Tallgrass Energy Partners (TGE) and Kinder Morgan (KMI) signed an agreement to boost existing crude oil transport capacity in the Powder River and Denver-Julesburg basins and to add incremental capacity to the Williston Basin and parts of Western Canada.
In this connection, TGE and KMI will combine their existing and newly constructed pipeline assets to boost their crude oil transportation from the Rockies region.
TGE, on its part, will contribute its 1,223km long Pony Express Pipeline System while KMI will contribute parts of its Wyoming Intrastate and Cheyenne Plains Gas pipelines and commence the process of abandonment and conversion to crude oil service.
Apart from combining the pipeline assets, the parties will construct 322km or so of new pipeline to offer crude oil deliveries into Cushing, Oklahoma.
KMI products pipelines chief commercial officer Don Lindley said: “There are a number of competitive advantages to jointly developing this project and leveraging KMI’s and TGE’s existing assets, including the expansion of our Double H Pipeline system.
“Chief among them is the ability to quickly and efficiently place an additional 550,000 barrels per day of crude transportation takeaway capacity in service from the Rockies, which helps domestic producers and offers near-term relief for Canadian producers.”
Overall, the combined pipeline system is likely to be capable of transporting up to 800,000 barrels per day (bpd) of light crude oil and 150,000 bpd of heavy crude oil from points in Wyoming and Colorado to the two companies Deeprock terminal located in Cushing.
From the Deeprock terminal, customers will have pipeline connectivity to the Gulf Coast and export markets via TGE’s proposed 1,126km long Seahorse Pipeline and other existing or planned future pipeline projects.
The combined pipeline project of TGE and KMI is anticipated to deliver initial service as early as the second half of next year.
Tallgrass chief operating officer Bill Moler said: “This combination of assets creates a significant growth opportunity for both companies.
“Shippers benefit by gaining access to a pipeline system that can source from multiple basins and access numerous demand markets including existing refinery connections on Pony Express and Tallgrass’ downstream options. Other shipper benefits include a quicker in-service date and the ability to batch a greater variety of common streams.”
The transaction between TGE and KMI will be closed subject to conditions such as receipt of applicable state and federal regulatory approvals, among other things.