Sunoco 2013 Annual Report Download - page 14

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Competition
Crude Oil Pipelines
Our Crude Oil Pipelines face competition from a number of major oil companies and other smaller entities. Competition
among common carrier pipelines is based primarily on transportation charges, access to crude oil supply and market demand,
which may be negatively impacted by changes in refiners' supply sources. Additional investment in rail infrastructure to
transport crude oil has also provided increased competition for crude oil pipelines.
Crude Oil Acquisition and Marketing
Our competitors include other crude oil pipeline companies; the major integrated oil companies, their marketing affiliates
and independent gatherers; banks that have established trading platforms; and brokers and marketers of widely varying sizes,
financial resources and experience. Some of these competitors have capital resources many times greater than ours, and control
greater supplies of crude oil. Crude oil acquisition and marketing competitive factors include price and contract flexibility,
quantity and quality of services, and accessibility to end markets.
Terminal Facilities
Our 39 active refined products terminals located in the northeast, midwest and southwest compete with other independent
terminals on price, versatility, and services provided. The competition primarily comes from integrated petroleum companies,
refining and marketing companies, independent terminal companies, and distribution companies with marketing and trading
activities. We are not aware of any direct competitors in the butane blending business in the United States and our patents
provide us exclusive use and control over the distribution of our butane blending technology.
Throughput at the Nederland Terminal is primarily related to third-party customers. The primary competitors of the
Nederland Terminal are its refinery customers' docks and other terminal facilities located in the Beaumont, Texas area.
The majority of the throughput at our crude oil terminal facilities in the northeast relates to refining operations at PES's
Philadelphia refinery. In 2012, we entered into a 10-year agreement to provide terminalling services to PES at the Fort Mifflin
Terminal Complex. For further information, see Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations—Agreements with Related Parties."
Refined Products Pipelines
A substantial portion of the Refined Products Pipelines are located in the northeast United States and were constructed or
acquired to distribute refined products to Sunoco's retail network. While Sunoco completed the exit from its refining business
in 2012, Sunoco continues to operate its retail marketing network and we expect that Sunoco will continue to utilize our
Refined Products Pipelines as an efficient means to meet its retail marketing demand. For further information on the impact,
see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations – Agreements with
Related Parties."
Generally, pipelines are the lowest-cost method for long-haul, overland movement of refined products. Therefore, the
most significant competitors for large volume shipments in these areas are other pipelines. Our management believes that high
capital requirements, environmental considerations, and the difficulty in acquiring rights-of-way and related permits make it
difficult for other companies to build competing pipelines in areas served by our pipelines. As a result, competing pipelines are
likely to be built only in those cases in which strong market demand and attractive tariff rates support additional capacity in an
area. Although it is unlikely that a pipeline system comparable in size and scope to the northeast and midwest portion of the
Refined Products Pipelines will be built in the foreseeable future, new pipelines (including pipeline segments that connect with
existing pipeline systems) could be built to effectively compete with it in particular locations.
In the southwest United States, our MagTex refined products pipeline system faces competition from existing third-party-
owned and joint-venture pipelines that have excess capacity. Gulf Coast refinery expansions could justify the construction of a
new pipeline that would compete with our refined products pipeline system in the southwest. However, at this time, we believe
the existing pipelines have the capacity to satisfy expected future demand.
In addition to competition from other pipelines, we face competition from trucks that deliver refined products in a
number of areas that we serve. While their costs may not be competitive for longer hauls or large volume shipments, trucks
compete effectively for incremental and marginal volume in many areas where such means of transportation are prevalent. The
availability of truck transportation places a significant competitive constraint on our ability to increase tariff rates.