Midstream companies are already seizing some of the opportunities provided by both the surge in crude production in the mid-continent and refinery closures on the East Coast. Longer supply lines to East Coast markets will not only require upgraded transportation logistics, but also raise demand for storage, as higher inventory levels will be needed to manage seasonal demand peaks and disruption risks. Storage operators have announced several plans to significantly expand East Coast and Caribbean tank farms. Shrinking refining capacity there seems to go hand in hand with rising terminal capacity, not least because some of the idled refineries are being converted to storage. In the Bakken, crude oil aggregators, transportation providers, and marketers are in high demand. Despite steep capital costs and often cumbersome permitting processes, they are responding with a flurry of infrastructure projects to resolve the bottlenecks.
Perhaps not coincidentally, these expansion plans occur even as the midstream services industry is itself going through a period of restructuring. Once-ancillary segments of a vertically integrated oil industry, U.S. transportation and storage companies are increasingly becoming their own masters. Starting in the late 1990s, the emergence of the U.S. "super majors" saw large oil companies combine upstream assets and turn over refining assets seen as nonessential to a new crop of independent refiners, some of which went on with their own wave of consolidation. Those independent refiners have in turn been spinning off storage and transportation assets, often as separate Master Limited Partnerships (MLPs), adding to the ranks of more established midstream companies such as Buckeye Partners, L.P., first incorporated as a Standard Oil subsidiary in 1886. An example of those new, stand-alone midstream entities is Nustar Energy L.P. (NuStar), first spun off as Shamrock Logistics L.P. by refiner Ultramar Diamond Shamrock Corporation (UDS) in 2001, and later renamed Valero L.P. after Valero Energy Corporation bought UDS. Sunoco Logistics, spun off by Sunoco in 2002 to own, buy and operate crude and product pipelines, terminals and storage facilities, and crude acquisition and marketing assets, is another example, as is Tesoro Logistics L.P., the transportation arm of Tesoro Corporation.
Unlike the shrinking East Coast refining industry, midstream services are undergoing a growth spurt, fuelled by both organic expansion and acquisitions. Logistics companies are snapping up discarded refining assets. Plains All American Pipeline, L.P. last year bought the Yorktown, VA refinery, now a 6.6 million-barrel crude, product, and LPG terminal. HOVENSA said it would convert its St. Croix, USVI refinery into an oil storage terminal. Much of Sunoco's East Coast logistical assets were handed over to Sunoco Logistics, making the sale of the refineries with which they had once been associated all the more problematic.