NuStar Energy, which has 97 million barrels of global storage capacity, is testing market response to plans for enlarging its train terminal in Louisiana by tapping into a mix of North Dakota Bakken crude and bitumen from the Alberta oil sands.
Ranked as the second-largest liquids terminal operator in the United States, NuStar announced in late June that it has inked a three-year commitment with Great Northern Oil Co. to move Bakken crude and heavy Canadian crude to its St. James facility, starting in the fourth quarter.
Danny Oliver, the company’s senior vice president of marketing and business development, said NuStar wants to be as open as possible to carrying a variety of crudes.
He said current discussions aimed at reaching new contracts involve Bakken producers and Canadian producers who are moving diluted-bitumen, dilbit, from the oil sands.
NuStar’s expansion plans also include converting one dock at St. James to handle exports and adding another, reversing its traditional role of accepting only inbound crude shipments.
St. James third-largest facility
In a presentation to a Credit Suisse and Energy Logistics conference, Chief Financial Officer Steve Blank said the St. James facility is NuStar’s third largest at about 9 million barrels, including a 700,000 barrel expansion in January
He said the first unit train expansion came on line 15 months ago under a profit-sharing agreement with EOG Resources and the new deal with Great Northern is expected to cost about $45 million, yielding an estimated annual EBITDA in the $15 million-$20 million range.
At that rate he said NuStar should recover its investment costs within the three years.
Blank said that of the additional capacity of about 70,000 barrels, Great Northern has signed on at about 30,000 barrels.
Oliver said that as the volume of extra-light crudes grows in the Bakken and Eagle Ford formations customers are seeking more space in storage tanks as they get involved in more blending with lighter crudes.
He said the new terminal with nameplate capacity of 70,000 barrels may be capable of offloading more than two unit trains every 24 hours, raising capacity to 100,000 barrels.
Blank said improvements to the St. James dock will enable faster loading of ships, while NuStar has 900 acres that can be used for further expansion.
