Marine transport matters for several reasons. Of the roughly 100 energy- related master limited partnerships (MLPs) currently trading, only six are considered to be shipping or marine-transportation MLPs. These MLPs transport commodities such as crude oil, refined petroleum products, as well as specialty products and liquefied natural gas (LNG) via barges and tankers.

The oldest, Teekay LNG Partners, has been around since its initial public offering in 2005. The newest, KNOT Offshore Partners priced in early April. Typically, these companies operate under long-term (five-plus years) fee-based contracts, although services are occasionally performed on a spot basis

MLPs not classified as marine-transportation companies may nonetheless have a shipping segment or assets. Martin Midstream Partners is one such company, owning 54 inland barges, 29 inland push boats and four offshore tug/barge units. With a 100% fee-based marine business, Martin focuses on specialty-product transportation. Still, marine transportation is only 12% of its business. Plains All American Pipeline has a fleet of 104 transport and storage barges and 51 transport tugs operating in U.S. inland waterways. Enterprise Products Partners also recently christened its 64th tug, the Dan L, named after late founder Dan Duncan.

As the shale plays boom in the U.S., rail is frequently discussed as a flexible immediate solution to move crude to the refiners that used to process imported crude. However, in order to utilize rail, there must also be a rail-unloading facility built at the other end of the line. While this poses few problems on the Gulf Coast, the refineries along the East and West Coasts often have complicated regulatory processes, or the land simply isn’t available.

Coastal refineries were only built to receive crude by water. In these situations, combining rail and barge transportation can be a powerful solution. Global Partners was the first company to pioneer this “virtual pipeline” in 2011. Combining rail and barge facilities, Global moves Bakken crude eastward on the Canadian Pacific to Albany, New York, where it is then loaded onto barges for transport to refineries in New Jersey and Philadelphia.

Earlier this year, Global signed a five-year deal with Phillips 66 and even more recently completed an acquisition of a West Coast rail transloading facility. This way, Global can supply Bakken crude to both East and West Coast refiners. While more expensive than a traditional pipeline, the final cost of crude is still cheaper than imported, waterborne crude.

Even beyond these recent solutions, the Panama Canal expansion project will provide much greater export incentives. Begun in 2005, it was originally intended to ease the shipment of goods produced in Asia to the East Coast. Now, two years from completion, the energy renaissance in the U.S. is likely to change conventional shipping dynamics.

The canal may move significant amounts of LNG from the U.S. to Asia. Currently, Cheniere Energy’s Sabine Pass facility is under construction, and 11 other LNG export terminals have been proposed and are undergoing governmental review. There is no established LNG trade through the Panama Canal due to existing size restrictions on vessels. Once the new locks open, the transport route from the Gulf Coast to Asia will be 7,500 nautical miles shorter and 25% cheaper.

Marine-transportation MLPs are still a very small part of the overall sector; however, the role they play in transporting energy commodities keeps the U.S. connected to the global energy markets. The continued integration of these markets increases efficiencies and opportunities for the entirety of the space.

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