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Phillips 66 Grabs Domestic Shale Crude to Increase Exports

Jan. 30 (Bloomberg) -- Phillips 66 expects to refine more domestic shale oil this year and increase export capacity at Gulf Coast and West Coast refineries, the company said in today’s earnings report.

The company plans to use more than 200,000 barrels a day of shale oil in 2013, up from 112,000 in 2012. To transport the crude, the company received a tanker in January and expects to add 2,000 railcars next month. Phillips will receive about 50,000 barrels a day of North Dakota Bakken oil at its Bayway refinery in New Jersey from Global Partners LP.

“As we start taking delivery of the 2,000 rail cars, with the Global deal, we’re going to move more Bakken east and west, primarily to Bayway and our Ferndale refineries,” said Greg Garland, chairman and chief executive officer of Phillips 66, in a conference call with analysts.

The company is adding capacity amid rising U.S. oil production. Domestic output reached the highest level since 1993 this month, according to the Energy Information Administration, the statistical unit of the Energy Department.

Phillips 66 processed 135,000 barrels a day of domestic shale crude in the fourth quarter of 2012, almost double the year-earlier total.

“This is definitely something that oil refiners are going to follow suit with,” said Carl Larry, president of Houston-based Oil Outlooks & Opinions LLC. “It’s surprising to see this much shale being used, with limited resources outside of railcars.”

Export Capacity

The company forecast that refinery export capacity will rise to 370,000 barrels a day by the end of 2013 from 285,000. It expects to finish a project at its Ferndale, Washington, refinery in the first quarter to increase capacity by 20,000 barrels a day and plans other investments in Gulf Coast and West Coast refineries.

Phillips also plans to move natural gas liquids on pipelines built by DCP Midstream, which is jointly owned by Phillips 66 and Spectra Energy Corp. It said the Sand Hills pipeline from the Eagle Ford basin in Texas to Mont Belvieu, Texas, is in service, with a second phase connecting to the Permian Basin in West Texas to be complete in the second quarter.

The Southern Hills pipeline from the central U.S. to Mont Belvieu is on schedule to start in mid-2013 with an initial capacity of 150,000 barrels a day.

To contact the reporter on this story: Eliot Caroom in New York at ecaroom@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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