Oiltanking Partners LP announced that the board of directors of its general partner approved a $70 million expansion project to construct approximately 3.3 million barrels of new crude oil storage capacity at its Houston TX terminaling facility. The project, named Appelt II, will be located adjacent to Appelt I which was announced in April 2012 and is currently under construction.
Carlin G Conner, president, chief executive officer, and chairman of the board, says: "As expected, the increase in domestic crude oil production continues to create a need for additional crude storage capacity by refiners, oil producers, and marketers. This new project is supported by long-term storage contracts and is further evidence of the excellent service, flexibility and optionality that our terminal provides to the marketplace."
The partnership anticipates commencing construction by the beginning of the second quarter of 2013 when all relevant permits are in place. The additional storage capacity is expected to be placed into service during the third and fourth quarter of 2014. Once complete, the new storage capacity will bring total active storage capacity at the partnership to over 25 million barrels.
The expansion project is expected to be accretive to distributable cash flow once the additional storage is operational and is expected to generate returns of approximately five to seven times EBITDA, or earnings before interest, taxes and depreciation. The partnership anticipates funding the project primarily with debt.