Keystone, Seaway Pipelines Won't Hurt HollyFrontier - CEO

    By Alison Sider

    SAN ANTONIO--Its proximity to sources of inexpensive crude and the prospect of exports keeping fuel markets from being oversupplied will bolster HollyFrontier Corp. (HFC) even if pipelines increase the price of West Texas Intermediate Crude, Chief Executive Michael Jennings said Tuesday.

    "The news of our demise is probably overstated," Mr. Jennings said, speaking on the sidelines of the American Fuel and Petrochemical Manufacturers annual meeting in San Antonio. "The fact is, our company lived for many years without a crude differential."

    Pipeline projects, such as the proposed Keystone XL and the reversal of the Seaway, likely will boost the price of West Texas Intermediate crude by relieving a supply bottleneck at the Cushing, Okla., hub, Mr. Jennings said. The glut at Cushing has helped keep prices of the West Texas Intermediate crude low and has bolstered margins at HollyFrontier's mid-continent refineries. Analysts have speculated whether the company's margins would crumble as new pipelines come online.

    Mr. Jennings said he expects the price difference between crude in the middle of the country and on the Gulf Coast might narrow to $5 per barrel. On Monday, Louisiana Light Sweet crude, a Gulf Coast benchmark, was $21 more expensive than WTI per barrel.

    But as long as crude along the Gulf Coast has a price advantage to oil in other parts of the world, the industry will benefit, Mr. Jennings said. As Eagle Ford and Canadian bitumen make it to the Gulf of Mexico, the industry will be able to capture a greater share of international product markets, "which means to HollyFrontier, there's less coming north, and supply and demand stays in better balanced despite declining demand," Mr. Jennings said.

    Opponents of the Keystone Pipeline have cited exports as an argument for their view, saying that the U.S. won't benefit if products made from the crude it delivers are exported.

    Write to Alison Sider at