The Oiltanking Partners LP board of directors has approved approximately $200 million of additional crude expansion projects at the new Appelt crude oil terminal in Houston TX.
The Partnership intends to construct two new crude oil pipelines connecting its Houston terminal with Crossroads (sometimes referred to as Moore Road) Junction, a critical distribution point for the Houston market, for a total cost of approximately $98 million. Expansion projects will include a new 24-inch pipeline to Crossroads Junction that will give terminal customers access to the origination point of Shell Pipeline's Houston-to-Houma pipeline (the HoHo Pipeline), which is scheduled to transport crude oil from the Houston area eastbound to refining centers in Texas and Louisiana. The Partnership also intends to construct a new 36-inch pipeline to Crossroads Junction that will give terminal customers access to the termination point of TransCanada Corporation's Gulf Coast Pipeline from Cushing, which is expected to connect to the Keystone XL pipeline if approved and constructed.
Anne-Marie Ainsworth, Oiltanking Partners president and chief executive officer, says "These projects will be a further extension of our unmatched crude network in the Houston market. The new pipelines will provide our customers additional inbound and outbound connections to our crude storage hub, thereby driving higher throughput volumes and demand for incremental crude storage at our facilities."
The Partnership also announced a new phase of construction at the Appelt facility to add a total of 3.5 million barrels of new storage for a total cost of approximately $101 million. The storage will be built in two phases. The largest component, which is named Appelt III, will include 3.1 million barrels of storage and a new manifold on 26 acres of land adjacent to our existing Appelt II facility. In addition, the company will construct a new 390,000-barrel storage tank that should be completed before Appelt III is in service. Upon completion of these projects, the total storage capacity at the Appelt property will be nearly 10 million barrels.
"The additional storage capacity at our Appelt facility represents the fourth phase of our extensive infrastructure expansion program,” Ainsworth says. “As with our prior projects, this latest expansion is designed to address continuing robust demand for additional crude storage capacity from both existing and potential new customers. With these exciting new projects, we have now announced more than $500 million of capital investments to expand our connectivity and storage capacity since our initial public offering in July 2011."
The 24-inch Crossroads pipeline is expected to be completed by the end of 2014, and the 36-inch Crossroads pipeline is expected to be completed by the end of the first quarter of 2015.
The new 390,000 barrel Appelt storage tank is expected to be completed by the end of 2014, with construction anticipated to begin during the fourth quarter of 2013. The company anticipates commencing construction on Appelt III's 3.1 million barrels of storage capacity during the third quarter of 2014, after all relevant permits are in place, and placing this storage into service during the fourth quarter of 2015 and first quarter of 2016. When the Appelt I, II and III expansion projects have been completed, the Partnership's total storage capacity is projected to be nearly 29 million barrels.
The expansion projects are expected to be accretive to distributable cash flow once operational and are expected to generate returns of approximately 6 to 8 times EBITDA, or earnings before interest, taxes, depreciation and amortization.