February 22, 2012 [OPIS] - SemGroup Corp., Gavilon Midstream Energy and a Chesapeake Energy Corp. unit will set up a joint venture to construct a 210-mile pipeline in western and north central Oklahoma to move crude oil to a 1-million-barrel storage facility in Cushing, Okla.
Construction of the pipeline is planned to begin in July 2012, and it is expected to be in service in the third quarter of 2013, the companies said in a joint statement. The pipeline and storage facility will meet growing midstream needs resulting from the burgeoning drilling activity in western Oklahoma and the Mississippi Lime play, the companies said Tuesday.
The pipeline will consist of two laterals, one originating near the town of Alva in Woods County, Okla., and the other near the town of Arnett in Ellis County, Okla., they said. The laterals will intersect near Cleo Springs in Major County, Okla., where the pipeline will increase in diameter and continue east to storage at Cushing, they added.
The pipeline will have an initial capacity of 140,000 b/d, and following the addition of more horsepower, a maximum operating capacity of 180,000 b/d. “SemGroup brings the capability to design, construct and operate crude oil pipeline and storage; Gavilon has the financial strength and risk management capabilities to clear the barrels in the Cushing market; and Chesapeake is stepping up with a volume commitment from its vast acreage holdings and high-quality reserves to anchor the project,” said Norm Szydlowski, chief executive officer of SemGroup Corporation.
“New crude oil discoveries in the U.S. necessitate additional infrastructure and supply chain management expertise to serve producers and consumers, which has been the focus of growth for Gavilon’s energy segment,” said Tom Ramsey, chief operating officer of Energy at Gavilon. “Strong crude prices continue to provide attractive economics for producers in these plays,” said Mike Stice, senior vice president of Chesapeake Energy Corporation.
“This pipeline will further improve the upstream economics of Chesapeake Energy Corporation by providing a lower-cost transportation alternative to move production from the field to downstream markets at the Cushing interchange, and will provide the same economic advantage to other producers in these drilling plays,” Stice added.
