February 23, 2017 [OPIS] - A new 625,000-bbl tank will be constructed to handle sour crude at PBF's refinery in Chalmette, La., after a deal was reached between the refiner and its master limited partnership affiliate.
The additional tank is a reminder that refiners with publicly traded MLPs are motivated to add storage that can yield a nice earnings stream for logistics and afford the refining company more agility with crude supply or refined products marketing.
A 10-year storage services agreement was signed last week between PBF Holding and PBFX (the master limited partnership) for tankage that should be ready by Nov. 1, 2017 or earlier. PBF affiliate Chalmette Refining along with PBFX Operating (a PBFX affiliate) have entered into a 20-year lease on the premises where the tank will be located and Chalmette Refining will manage the construction of the tank.
Under the storage agreement, which is typical between refiners and their logistics affiliates, PBFX will provide the parent company (PBF Holding) with storage services in return for storage fees. The agreement requires the parent company to pay a monthly fee of 60cts per barrel of shell capacity and the lease can be extended for various terms.
The project underscores how independent refiners and their MLPs can be much more nimble than major oil companies such as ExxonMobil. Among major oil companies in the U.S., only Shell has a master limited partnership affiliate, whereas nearly every publicly traded independent refiner has a publicly traded MLP.
Beyond leverage for refining operations, the additional crude oil storage could pay off when there is deep contango in crude oil prices. Much of the crude that is in U.S. tanks was put there as part of “carry plays” by public and private trading companies.
