The Colonial pipeline is one of the major refined product pipelines that moves gasoline, diesel, and jet fuel from the US Gulf Coast to the US East Coast market.

Colonial plays an important role in both supplying the US East Coast and allowing Gulf Coast refiners to place their production competitively. Most Gulf Coast refiners place at least some of their product on the Colonial pipeline, or sell to customers who do.

Due to the volume of refined product moved, the pipeline (especially at its Houston origin) is a major point for spot market trading of these products, providing the basis for the Gulf Coast Pipe price assessment.

Description

The Colonial pipeline consists of 4 main lines and a number of branch lines.

Line 1 - A 40 inch line moving 1.5 million barrels/day of gasoline from Houston to Greensboro, NC

Line 2 - A 36 inch line moving 1.2 million barrels/day of middle distillates (diesel, heating oil, jet fuel) from Houston to Greensboro, NC

Line 3 - A 32 inch line moving 885 thousand barrels/day of all products (gasoline, diesel, heating oil, jet fuel) from Greensboro, NC to Linden, NJ

Line 4 - A 32 inch line moving 700 thousand barrels/day from Greensboro, NC to Baltimore

Major spurs off the main lines include:

Atlanta to Southern Georgia

Atlanta to Tennessee (Chattanooga, Nashville, Knoxville)

Greensboro to Raleigh/Durham, NC

Mitchell (central Virginia) to Richmond, Norfolk, and Roanoke

Colonial connects to a number of other pipelines that move product on through the Northeast, including:

Laurel pipeline (Buckeye) - Connects in Philadelphia and moves product west through Pennsylvania to Pittsburgh

IHT - Connects in Linden and moves product across the surrounding New York and New Jersey area

Long Island pipeline (Buckeye) - Connects in Linden and moves product across Long Island

Buckeye East System - Connects in Linden and moves product west to Eastern Pennsylvania, where there is a connection to the Laurel pipeline and lines moving north into Northeastern Pennsylvania and upstate New York

Colonial batches can be either fungible between shippers (with standard specifications set by Colonial) or segregated for a specific shipper.

Lines 1 and 2 have a minimum batch size of 75 thousand barrels, while lines 3 and 4 have a minimum of 25 thousand barrels.

Colonial schedules batches in 5-day cycles (72 each year). The mix of products and grades in each cycle will vary with changes in market demand.

The pipeline is frequently operating at capacity requiring Colonial to allocate space to shippers. Allocated volumes for shippers with an established history (regular shippers) are based on historical shipped volumes. 5% of space is allocated to all new shippers (without necessary shipping history to be regular shippers), which is then assigned to individual shippers by lottery. There is an active market for trading shipping space on the line.

Colonial was originally founded by nine oil companies: Sinclair, Texaco, Gulf Oil, American Oil, Pure Oil, Phillips Petroleum, Cities Services, Continental Oil, and Mobil

Currently, Colonial is owned by six companies:

Koch Industries (28.09%)

South Korea National Pension Service and KKR through Keats Pipeline Investors (23.44%)

Caisse de depot et placement de Quebec (CDPQ) (16.55%)

Shell Pipeline (16.12%)

Industry Funds Management (15.80%)

History

1961 - Suwannee Pipe Line company created by eight major oil companies for the purpose of building a refined products pipeline from the Gulf Coast to the East Coast

1962 - Project renamed Colonial pipeline and the construction began with the addition of Mobil as the ninth owner

1964 - Pipeline fully operational

1967 - Major expansion to 1 million barrels/day

1972 - Looping project increased capacity to 1.6 million barrels/day