Shell Midstream Partners, L.P. owns, operates, develops, and acquires pipelines and other midstream, and logistics assets in the United States. The company is a subsidiary of Shell Pipeline Company LP.
The company conducts its operations either through its wholly owned subsidiary Shell Midstream Operating LLC (the Operating Company) or through direct ownership. The company’s general partner is Shell Midstream Partners GP LLC (general partner).
As of December 31, 2021, the company’s assets incl...
Shell Midstream Partners, L.P. owns, operates, develops, and acquires pipelines and other midstream, and logistics assets in the United States. The company is a subsidiary of Shell Pipeline Company LP.
The company conducts its operations either through its wholly owned subsidiary Shell Midstream Operating LLC (the Operating Company) or through direct ownership. The company’s general partner is Shell Midstream Partners GP LLC (general partner).
As of December 31, 2021, the company’s assets included interests in entities that own crude oil and refined products pipelines and terminals that serve as key infrastructure to transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and deliver refined products from those markets to major demand centers; and storage tanks and financing receivables that are secured by pipelines, storage tanks, docks, truck and rail racks and other infrastructure used to stage and transport intermediate and finished products. The company’s assets also include interests in entities that own natural gas and refinery gas pipelines that transport offshore natural gas to market hubs and deliver refinery gas from refineries and plants to chemical sites along the Gulf Coast.
The company generates revenue from the transportation, terminaling and storage of crude oil, refined products, and intermediate and finished products through its pipelines, storage tanks, docks, truck and rail racks, generate income from its equity and other investments and generate interest income from financing receivables on certain logistics assets.
As of December 31, 2021, the company had ownership interests included Pecten Midstream LLC (Pecten); Sand Dollar Pipeline LLC (Sand Dollar); Triton West LLC (Triton); Zydeco Pipeline Company LLC (Zydeco); Mattox Pipeline Company LLC (Mattox); Amberjack Pipeline Company LLC (Amberjack) – Series A/Series B; Mars Oil Pipeline Company LLC (Mars); Odyssey Pipeline L.L.C. (Odyssey); Bengal Pipeline Company LLC (Bengal); Crestwood Permian Basin LLC (Permian Basin); LOCAP LLC (LOCAP); Explorer Pipeline Company (Explorer); Poseidon Oil Pipeline Company, L.L.C. (Poseidon); Colonial Enterprises, Inc. (Colonial); Proteus Oil Pipeline Company, LLC (Proteus); Endymion Oil Pipeline Company, LLC (Endymion); and Cleopatra Gas Gathering Company, LLC (Cleopatra).
Assets and Operations
Onshore Crude Pipelines
The company’s onshore crude pipelines transport various grades of crude oil across more than 500 miles. The company’s onshore crude pipelines serve varying purposes, including transporting crude oil between major onshore demand centers, as well as aggregating volume from multiple offshore pipelines and connecting this offshore production to key onshore markets, including refineries and tankage space. These pipelines are regulated by Pipeline and Hazardous Materials Safety Administration (PHMSA) for safety and integrity, and the Federal Energy Regulatory Commission (FERC), Louisiana Public Service Commission (LPSC) and Texas Railroad Commission (TRRC) for tariff regulations.
The company’s onshore crude pipelines transport volumes on a spot basis, as well as under transportation services and throughput and deficiency agreements (T&D agreements). The company’s FERC-approved transportation services agreements entitle the customer to a specified amount of guaranteed capacity on the pipeline.
Offshore Crude Pipelines
The offshore crude pipelines in which the company owns interests span across approximately 1,500 miles, and are regulated primarily by PHMSA, Bureau of Safety and Environmental Enforcement (BSEE) or Bureau of Ocean Energy Management (BOEM), and in some cases by the FERC or LPSC. The company’s offshore crude pipelines provide transportation for major oil producers and from multiple production fields in the Gulf of Mexico, offering delivery options into various pipelines, in which it may also own interests. Through the pipeline connectivity options, these pipelines provide access to desirable onshore destinations, including trading hubs and refinery complexes.
The company’s offshore crude pipelines generate revenue under several types of long-term transportation agreements: life-of-lease transportation agreements, life-of-lease transportation agreements with a guaranteed return, T&D agreements, debottleneck surcharge agreements and buy/sell agreements. Some crude oil also moves on the company’s offshore pipelines under posted tariffs, which may be indexed annually. Inventory management fees are also charged in some cases.
