The terminal will be receiving products from a new 406-mile Utah-Nevada(UNEV) oil products pipeline, which could deliver up to 60,000 b/d of gasoline and diesel to Las Vegas from Salt Lake City.   
A company spokesman said that the Las Vegas terminal will have products for sale in early January, and its new Cedar City terminal in southwestern Utah is already up and running. The Cedar City terminal has already begun to sell products at the racks level. HollyFrontier has yet to post rack prices at its new terminal in Las Vegas, but traders expect the price to be competitive to nearby Pro and Kinder Morgan terminals. “HollyFrontier does not have an exact date yet, but the products sales are for sometime in January,” a source said.   
Products prices at the new HollyFrontier terminal in Las Vegas are expected to be cheaper than terminals that sourced their products from the West Coast because Salt Lake City refineries have much lower production costs.   The refineries in Utah have access to relatively cheaper Midcon crude, whereas West Coast refining margins are squeezed by higher foreign crude import costs.   
OPIS reported in November that the start-up date of the pipeline was pushed back by at least a month from HollyFrontier’s original target commissioning date in mid-November.   The line fill for the new pipeline occurred in December.

NO HURRY

In October, HollyFrontier’s Executive Chairman Matt Clifton said during a conference call addressing the company’s third-quarter financial results that the UNEV pipeline was on target for completion in November.   Talks of a possible delay for the first product delivery on the new pipeline first surfaced in October.   
The slower-than-expected pipeline start-up could be attributed to ample gasoline supplies in Nevada and a plunge in Californian gasoline values.   Also, sources pointed out that buyers are less than eager to stock up over the holidays amid a weak gasoline market.   The Last-In-First-Out strategy could also come into play for buyers as the end of the year approaches.   
In Salt Lake City, refiners may also not be running at maximum capacity due to a poor gasoline crack spread.   Traders said that the UNEV pipeline will be a game changer for the Las Vegas market, which currently draws fuel from California. Las Vegas has become a more important market for refiners and traders in California due to sluggish demand on the West Coast and high unemployment.   
Nevada oil products buyers are expected to buy more gasoline from Salt Lake City instead of the West Coast when the UNEV pipeline starts flowing because of expectations of comparably cheaper prices.   However, it is noted that the recent drop in West Coast gasoline prices is keeping Las Vegas well supplied.   HollyFrontier expects the pipeline will bring products to two new terminals at North Las Vegas and Cedar City, Utah. Those markets are currently serviced by truck.   At start-up, the line will probably run at about 50% of its 60,000-b/d capacity.   
About 15,000 b/d, or half of the initial flow rate, will go to Southwest Utah. The other half will hit North Las Vegas.   The $385 million pipeline is 75% owned by HollyFrontier, and Sinclair owns the remaining 25%. HollyFrontier invested $289 million in the project, which came in substantially above its original budget.   The general market consensus is that California refiners would not be able to compete with Salt Lake City refiners on pricing in the longer run because Utah refiners are processing significantly cheaper Midcon crude.   The Las Vegas market is likely to source the cheaper products from Utah at least in fall and winter as Salt Lake City is net long on gasoline in the high- RVP months.   
As a result of competition from Utah to supply Las Vegas, California refiners are looking at export alternatives including Asia, South America, Mexico and Canada. Some less efficient refineries in California may shut or cut rates significantly in a worst-case scenario.