Midstream player Kinder Morgan (KMI) and Tallgrass Energy (TGE) have agreed to jointly develop a solution to increase existing crude oil capacity in the Rockies plays of the U.S.
The deal will see both companies increase existing crude oil takeaway capacity in the growing Powder River and Denver-Julesburg basins and to add incremental capacity to the Williston Basin and portions of Western Canada.
The proposed venture would include both existing and newly constructed assets. TGE would contribute its Pony Express Pipeline System, and KMI would contribute portions of its Wyoming Intrastate Company and Cheyenne Plains Gas Pipeline and begin the process of abandonment and conversion to crude oil service. In addition, approximately 200 miles of new pipeline would be constructed to provide crude oil deliveries into Cushing, Okla.
In total, the combined pipeline system is expected to be capable of delivering 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 TGE’s and KMI’s Deeprock terminal in Cushing.
This combination of assets creates a significant growth opportunity for both companies,” said Tallgrass Chief Operating Officer Bill Moler. “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.”
“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,” said Don Lindley, Chief Commercial Officer for Products Pipelines at KMI. “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.”