Sunoco 2008 Annual Report Download - page 46

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production line. During 2007, Sunoco also recorded a $7 million after-tax loss associated with the sale of its
Neville Island, PA terminal facility, which included an accrual for enhanced pension benefits associated with
employee terminations and for other required exit costs. These items are reported as part of the Asset Write-
Downs and Other Matters shown separately in Corporate and Other in the Earnings Profile of Sunoco Businesses
(see Note 2 to the Consolidated Financial Statements under Item 8).
During 2003, Sunoco formed a limited partnership with Equistar Chemicals, L.P. (“Equistar”) involving
Equistar’s ethylene facility in LaPorte, TX. Equistar is a wholly owned subsidiary of LyondellBasell Industries.
Under the terms of the partnership agreement, the partnership has agreed to provide Sunoco with 500 million
pounds per year of propylene for 15 years priced on a cost-based formula that includes a fixed discount that
declines over the life of the partnership. Under a separate 15-year supply contract, Equistar provides Sunoco with
200 million pounds per year of propylene at market prices. Through the partnership and the supply contract, the
Company believes it has secured a favorable long-term supply of propylene for its Gulf Coast polypropylene
business. Realization of these benefits is largely dependent upon performance by Equistar. In January 2009,
LyondellBasell Industries announced that its U.S. operations (including Equistar) filed to reorganize under
Chapter 11 of the U.S. Bankruptcy Code. Neither the partnership nor the Equistar entities that are partners of the
partnership has filed for bankruptcy. In addition, Equistar has not given any indication that it will not perform
under its contracts. Sunoco does not believe that the bankruptcy will have a significant adverse impact on its
business. However, in the event of nonperformance, Sunoco has oversight, performance and other contractual
rights under the partnership agreement.
Logistics
The Logistics business operates refined product and crude oil pipelines and terminals and conducts crude oil
acquisition and marketing activities primarily in the Northeast, Midwest and South Central regions of the United
States. In addition, the Logistics business has an ownership interest in several refined product and crude oil
pipeline joint ventures. Substantially all logistics operations are conducted through Sunoco Logistics Partners
L.P. (the “Partnership”), a consolidated master limited partnership. Sunoco has a 43 percent interest in Sunoco
Logistics Partners L.P., which includes its 2 percent general partnership interest (see “Capital Resources and
Liquidity—Other Cash Flow Information” below).
2008 2007 2006
Income (millions of dollars) ........................................... $85 $45 $36
Pipeline and terminal throughput (thousands of barrels daily)*:
Unaffiliated customers ............................................. 1,221 1,137 1,033
Affiliated customers ............................................... 1,587 1,665 1,644
2,808 2,802 2,677
*Excludes joint-venture operations.
Logistics segment income increased $40 million in 2008 due to record results from Sunoco Logistics
Partners L.P. primarily resulting from increased pipeline fees and higher lease acquisition margins in its western
pipeline system. Also contributing to the increase were higher earnings from the eastern pipeline system and
terminalling operations.
Logistics segment income increased $9 million in 2007 largely due to higher earnings from terminalling
operations, crude oil acquisition and marketing activities and the Partnership’s acquisitions completed in 2006,
partially offset by a reduction in Sunoco’s ownership in the Partnership subsequent to the public equity offering
in 2006.
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