Home > News > Content
Argus Colonial Pipeline Line Space Assessments
Feb 03, 2019

Due to the ongoing capacity restraints on the Colonial pipeline, bulk traders have created a new market that values line space by trading Houston origin lots for lots that can be taken off further down the line. Argus has devised a methodology to assess the value of this trade and is now publishing it in the Argus US Products.


Due to the ongoing capacity restraints on the Colonial pipeline, bulk traders have created a new market that values line space by trading Houston origin lots for lots that can be taken off further down the line. Argus has devised a methodology to assess the value of this trade and is now publishing it in the Argus US Products.


How is line space assigned? 


Line space on the Colonial pipeline is assigned to parties based on their historical shipping volumes. Parties are not required to use the line space, however, a party is assessed a penalty of approximately 1¢/USG by Colonial for unused line space. In addition to the penalty, Colonial distributes less line space to those under-using parties in the future. The Colonial Pipeline does not allow the reselling of actual line space between shippers. As a result, traders have developed a mechanism to sell physical gasoline or distillates in such a way as to protect their future allocations. Trading “line space” Purchasers of line space have the obligation to ship barrels. They have the right to ship to any point along the same line. This doesn’t include spur lines that branch off of the main gasoline or distillate trunk lines. In order to structure a trade that effectively values line space on line 01 or 02 of the Colonial pipeline, companies will exchange a volume of gasoline or distillates in Pasadena, TX for an equal volume of gasoline or distillates that has the obligation to ship on the Colonial pipeline and the right to ship to any terminal along the line up to and including Greensboro, NC. The volume can then be removed from the line at any terminal up to and including Greensboro.



Trades typically take place at a ¢/USG value representing the premium paid or discount received in acquiring the line space only. These differentials do not incorporate the tariff paid to Colonial.


Assessing Colonial line space


Demand for line space follows demand for shipping to destinations along the pipeline in the US southeast and Atlantic coast. Demand for shipping gasoline or distillate products is typically higher during the summer and Line 01 prices are usually higher as a result. The same is true for distillates during the winter: Demand for shipping distillate products is typically higher during the winter and line 02 space prices are usually higher as a result. Argus’ assessments for both Line 01 and Line 02 provide a more comprehensive look at shipping costs throughout the year.


Shippers have shown a willingness to sell line space at greater losses than the penalty assessed by Colonial for unused line space in order to protect their future allocations and the lucrative associated opportunities. Argus has verified deals wherein shippers have sold line space losses of up to 3.5¢/USG. Incorporating Argus line space assessments into contracts can help marketers more accurately reflect costs while inclusion of negative line space prices actually help retailers achieve lower costs available in the market.