Tallgrass Energy Partners and Silver Creek Midstream have agreed to jointly develop a new 128km long pipeline in the US to transport crude oil from the Powder River Basin (PRB) to Guernsey, Wyoming.
The joint venture pipeline project known as Iron Horse Pipeline will connect Silver Creek’s developing gathering system to Tallgrass’ new terminal, which is being constructed in Guernsey.
It will also connect the Silver Creek’s gathering system to Tallgrass’ Pony Express crude pipeline system and other pipelines at Guernsey.
Tallgrass expects to invest about $150m on its part for the new pipeline project and also on its new Guernsey terminal.
It will own 75% in the pipeline joint venture while Silver Creek will own the remaining 25%.
Tallgrass chief commercial officer Matt Sheehy said: “Silver Creek brings a best-in-class oil gathering management team to the PRB.
“Their extensive customer relationships and focus on customer service make them an ideal partner for Tallgrass. Iron Horse Pipeline will quickly become an important path to bring Wyoming production into Guernsey and onto Pony Express.”
The Iron Horse pipeline, which is slated to begin operations in the first quarter of 2019, will have 64km of new build and 64km of gas-to-oil conversion pipe. It will initially have a capacity of about 100,000 barrels per day and will be designed to facilitate future expansions.
Iron Horse and Pony Express plan to create a joint tariff to provide producers and marketers a single rate and direct access to the various refineries located along the latter and to the Cushing crude oil hub located in Oklahoma from the PRB production zone.
Apart from the Iron Horse joint venture, Tallgrass has agreed to sell its 80km long PRB crude oil gathering system to Silver Creek for an undisclosed price.
Silver Creek founder and CEO J. Patrick Barley said: “Silver Creek is extremely excited to work with Tallgrass in the PRB. Their current presence in the basin and long-haul crude transport capabilities bring a competitive advantage to Silver Creek as we work to fully build out our gathering system.
“Collectively, we will be able to provide optimal midstream service solutions for producers in the Powder River Basin.”
In a separate transaction, Tallgrass Energy Partners’ subsidiary Tallgrass Equity has acquired a 25.01% membership interest in Rockies Express Pipeline from Tallgrass Development.
Image: Map showing the Iron Horse pipeline and the Pony Express pipeline. Photo: courtesy of Business Wire.