Our Supply and Logistics segment operations generally consist of the following merchant activities:

  • The purchase of U.S. and Canadian crude oil at the wellhead; the bulk purchase of crude oil at pipeline, terminal and rail facilities; and the purchase of cargos at their load port and various other locations in transit
  • The storage of inventory during contango market conditions and the seasonal storage of NGL and natural gas
  • The transportation of crude oil and NGL on trucks, barges, railcars, pipelines, and ocean-going vessels from various delivery points, market hub locations or directly to end users such as refineries,  processors and fractionation facilities
  • The purchase of NGL from producers, refiners, processors and other marketers
  • The resale or exchange of crude oil and NGL at various points along the distribution chain to refiners, exporters or other resellers
  • The purchase and sale of natural gas

Merchant Activities

The majority of activities carried out within the Supply and Logistics segment are designed to produce a stable baseline of results in a variety of market conditions, while providing upside potential associated with opportunities inherent in volatile market conditions (including opportunities to benefit from fluctuating differentials). These activities utilize storage facilities at major interchange and terminalling locations and various hedging strategies to provide a balance. The tankage that is used to support our arbitrage activities positions us to capture margins in various market conditions.

In addition to hedged working inventories associated with its merchant activities, as of December 31, 2016, our Supply and Logistics segment also owned significant volumes of crude oil and NGL classified as long-term assets and linefill or minimum inventory requirements and employed a variety of owned or leased physical assets throughout the United States and Canada, including approximately:

14 million barrels of crude oil and NGL linefill and long-term inventory
820 trucks and 1,065 trailers
10,600 crude oil and NGL railcars

For more information on our Supply and Logistics segment, click here: Supply and Logistics Policy

Except for pre-defined inventory positions, our policy is generally:

  • To purchase only product for which we have a market
  • To structure our purchase and sales contracts so that price fluctuations do not materially affect our operating income
  • Not to acquire and hold physical inventory or derivatives for the purpose of speculating on outright commodity price changes

In connection with its operations, the Supply and Logistics segment secures transportation and facilities services from our other two segments as well as third-party service providers under month-to-month and multi-year arrangements. Intersegment sales are based on posted tariff rates, rates similar to those charged to third parties or rates that we believe approximate market rates. However, certain terminalling and storage rates recognized within our Facilities segment are discounted to our Supply and Logistics segment to reflect the fact that these services may be canceled on short notice to enable the Facilities segment to provide services to third parties, generally under longer-term arrangements.