshals Service to seize a cargo of oil from Iraqi Kurdistan

Tripoli Airport Ablaze, Rockets Leave Libya in Chaos

Diplomats flee Libyan chaos; Politicians appeal for international intervention. Clashes in Tripoli, Benghazi kill around 160 over two weeks, while Libyan capital face fuel, power shortages.


Diana Containerships Q2 & 1H 2014 Financial Results

Greece-based Diana Containerships Inc., a global shipping company specializing in the ownership of containerships, has reported net income of $0.6 million for the second quarter of 2014,

Mercator Lines Profit Hit by Low Bulk Freight Rate

Mercator Lines (Singapore) reported a revenue of US$ 16.5 million for Q1 2015, an increase of 19% as compared to correspoding period in the previous previous year, however a net loss of US$ 7.

Marseilles Fos Reports Mixed First Half

First-half container traffic at leading French port Marseilles Fos totalled 583,287 teu – up 7% on the first six months last year - marked by a 10% increase at the deepsea Fos terminals.

Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Pipelines Pod Propulsion Salvage Ship Electronics Ship Repair Ship Simulators Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1411 sec (7 req/sec)