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Colonial Pipeline Company operates more than 5,300 miles of underground pipeline that transports gasoline, kerosene, diesel fuel, defense fuels, and home heating oil from Gulf Coast refineries to marketing terminals in 13 Southeastern and Eastern Seaboard states. Daily deliveries by the company average 80 million gallons.

This makes Colonial the largest-volume refined liquid petroleum products pipeline operator anywhere in the world. Every day, we work hard to be the best - in our people, our products, and our procedures.

A recent step in this "commitment to excellence" is Colonial's acquisition of an ownership interest in six southern petroleum product terminals located along our pipeline system. The acquisition was completed in the third quarter of 1998 from Conoco, Inc. and Murphy Oil USA, Inc. at the Southern Facilities Terminals in Birmingham, Alabama; Doraville and Macon, Georgia; Chattanooga and Knoxville, Tennessee; and Spartanburg, South Carolina. Each of these terminals was already being served by Colonial.

The Background

There is considerable consolidation going on currently in the petroleum terminal business, a business which is competitve, complex and can be cyclical. Given Colonial's position as a leader in the oil transportation industry, we believe it's important for our company to play a prominent role as the consolidator of terminals along our system.

Our challenge is to aggressively enter this business, yet remain objective in providing logistical services to our customers so we don't compete with them directly.

The Benefits

By offering terminalling services, Colonial can provide its customers with a more cost efficient and better integrated distribution system. We now have the ability to receive product from our customers at the refinery gate and transport it seamlessly through our system all the way to tank trucks. The benefits to our customers include increased local supply stability, increased flexibility for product grades, reduced product inventory requirements, and more predictable distribution costs.

The strategic initiatives described here are designed to improve Colonial's presence in the shipper supply chain, to improve our competitive position in local markets, and to customize services for our customers, and to increase sales and value for our shareholders.

The Details

Under the acquisition agreement, Conoco continues as the operator of all six terminals. No jobs at the terminals are affected and operations personnel remain employees of Conoco.

Through a combination of equity and leased positions, Colonial has secured additional terminal capacity. This additional capacity along our pipeline system will be provided for the exclusive use of Colonial and its customers.

Here are answers to some commonly asked questions.

Q. Why did Colonial decide to enter the terminalling business?
A. For three main reasons:

1. economic and logistical benefits to our customers;

2. strategic business value for Colonial; and,

3. as a leader in the oil transportation industry, Colonial seeks to leverage the current terminal consolidation trend that's occurring.

Q. Is Colonial going to compete with its customers, either system-wide or in local markets?
A. We don't intend to compete directly with customers. We will take advantage of opportunities to enhance our system, making it more cost effective and more efficient, adding value for our customers and shareholders.

Q. Will customers of Colonial's terminal venture receive preferential treatment?
A. Simply and emphatically, no … period!

Q. What are Colonial's future plans concerning terminals?
A. We will seek out appropriate opportunities to take ownership of terminals when it makes economic and logistical sense.

For more information, please e-mail us at terminalling@colpipe.com.

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