Kansas City Southern will develop a terminal for heavy Canadian crude oil

Kansas City Southern, which has seen a boost in revenues from transporting crude oil, is aiming to tap more of the potential business by developing a terminal on the U.S. Gulf Coast.

The Kansas City railroad company said Tuesday it will partner with Global Partners LP, a logistics and marketing company, to build the facility in Port Arthur, Texas. It will initially be able to accommodate two unit trains daily from western Canada.

The terminal will be built on 200 acres leased by Global from Kansas City Southern. It will have 340,000 barrels of initial storage capacity.

“The Port Arthur terminal represents a significant opportunity to capitalize on strong demand for the movement of western Canadian crude initially to one of the world’s premier refining centers in the U.S. Gulf Coast,” David Starling, Kansas City Southern’s president and chief executive, said in a statement.

The cost of the project was not disclosed, but the investment will be covered by Global. The proposal is contingent on Global receiving necessary environmental and construction permits.

The surge of oil production in the U.S. and Canada has caused a shortage of pipeline capacity to transport the commodity. Railroad companies have helped fill the gap, but concerns have grown about the safety of shipping so much crude by rail.

The Gulf Coast is home to the largest concentration of refineries in the U.S., which have been upgraded to handle the heavy grades of oil that will come from Canada. The refinery investments have led to a surge in petroleum exports from the U.S.

Global Partners, a publicly traded master limited partnership, owns, controls or has access to one of the largest terminal networks of refined petroleum products and renewable fuels in the Northeast. It is also one of the largest distributors of gasoline and other fuel products to wholesalers, retailers and commercial customers in New England and New York.

This story was originally published July 8, 2014 at 1:40 PM with the headline "Kansas City Southern will develop a terminal for heavy Canadian crude oil."