The company’s life-of-lease transportation agreements have a term equal to the life of the applicable mineral lease and require producers to transport all production from the specified fields connected to the pipeline for the entire life of the lease. The company’s offshore T&D agreements require shippers to dedicate production from specific fields for a fixed term, generally for life of the facility or lease. In addition, some T&D agreements require a minimum volume to be delivered for a fixed term. Other systems provide for the transportation of crude oil via private Oil Transportation Agreements (OTAs). These OTAs are a mix of term and life-of-lease transportation agreements.
Refined Products Pipelines
The company owns interests in several refined products pipeline systems across approximately 7,400 miles spanning from the Gulf Coast to both the Midwest and the East Coast. These pipeline systems are regulated primarily by PHMSA and the FERC and transport refined products with many different specifications and for numerous shippers. The refined products pipelines connect refineries to both long-haul transportation pipelines and marketing terminals. These pipelines serve a diverse set of customers, including refiners, marketers, airports and airlines.
These refined products pipeline systems generate revenue under various types of rates and contracts, including ship-or-pay contracts that are renewable at the election of the shipper and may be indexed annually, joint tariff division agreements, FERC-approved rates subject to annual indexing and market-based rates. Additionally, there is an auction program on one system for certain excess capacity when the pipeline is fully subscribed.
Terminals and Storage
The company owns an interest in certain logistics assets in Louisiana, as well as interests in refined products and crude terminals located in Washington, Texas, Illinois and Oregon. The company’s logistics assets are consisted of crude, chemicals, intermediate and finished product pipelines, storage tanks, docks, truck and rail racks and supporting infrastructure. The company generates revenue on these assets pursuant to terminaling services agreements with related parties, which are treated as a failed sale leaseback for accounting purposes.
The company’s refined products terminals receive refined products from pipelines and, in certain cases, barges, ships or railroads, and distribute them to third parties, who in turn deliver them to end-users and retail outlets. These terminals play a key role in moving products to the end-user market by providing efficient product receipt, storage and distribution capabilities, inventory management, ethanol and biodiesel blending, and other ancillary services that include the injection of various additives. For each of these terminals, revenue, based on throughput, is generated via a single, long-term, terminaling services agreement with a related party, which is treated as an operating lease for accounting purposes. Each agreement provides for a guaranteed minimum throughput.
The company’s crude terminal feeds regional refineries and offers strategic trading opportunities by providing storage services for several customers and supplying refineries. The company’s storage tanks are 100% contracted via four terminal services agreements with expirations ranging from mid-2022 through 2024.
Other Midstream Assets
The company has interests in certain other midstream assets. The company owns an interest in a network of refinery gas pipelines connecting multiple refineries and plants operated along the Gulf Coast to Shell chemical sites. The pipelines transport refinery gas, which is a mix of methane, natural gas liquids and olefins. This system generates revenue under transportation services agreements that include minimum revenue commitments and are treated as operating leases for accounting purposes. The contracts require a specified monthly payment regardless of volume shipped, and shippers do not receive a credit for unused volume in a given month to use in future months.
The company also owns interests in gas gathering systems that provide gathering and transportation for multiple gas producers and third-party gas shippers.
Additionally, the company’s interest in a pipeline that connects the LOOP Clovelly Salt Dome storage facility to the active trading hub of St. James, Louisiana allows for crude oil arriving at the terminal to be dispatched to several local refineries or to other pipeline systems.
Relationship with Shell plc and its affiliates (Shell)
Shell is an international energy company with expertise in the exploration, production, refining and marketing of oil and natural gas, and the manufacturing and marketing of chemicals. As one of the largest producers in the Gulf of Mexico, Shell is developing several deepwater prospects and associated infrastructure. In addition to its offshore production, Shell has onshore exploration and production interests and produces crude oil and natural gas throughout North America. Shell’s downstream portfolio includes interests in chemical processing plants throughout the United States, as well as a refinery on the Gulf Coast. Shell’s portfolio of midstream assets provides key infrastructure required to transport and store crude oil and refined products for Shell and third parties. Shell’s ownership interests in transportation and midstream assets include crude oil and refined products pipelines, crude oil and refined products terminals, chemicals pipelines, natural gas pipelines and processing plants and LNG infrastructure assets. Shell or its affiliates are customers of most of the company’s businesses.
