Calumet Specialty Products has entered into an agreement
with TexStar Midstream Logistics under which TexStar will
construct, own and operate a 30,000 bpd crude oil pipeline
system that will supply significant volumes of Eagle Ford crude
oil to Calumet's refinery in San Antonio, Texas.
Under the terms of the 15-year agreement, which
was first announced on Wednesday, TexStar has
committed to install and operate the Karnes North pipeline
system (KNPS), an 8-inch, 50-mile pipeline that will transport
crude oil from Karnes City, Texas -- a major center
of oil production in the Eagle Ford shale formation -- to
Calumet's Elmendorf, Texas terminal, a key supply hub for
Calumet's San Antonio refinery.
The San Antonio refinery expects to receive deliveries of at
least 10,000 bpd of crude oil through the KNPS-Elmendorf
terminal supply route once the line comes into service during
the fourth quarter 2014.
"We expect this agreement will help to further improve the
long-term profitability of our San Antonio refinery," said
Jennifer Straumins, chief operating officer of Calumet. "By
year-end 2014, the refinery will begin receiving
significant volumes of Eagle Ford crude oil via the TexStar
line, thereby enabling us to realize significant transportation
cost savings on our delivered feedstock."
As a result of this agreement, Calumet expects to
significantly reduce its costs to transport crude oil to the
San Antonio refinery, where it currently receives crude oil
deliveries by truck. Over time, Calumet expects to increase the
volume of crude oil shipped on the KNPS above 10,000 bpd, which
should contribute to incremental cost savings.
"During the fourth quarter of 2013, we successfully
completed a project that allows the San Antonio
refinery to blend heavy reformates,
light naphtha and ethanol to produce up to 3,000 bpd
of higher-value finished gasoline," said
"Early into the first quarter 2014, we expect to complete a
crude unit expansion at the San Antonio
refinery," she added. "This expansion will increase our total
capacity at the facility from 14,500 bpd to 17,500 bpd, while
allowing for increased production of jet fuel, diesel fuel and
gasoline. These projects, in concert with our
ongoing efforts to source increased volumes of cost-advantaged
Eagle Ford crude oil, should serve to greatly enhance the
financial performance of the San Antonio refinery in the years to come."