South California Ports May Rethink Oil, Container Business Strategy on Changing Econs
10.18.2010 - NEWS
October 15, 2010 [OPIS] - A combination of rebounding container traffic flow, and lackluster oil import and exports at Los Angeles shipping ports may prompt port authorities to scale back liquid bulk business and focus more on container business in the long run, industry sources in California told OPIS recently.

Los Angeles and Long Beach ports are the largest container ports in the U.S., and both also offer critical import/export waterborne access for oil companies operating in California.
A reconfiguration of business strategy at the ports could mean less dock access and storage facilities allocated to the oil sector, and some existing oil terminals at the ports could be converted to serve the recovering container industry when existing leases expire.
Port authorities receive revenues from tenants on fixed priced leases as well as a variable component based on dock usage and volume. A higher traffic flow would mean higher revenues for the ports.
OPIS notes that arbitrage opportunities to bring foreign products have been almost non-existent in the past three to four years. Gasoline cargoes occassionally sail across the Pacific when arbitrage economics work, and West Coast exports a few cargoes of high-sulfur diesel a month to South America.
However, for now, the port configuration for container and liquid bulk is not expect change significantly in the near future.
Kinder Morgan is currently working with the Port of Los Angels regarding dock access past the end of its current dock lease in 2014, Emily Mir Thompson, a company spokeswoman, told OPIS in response to queries about future dock access for its Carson oil terminal.
Kinder Morgan’s 4.42 million bbl Carson terminal depends mainly on the Port of L.A. for dock access to load or discharge products from or on ships.
Rachel Campbell, a Port of Los Angeles spokeswoman, said that Kinder Morgan terminal at the port was located in between two container terminals, but the use is liquid bulk and the port does not expect that to change in the near
Annual gasoline consumption in California is to decrease over the forecast period up to 2030 largely because of high fuel prices, efficiency gains, competing fuel technologies and mandated increases of alternative fuel use, according to an integrated energy policy report issued by the California Energy
California’s gasoline imports would decrease significantly over the next 15 years, while diesel and jet fuel imports would still rise to keep pace with growing demand for those products.
A large portion of imports into California is for supplies to Arizona and Nevada.
However, sources noted that in addition to a sluggish economy and lackluster fuel consumption, Nevada and Arizona are buying less fuel from California, opting to rely more the Gulf Coast.
This is partly due to favorable economics and a need to diversify its gasoline supply sources.
This bearish scenario for Californian suppliers could be exacerbated next year when Holly Corporation (NYSE: HOC) and Sinclair Transportation completes the UNEV pipeline, a 406-mile pipeline transporting refined products from Salt
Lake City, Utah to terminals in Cedar City, Utah and in Las Vegas, Nevada.
UNEV expects mechanical completion of this pipeline to occur in early 2011, with service to begin later in 2011.

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