Could Philadelphia Become 'Cushing East'?
Eddystone's location on the Delaware River also presents the opportunity to send crude-laden barges to refineries in the New York City area such as Phillips 66's Bayway and Linden facilities in New Jersey, Johnson added.
Birth of a Trading Hub?
Canopy and Enbridge also underscore the independence of the Eddystone crude-by-rail facility. Unlike some crude oil terminals, the Philadelphia facility will not be controlled by a single refiner or railroad.
"We feel that regardless of which carrier one of our customers chooses, they will do well," said Johnson. "We are an open facility, we are Geneva for the railroads. As long as they provide reliable service, we don't care."
Having access to an independent facility enables a producer to market its crude oil to multiple refineries for the best price, Johnson explained. Refiners wishing to run different crude slates will have options from various producers, he added. In fact, the Eddystone terminal will be equipped to handle light sweet crude oils from other plays beside the Bakken. Under Phase 1 of the project, the terminal will be equipped to accept "Bakken-esque" crudes with API gravities ranging from 35 to 45 and 0.2 percent or lower sulfur content. As a result, fungible crudes that could be traded under this "Philly Light" spec include production from Eagle Ford, Niobara, Permian Basin and Canadian Light Synthetic Crude sources.
Johnson likened the Eddystone terminal to a Swiss city known as a neutral venue where diplomats from around the world meet to broker deals on behalf of their respective governments. However, he acknowledged that a component of the project's second phase could help the burgeoning facility become a smaller, East Coast version of a place well-known to energy industry dealmakers: the U.S. oil trading hub at Cushing, Okla. After Eddystone adds segregated storage capacity in the second phase, it will also be able to accept non-fungible slates – that is, crude oils that cannot be substituted for one another.
"We're able to create a kind of mini-Cushing here, eventually," said Johnson. "There's a lot that can be done. It all depends really on where the market will take us."
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