Chevron has agreed to sell a 90,000-barrel-per-day, common-carrier pipeline linking Kern County oil fields with refineries in the Bay Area, prospective buyer Crimson Pipeline LP announced Thursday.
The sale of the KLM pipeline, one of a handful of conduits that deliver local crude oil to refineries to the north and south, probably would not disrupt local deliveries, though it might eventually affect shipping prices paid by Kern County oil producers.
Terms of the pending sale by Chevron Pipe Line, were not disclosed.
Denver-based Crimson said buying the KLM would increase the volume of its California pipeline network by about 56 percent to 250,000 barrels per day, while expanding the length of its pipeline system in the state by about 42 percent to roughly 1,000 miles.
Gordon Schremp, a senior fuels analyst at the California Energy Commission, said the pipeline’s change of ownership probably won’t have much near-term effect on local oil field operations. But he said the tariffs Crimson charges KLM’s customers will have to be reviewed by the California Public Utilities Commission, and delivery prices may rise depending on what level of maintenance or repair is warranted.
“How much (the new tariffs) may vary from the pre-existing tariffs remains to be seen,” Schremp said.
The KLM made news in 2012 when organic chlorides were detected in oil that had been shipped through the pipeline to a refinery in the Bay Area. The chlorides, a common solvent, are thought to have originated in Kern.
Some 1 million barrels of oil were declared tainted and unusable in California because of the damage organic chlorides can do to refinery pipes. At least some of that oil has since been sold to a buyer in Asia.
The 295-mile KLM comprises segments ranging in diameter from 16 to 18 inches. With a southern terminus in Kern, it delivers oil directly to three Bay Area fuel processing plants: Tesoro Petroleum Co.’s Golden Eagle Refinery, Valero’s Benicia Refinery and Shell’s Martinez Refinery.
Chevron has owned the KLM since its construction in the 1990s. The company said the sale is consistent with its “ongoing efforts to align its pipeline asset portfolio with its long-term business strategies.” It said it has divested assets in Australia, Nigeria, Vietnam, Lithuania, the Netherlands and the United States during the last couple of years.
Crimson Pipeline was founded in 2005 and has grown since then from eight to about 80 employees. As of May, it operated about 1,400 miles of pipeline in California and Louisiana.
Along with the KLM, Crimson has also agreed to buy from Chevron a network of short oil field gathering lines known as the Western San Joaquin Laterals.