Calumet expands crude logistics network to supply South Texas refinery

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 Straumins. 

"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."

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