Price Hike for Houston Ship Channel

Houston Ship Channel

By MarEx 2015-02-25 13:06:59

Enterprise Products Partners LP said on Wednesday that companies using its crude oil storage facility in the Houston Ship Channel must pay extra for dock services, brushing off complaints from client BP Plc.

"We believe if you want a service, you pay for it," Enterprise Chief Operating Officer Jim Teague told analysts when asked about concerns, first reported by the Wall Street Journal, that the company's strong position in Gulf Coast storage gives it too much pricing power.

Britain's BP has reportedly told the U.S. Federal Trade Commission that Enterprise, a major midstream company, has started charging $1 a barrel in dock fees for crude it handles at the Houston site, on top of storage fees.

Since Houston is the top U.S. petrochemicals port, the dock fees could add up to big revenue.

But BP has not yet filed a formal written complaint to the FTC, an industry source said, and it is not clear if it would have a case. A BP official did not comment. The FTC was not available for immediate comment.

Teague said Enterprise itself had paid for dock services at the facility before buying it from Oiltanking Partners LP in October. The $4.4 billion deal gave Enterprise control over the lion's share of the region's commercially available crude oil storage tanks.

Storage and tank space are in high demand amid a global glut of oil and as U.S. companies, as well as BP, increasingly move to export a type of very light crude known as condensate. Companies are lightly distilling condensate so it qualifies as a refined product that can be shipped overseas.

Teague said Enterprise was honoring every contract it inherited when it bought Oiltanking.

"There were some people that had storage, but in their contacts did not have dock rights," he said, noting they might have had waivers in the past.

"Anyone that would like to sign a contract like (Enterprise) signed, we'd be all for it," he said.

At the time of the acquisition, Enterprise was Oiltanking's largest customer, with 30 percent of its capacity. But other large Oiltanking customers have included BP, Exxon Mobil Corp and Royal Dutch Shell.

The Oiltanking buy gave Enterprise 11 million barrels of crude oil storage capacity on the Houston Ship Channel and another 6.2 million barrels planned for buildout in Beaumont, Texas.

Copyright Reuters 2015.