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Crude, Condensate Pipeline Proposals Merge in DJ Basin

Two oil/condensate pipeline proposals from Colorado to the oil processing hub at Cushing, OK, have merged, the project sponsors said Wednesday in an announcement by the four companies involved.

The merger will combine the proposed 200,000 b/d Saddlehorn Pipeline oil project and the 130,000 b/d Grand Mesa Pipeline into one 20-inch diameter, 340,000 b/d pipeline that is already under construction, taking the oil and condensate some 550 miles to the Cushing hub.

While Grand Mesa is owned by Tulsa-based NGL Energy Partners, the Saddlehorn line is a joint venture involving Tulsa-based Magellan Midstream Partners (40%), Houston-based Plains All American Pipeline (40%) and The Woodlands, TX-based Anadarko Petroleum Corp., which bought a 20% interest earlier this year (see Shale DailyMarch 18).

The Saddlehorn and Grand Mesa sponsors will share the costs of the merged pipeline; Saddlehorn will hold 190,000 b/d of capacity and Grand Mesa 150,000 b/d.

"Saddlehorn has the option to expand the maximum capacity of the pipeline to more than 450,000 b/d in the future at its sole discretion and cost," it said. Grand Mesa will retain ownership of its previously acquired pipeline easements from Lucerne, CO, to Cushing.

The merging partners will retain their respective origin points on the new pipeline. For Saddlehorn that means Platteville, CO, including 1 million bbl of storage, along with a pipeline segment from Carr, CO, to the Lucerne junction. Grand Mesa will keep its two origin points at Lucerne and Riverside, CO, as well as a pipeline segment between Lucerne and Riverside.

Magellan will serve as construction manager and operator of the pipeline system, the companies said. No total cost estimate was given, but Magellan said it expects to spend about $650 million for its share, compared to its previous interest for Saddlehorn by itself at $950 million.

Construction began last month for the Platteville-to-Cushing segment and is expected to be completed by mid-2016. Right-of-way acquisition is under way for Carr-to-Platteville and is expected to be operation in the fourth quarter of 2016.

"Combining projects makes strong economic sense by reducing overall construction and operating costs and better aligning pipeline capacity with current DJ Basin production while allowing for future growth when the market conditions improve," said Magellan CEO Michael Mears.

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