Enterprise Products Partners L.P., TEPPCO Partners, L.P. and Oiltanking Holding Americas, Inc. have formed a joint venture to design, construct, own and operate a new Texas offshore crude oil port and pipeline system to facilitate delivery of waterborne crude oil to refining centers along the upper Texas Gulf Coast. The initiative will provide an efficient alternative to offshore lightering and inland dock operations.

The Texas Offshore Port System (TOPS) project would include an offshore port, two onshore storage facilities with approximately 5.1 million barrels of total crude oil storage capacity, and an associated 160-mile pipeline system with the capacity to deliver up to 1.8 million barrels per day (BPD) of crude oil. System capacity could be expanded with construction of additional offshore facilities. Development of the offshore port system and onshore infrastructure is supported by long-term contracts with Motiva Enterprises LLC and an affiliate of Exxon Mobil Corporation, which together have committed a total volume of approximately 725,000 BPD.

Demand for TOPS is being driven by planned and expected refinery expansions along the upper Texas Gulf Coast that are anticipated to add approximately 425,000 BPD of capacity beginning in 2010, as well as expected increases in general ship traffic at onshore ports. According to data from the federal Energy Information Administration, the Texas Gulf Coast is home to refineries with aggregate crude oil capacity of 3.9 million BPD (including planned and announced expansions), 2.5 million BPD of which are imported on vessels that require lightering services. Given the forecasted increased shipping traffic resulting from incoming crude oil supplies and operating limitations of ship channels, TOPS would offer refiners another delivery option that would provide added flexibility and enhanced reliability. TOPS is designed to allow operations 24 hours per day without restrictions on movements and vessel size that limit most ship channels. TOPS would be able to accommodate the largest vessels which can carry approximately 3 million barrels of crude oil. The location of TOPS is also designed to avoid delays and risks related to fog, navigation hazards and channel closures on coastal waterways. Over the next several years, key port locations along the Texas Gulf Coast are expected to see a sharp increase in total traffic for all types of cargo, and TOPS would be well-positioned to play an important role in relieving potential congestion.

"With refining capacity along the upper Texas coast continuing to expand, TOPS offers a comprehensive solution for ensuring reliable access to supplies of crude oil," said Michael A. Creel, president and chief executive officer of Enterprise. "This project should provide refiners with cost savings, operating efficiencies and access to additional supplies beyond the Gulf Coast region. We are very pleased to be working with our joint venture partners, each of which brings complementary assets and expertise in the crude oil logistics business. In addition, TOPS should provide Enterprise with a new source of fee-based cash flow for decades to come."

Jerry E. Thompson, president and chief executive officer of the general partner of TEPPCO said, "The deepwater port is an integral part of our strategic plan for growing the partnership, which includes pursuing attractive infrastructure projects that provide facilities to meet the growing demand for imported crude oil coming into the Gulf Coast refining centers. We are very pleased to be part of this project, which should not only offer significant benefits for TEPPCO and our investors, but will also better serve the refining industry and support its efforts to meet the future energy needs of consumers."

Carlin G. Conner, chairman of the new joint venture's Management Committee and president and chief executive officer of Oiltanking's North American subsidiaries, said, "TOPS is a key U.S. Gulf Coast infrastructure project that would enhance delivery of crude oil to the western gulf coast refiners. We are pleased to be a partner in TOPS. Each of the partners brings experience and know-how to this project, which is a necessary development to further drive Gulf Coast refining efficiencies. The project would also provide our customers with access to an efficient and reliable crude oil delivery system for years to come." Conner added, "Our investment in TOPS complements our other Gulf Coast terminals and is another step toward our goal of becoming the premier crude oil and chemical feedstock terminal company in North America."

Tags: Oiltanking Holding Americas, TEPPCO Partners, Texas Offshore Port System