Tallgrass and Kinder Morgan agree to increase oil takeaway capacity

Tallgrass Energy (TGE) has signed an agreement with Kinder Morgan (KMI) to increase existing crude oil takeaway capacity in the Powder River and Denver-Julesburg basins.

The companies will work on jointly developing a solution to increase the takeaway capacity.

The scope of the partnership also includes the addition of incremental capacity to the Williston Basin and portions of Western Canada.

Tallgrass Energy 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.”

TGE will contribute its Pony Express Pipeline System to the proposed venture, while KMI would contribute portions of its Wyoming Intrastate Company and Cheyenne Plains Gas Pipeline.

The companies will commence the process of abandonment and conversion to crude oil service.

TGE and KMI will also construct 200 miles of new pipeline to provide crude oil deliveries into Cushing, Oklahoma.

The proposed project will create a combined pipeline system with an estimated capacity to carry up to 800,000bpd of light crude oil and 150,000bpd of heavy crude oil from points in Wyoming and Colorado to the companies’ Deeprock terminal in Cushing.

From the terminal in Cushing, shippers can export the crude to the Gulf Coast and export markets through TGE’s planned Seahorse Pipeline and other future pipeline projects.

The combined pipeline system is expected to begin service in the second half of next year.

KMI Products Pipelines chief commercial officer Don Lindley noted that the development of the project will place an additional 550,000bpd of crude transportation takeaway capacity in service from the Rockies.

The transaction is subject to certain conditions, including state and federal regulatory approvals.