October 07, 2019 [Hydrocarbon Engineering] – Holly Energy Partners L.P. (HEP) and Plains All American Pipeline have announced the formation of a 50/50 joint venture (JV), Cushing Connect Pipeline & Terminal LLC.
The JV will develop and construct a new 160 000 bpd common carrier crude oil pipeline that will connect the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HollyFrontier Corp.
The JV will also own and operate 1.5 million bbls of crude oil storage in Cushing, Oklahoma. This terminal is expected to be in service during 2Q20, and the pipeline is expected to be in service during 1Q21. Long-term commercial agreements have been entered into to support the JV assets.
The JV will contract with an affiliate of HEP to manage the construction and operation of the pipeline and with an affiliate of Plains to manage the operation of the JV terminal. The total JV investment will be shared proportionately among the partners and is estimated to total approximately US$130 million, including the existing JV terminal contributed by Plains valued at approximately US$40 million. The JV is expected to generate an initial annual EBITDA multiple of approximately 8x to 9x once the terminal and pipeline are placed into JV service.
“The new joint venture will provide growth to HEP by insourcing logistics spend and provide the capability to supply 100% of HFC’s Tulsa Refinery crude throughput,” commented George Damiris, Chief Executive Officer of the general partner of Holly Energy Partners. “Our partnership with Plains generates HEP growth while providing HFC long-term control of a strategic asset.”
“This win-win joint venture aligns with our strategy of optimising existing assets to provide value-chain solutions for long-term industry partners in a capital efficient manner,” stated Jeremy Goebel, Executive Vice President – Commercial, Plains All American. “This investment expands our relationship with a key operational hub service customer and provides additional long-term alignment on movements to the Tulsa refinery.”
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