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An Overview of Sunoco Logistics’ Products Pipelines Segment

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Mar. 26 2015, Updated 4:05 p.m. ET

Products pipelines segment

We discussed Sunoco Logistics’ (SXL) terminals facilities segment in the previous article. In this part of the series, we’ll discuss what drives its products pipelines business.

Sunoco Logistics Partners’ (SXL) products pipelines segment transports refined products and NGLs in the northeast, midwest, and southwest United States, and in Ontario, Canada. These products include gasoline, heating oil, diesel and jet fuel, and liquefied petroleum gases such as propane and butane. These products are transported through Sunoco Logistics’ (SXL) 2,400 miles of pipeline.

In addition to the company-owned pipelines, Sunoco Logistics is party to four product pipelines joint ventures. The two most significant projects in this segment are the Allegheny Access and Mariner East projects.

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Allegheny Access project

Expected to start in 1Q15, the pipeline will transport 85,000 barrels per day (or bpd) of refined products from the Midwest to Eastern Ohio and Western Pennsylvania markets.

Mariner East projects

Mariner East 1, which began operation in 4Q14, delivers natural gas liquids (or NGLs) from the Marcellus shale to Marcus Hook. In the second phase of expansion, Mariner 2, the total takeaway capacity is expected to reach 345,000 bpd. Mariner 2 is expected to start operation in 4Q16.

The segment also consists of a third pipeline called The Mariner South pipeline, which transports propane and butane products from the Mont Belvieu region to the Nederland terminal in Texas.

Factors affecting the products pipelines segment

  • Seasonality: Seasonality and the nature of refined products affect the products pipelines segment. Typically, gasoline demand peaks during the summer months, while heating oil and other distillate fuels demand peaks in the winter.
  • Weather condition: Weather has a short-term effect on the product mix.

Seasonality and weather conditions all affect other energy MLPs and midstream operators that actively transport refined products. These include Kinder Morgan (KMI), Williams Companies (WMB), and Plains All American Pipeline (PAA). Kinder Morgan and Williams Companies together account for 7.2% of the Energy Sector Select SPDR ETF (XLE).

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