May 20, 2011 [OPIS] - Plains All American Pipeline said on Tuesday that it has entered into a commitment to construct a new 130-mile crude oil and condensate pipeline, a marine terminal facility and 1.5 million barrels of storage capacity to service growing Eagle Ford production in south Texas.
Flint Hills’ 300,000 b/d refinery in Corpus Christi could be one of the likely delivery destinations for this new pipeline. OPIS notes that this is one of several projects announced in the past few months to deliver crude and condensate from the Shale region to the Gulf Coast via pipeline and rail. This is to take advantage of the favorable north-south arbitrage economics of delivering cheaper Mid-Con crude to the refining hub in the U.S. The project is expected to cost about $330 million and to be in service in the fourth quarter of 2012. To underpin the project, PAA has secured a long-term throughput agreement with Chesapeake Energy Marketing, Inc., a subsidiary of Chesapeake Energy Corporation.
The project is designed to provide approximately 300,000 b/d of take-away capacity from the western region of the Eagle Ford play to Corpus Christi, TX and other Gulf Coast markets. PAA has agreed to provide Chesapeake Midstream Development, L.P. the opportunity to acquire up to a 25% joint ownership interest in the project. Additionally, PAA and Flint Hills Resources have executed a Memorandum of Understanding regarding Flint Hills’ potential joint ownership in this project.
