Friday, March 13, 2009

Nustar poised to benefit from higher pipeline tariffs, asphalt production

Effective July 1, NuStar Energy LP’s tariffs increase by about 7.5 percent. The tariffs reset automatically based on inflation-indexed increases.
NuStar also stands to benefit from another source. About one quarter of its operating earnings come from its two asphalt refineries.
Like all refining operations, NuStar's margins in asphalt vary from quarter to quarter. There are several potential positives for the asphalt markets. On the supply front, several companies that used to produce asphalt have stopped doing so. The reason is that most refiners have set up their operations to maximize production of light products such as gasoline and diesel fuels. These companies have installed special equipment that allows them to turn heavy residual products like asphalt into lighter, higher-value products.
As a result, U.S. asphalt production in 2008 was off 10 percent and imports were down nearly 50 percent against 2007 levels. This leaves less competition for NuStar's dedicated asphalt refineries.

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