SPLC is Shell’s principal midstream subsidiary in the United States. As of December 31, 2021, Shell Pipeline Company LP (SPLC) owned the company’s general partner, a 68.5% limited partner interest in the company and all of its Series A Preferred Units.
FERC and State Common Carrier Regulations
The FERC regulates interstate transportation on the company’s common carrier pipeline systems under the Interstate Commerce Act of 1887, as modified by the Elkins Act (ICA), the Energy Policy Act of 1992 (EPAct) and the rules and regulations promulgated under those laws. Under the Outer Continental Shelf Lands Act (OCSLA), the company must provide open and nondiscriminatory access to both pipeline owner(s) and non-owner shippers and comply with other requirements.
The company is subject to regulation by PHMSA under the Natural Gas Pipeline Safety Act of 1968 (NGPSA) and the Hazardous Liquid Pipeline Safety Act of 1979 (HLPSA). The Natural Gas Pipeline Safety Act of 1968 (NGPSA) delegated to PHMSA through Department of Transportation (DOT) the authority to regulate gas pipelines.
The company’s tanks are inspected on a routine basis in compliance with PHMSA and EPA regulations. Every tank periodically receives a full out of service, internal inspection per American Petroleum Institute standard 653 and is repaired as necessary. Certain aspects of the company’s offshore pipeline operations, such as new construction and modification, are also regulated by BOEM, BSEE and the U.S. Coast Guard.
Security
The company is also subject to U.S. Department of Homeland Security Chemical Facility Anti-Terrorism Standards, which are designed to regulate the security of high-risk chemical facilities, and to Transportation Security Administration Pipeline Security Guidelines.
Environmental Matters
The company’s operations are subject to the Clean Air Act and its regulations and comparable state and local statutes and regulations in connection with air emissions from its operations. Under these laws, permits may be required before construction can commence on a new source of potentially significant air emissions, and operating permits may be required for sources that are already constructed.
The company generates solid wastes, including hazardous wastes, that are subject to the requirements of the federal Resource Conservation and Recovery Act (RCRA) and comparable state statutes. From time to time, the EPA considers the adoption of stricter disposal standards for non-hazardous wastes. Hazardous wastes are subject to more rigorous and costly disposal requirements than are non-hazardous wastes.
The company is subject to the requirements of the Occupational Safety and Health Act (OSHA) and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in operations and that this information be provided to workers, state and local government authorities and citizens.
Control Center Operations
Zydeco, Mattox, Amberjack, Mars, Odyssey, Bengal’s pipeline, Auger, Lockport, Delta, Na Kika, Proteus, Endymion, Cleopatra, Refinery Gas Pipeline and the company’s terminals are operated by SPLC or its general partner pursuant to operating and maintenance agreements. The pipeline, storage and terminal systems that are operated by SPLC are controlled from a central control room located in Houston, Texas. The Operating Company, on behalf of Triton, engaged SPLC to operate the Norco Assets pursuant to an operating agreement, and such assets are operated by SPLC through the provision of services by employees assigned by SOPUS and located at the facilities under the terms of an employee assignment and services level agreement between SOPUS and SPLC. Colonial Pipeline Company operates its pipeline system and Bengal’s tankage in a similar manner and has its own management team based in Alpharetta, Georgia. Explorer operates its pipeline system in a similar manner and has its own management team and control center operations in Tulsa, Oklahoma. Poseidon is operated by Manta Ray Gathering Company, LLC, LOCAP is operated by LOOP LLC and Permian Basin is operated by CPB Operator LLC.
FERC and State Common Carrier Regulations
The company’s assets are subject to regulation by various federal, state and local agencies; for example, its interstate common carrier pipeline systems are subject to economic regulation by the FERC. Intrastate pipeline systems are regulated by the appropriate state agency.
Seasonality
The volume of crude oil and refined products transported and stored utilizing its assets is directly affected by the level of supply and demand for crude oil and refined products in the markets served directly or indirectly by the company’s assets. Additionally, producer turnarounds are often planned for certain periods during the year (year ended December 31, 2021) based on optimal, and in some cases, required weather and working conditions.
Significant Events
Effective May 1, 2021, Triton sold to Equilon Enterprises LLC, doing business as Shell Oil Products US (SOPUS), as designee of SPLC.
History
Shell Midstream Partners, L.P., a Delaware limited partnership, was founded in 2014. The company was incorporated in 2014.
The Analyst Price Target shows the analysts’ low, high, and average target at a glance.
