NuStar Diversification

Will See Major Changes at Paulsboro, Savannah

Jan. 10, 2014 – NuStar Asphalt has a busy 2014 agenda. The company got out of some undesirable supply contracts with Venezuela as 2013 concluded, and it will continue to diversify out of asphalt and into more profitable logistics and marketing projects in 2014. Almost every project appearLO-SRG docss designed to insure that the company’s dependence on asphalt demand is reduced with alternatives that should insulate the company when asphalt demand is poor.

The company, a 50-50 joint venture between parent NuStar Energy LP and private equity firm Lindsay Goldberg, has big plans for two small refining sites that were acquired from Citgo back in 2008. The Savannah, Ga., refinery has been idled since 2012 but ambitious projects will make the location much more strategic to domestic and even offshore oil flow. The Paulsboro, N.J., refinery should be making some more attractive intermediate or even finished products as early as this spring.

More specifically, ongoing modifications at the 72,000-b/d Paulsboro refinery will enable one of two crude oil distillation units at the site to process light sweet crude by the end of the first quarter. The facility would be able to run various crudes ranging from the very light Bakken North Dakota material to heavier offshore blends like Venezuelan Boscan crude. Running the light feedstock will enable the refinery to make intermediate cuts such as naphtha and unfinished gasoil which could be sold to other Mid-Atlantic refiners, or be exported to a number of countries.

There are also projects that should enable NuStar to bring in additional heavy crude oil by rail, and initial expectations are that those logistics have a September completion date. Later this year, NuStar may look at the feasibility of investment in more unit trains as well as further hydrotreating that could help the company manufacture a domestic ULSD. In any case, the Paulsboro plant should be able to receive unit trains at some point in 2014.

Savannah no longer has refining capability but the terminal could grow more strategic, particularly if the U.S. eases restrictions on crude oil exports this decade. Most recently, the terminal was simply an asphalt distribution point but upgrades were just concluded that will allow 16 rail cars of heavy crude (or eight of asphalt) to arrive each day, with the potential to raise that tally to 32 cars in the first half of this year. Crude that is shipped by rail to Savannah could conceivably move to Paulsboro via backhauls on waterborne vessels that are termed up by NuStar via time charters. Ultimately, NuStar could have 800,000 bbl of total storage on the Savannah River, giving it a major staging area for North Atlantic supply.

–Tom Kloza,

Copyright, Oil Price Information Service

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