The takeover of the dock has been earmarked in the Port of Los Angeles’ long-term plan, and Kinder Morgan was informed of that plan, they said.   Kinder Morgan is expected to look at their options, including finding another dock within the Port of Los Angeles, sources said.   
“A closing of the Carson dock at Kinder Morgan terminal could be a game changer,” a trader said.   “Kinder Morgan is running out of time. It would need to install a new Vapor Recovery Unit (VRU) if Kinder Morgan were to move to a different dock, and that would take two years,” he added.   A VRU is to recover flammable vapors generated during cargo transfer into marine vessels, which could present numerous hazards, including cargo tank overfill, cargo spillage, and fire and/or detonation of the cargo or its vapors.   
This expected change is to occur as soon as 2014 when Kinder Morgan’s leaseto use that dock, which is located between two existing container terminalswithin the port, expires.   Kinder Morgan is unlikely to move the existing VRU to a new dock due to logistics issues and permitting difficulties.   
That dock access is vital to Kinder Morgan’s 4.42-million-bbl capacityCarson terminal, which depends mainly on the Port of L.A. loading ordischarging products from or on ships. A lack of dock access could lower thevalue of Carson products storage tanks as West Coast gasoline and distillatesplayers may have to find tanks in other terminals for regular exports toMexico, South America and Canada.   
A spokesman for the Port of Los Angeles declined to comment when asked aboutthe re-designation plan, and a Kinder Morgan spokesman maintained thatnegotiations to renew the lease were ongoing.   OPIS reported in October 2010 that a combination of rebounding container traffic flow, and lackluster oil import and exports at Los Angeles shippingports might prompt port authorities to scale back liquid bulk business andfocus more on container business in the long run.   Los Angeles and Long Beach ports are the largest container ports in theU.S., and both also offer critical import/export waterborne access for oilcompanies operating in California.   However, the robust container shipping business overshadows the anemic oilproducts volume for now and the near future.   Port authorities receive revenues from tenants on fixed priced leases aswell as a variable component based on dock usage and volume. A higher trafficflow would mean higher revenues for the ports.   
While container traffic shows a resurgence, OPIS notes that arbitrageopportunities to bring foreign products into the West Coast have been almostnon-existent in the past five years.

SLACK DEMAND

Traders said that many tenants at the Carson terminal, including oil trading companies and refiners, will have tank leases at that terminal expiring prior to 2014.   With the uncertainty on the dock access, tenants may be less inclined to sign on new leases or longer-term contracts at that terminal, they said.   Also, demand for storage tanks in a relatively tight tank market on the West Coast may not be as high as a few years ago as these traders are not incentivized to hang on to storage tanks, especially in a market without arbitrage opportunities as well as contango plays.    
However, an export outlet at Carson terminal could be critical in the longerrun.   The West Coast has turned into a net exporter of products from a netimporter, and gasoline exports could play an even bigger role for Californiarefiners over the next five-20 years amid lower consumption, efficiency gains,competing fuel technologies and mandated increases of alternative fuel use. Also, Nevada and Arizona are buying less fuel from California, opting torely more the Gulf Coast.   This is partly due to more favorable economics and a need to diversify its gasoline supply sources.   
The need to export gasoline on the West Coast should increase later thisyear when Holly Corporation and Sinclair Transportation complete the UNEVpipeline, a 406-mile pipeline transporting refined products from Salt LakeCity, Utah, to terminals in Cedar City, Utah, and in Las Vegas, Nev.   
Although Kinder Morgan looks set to lose that dock, some oil traders areoptimistic that there is ample time for the midstream company to look foranother dock within the port.   
“They (Kinder Morgan) have told customers that they are exploring theiroptions. They have two years to sort it out,” a West Coast trader said.   Besides securing another dock, it is unclear what Kinder Morgan’s otheroptions are.   Without the dock access, storage tanks at Carson terminal would lose theirvalue, he added.   
Besides Carson, West Coast players could also use BP terminal in LosAngeles, and to a limited extent, terminals at Tesoro, Valero and Chevron.