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.

EAST COAST OPPORTUNITIES


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 February 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Contracts

Electronics Retrofit for Taiwanese Research Vessel

L-3 SAM Electronics has been awarded a contract to retrofit propulsion control and automation systems aboard the Taiwanese Navy’s Ta Kuan hydrographic and oceanographic research vessel.

Keels Laid for Two Aluminum OSVs

Triangle Marine Services and Marine Core & Charter host keel laying ceremony for two Aluminum Fast Offshore Support Vessels   UAE-based shipbuilder Triangle Marine

Van Oord, Falck Ink Safety Training Deal

Van Oord has signed a two year contract with Falck Safety Services for the provision of safety training.   Van Oord, a contractor for dredging, marine engineering and offshore energy projects,

Legal

Dutch Chief Mate Sentenced for Fatal Collision

Gerardus Chapel, the chief mate at the helm of the dredger that collided with a sailing yacht at the entrance to the River Orwell in Suffolk last summer, has received a six-month sentence.

Philly Tankers Lines Up Charters

Philly Tankers AS announced today that its wholly owned U.S. subsidiary, Philly Tankers LLC, has entered into binding long-term time charter contracts with a domestic end-user for the two 50,

North Korea Reflags Ships to Evade Sanctions

A North Korea shipping company has been renaming and reflagging its vessels so it can evade an arms embargo, a UN report has said.   The effort by Pyongyang-headquartered

Ports

Port of LA Container Volumes Down 22.7% in January

Port of Los Angeles container volumes decreased by 22.7 percent in January compared to January 2014 volumes, the port announced today. The port's January 2015 cargo volumes totaled 529,

RoRo Ship Enters Operation for WWL

Wallenius Wilhelmsen Logistics welcomes into operation the M/V Thermopylae, the first of its new generation of Post Panamax HERO (High Efficiency RoRo) PCTC vessels.

Containership Becomes Largest to Sail the Thames

The Munkebo Maersk became the largest ship to ever sail up the River Thames as it called at DP World London Gateway, the U.K.’s newest deep-sea port hub. The 399-meter-long,

Energy

Brookings Institution Hosting Panels on LNG Marine Fuel

The Brookings Institution, a Washington D.C.-based think tank, will host a two-panel discussion on the use of LNG as a marine fuel on Tuesday, March 3, the organization announced today.

CGG to cut Vessel Fleet Further

French seismic group CGG said on Thursday it would further cut its fleet of seismic vessels after declining demand from oil and gas clients hit by the falling oil

Atlantic Gas Swings Keep LNG Traders Guessing

MILAN, Feb 26 (Reuters) - Atlantic natural gas markets are seeing some of the biggest price swings in years as volatile European trade, freezing U.S. weather

Fuels & Lubes

RoRo Ship Enters Operation for WWL

Wallenius Wilhelmsen Logistics welcomes into operation the M/V Thermopylae, the first of its new generation of Post Panamax HERO (High Efficiency RoRo) PCTC vessels.

Asia: LPG Shipping and LNG Pricing

While declining Asian LNG prices have reduced margins on the long-distance LNG trade, causing spot-charter rates for LNG vessels to fall, LPG shipping earnings

GTT Receives Order for LNG Bunker Barge

Gaztransport & Technigaz (GTT), a designer of membrane containment systems for the maritime transportation and storage of LNG liquefied natural gas (LNG), announced that its U.

Logistics

RoRo Ship Enters Operation for WWL

Wallenius Wilhelmsen Logistics welcomes into operation the M/V Thermopylae, the first of its new generation of Post Panamax HERO (High Efficiency RoRo) PCTC vessels.

Containership Becomes Largest to Sail the Thames

The Munkebo Maersk became the largest ship to ever sail up the River Thames as it called at DP World London Gateway, the U.K.’s newest deep-sea port hub. The 399-meter-long,

UK's Dragon LNG Port May Have Booked Two Cargoes

Britain's Dragon liquefied natural gas (LNG) import terminal shows only two unused import slots available over the next 13 days, compared with four slots advertised earlier this week,

 
 
Maritime Standards Naval Architecture Offshore Oil Pipelines Pod Propulsion Port Authority Ship Electronics Shipbuilding / Vessel Construction Sonar Winch
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: 0.3466 sec (3 req/sec)