Infrastructure / Mid-Continent / Shale Daily / NGI All News Access

Velocity Midstream Inks JV to Build Crude Pipeline in Midcontinent

A subsidiary of Tulsa-based Velocity Midstream Partners LLC said Monday that it has entered a joint venture (JV) with CVR Refining LP to construct a crude oil pipeline and terminal that would link production from the South-Central Oklahoma Oil Province (SCOOP) to a nearby refinery.

CVR, which operates the 70,000 b/d refinery in Wynnewood, OK, will hold a 40% ownership interest in the joint venture, Velocity Pipeline Partners LLC. Subsidiary Velocity Central Oklahoma Pipeline LLC would own the rest and manage and operate the pipelines once they are complete.

In addition to the pipeline and terminal, Velocity said it also expects to undertake another project looping the majority of Velocity's existing pipeline. Last year, Velocity completed a 100,000 b/d oil pipeline through the core of the SCOOP for Continental Resources Inc. The new pipeline and loop would provide producers with further crude segregation along the SCOOP fairway, allowing them to separate heavier crude barrels produced in the Springer and Woodford oil formations from lighter barrels produced in the Woodford condensate formation.

"CVR refining currently purchases significant volumes of SCOOP production by way of its wholly owned truck gathering fleet and the addition of this new pipeline provides the opportunity to further enhance crude supply to our Wynnewood refinery," said CVR Refining CEO Jack Lipinski.

The addition of the pipeline and crude oil loop would allow producers to gather and transport crude oil and condensate from points in Grady, Stephens, Garvin, McClain and Carter counties. CVR  also operates another 115,000 b/d refinery in the state and has oil trucking operations in the SCOOP and the Sooner Trend Anadarko Canadian and Kingfisher plays. The new pipeline would give its Wynnewood refinery  more direct access to SCOOP volumes and help reduce truck traffic in the region.

Monday's announcement builds on a letter of intent the companies signed a year ago to build the gathering and transportation system, adding to a growing list of midstream projects in the Midcontinent, where despite the downturn operators continue to focus on delineating multiple horizons and enhancing drilling and completion techniques (see Shale DailySept. 16, 2015). There were 65 rigs running in Oklahoma at the end of last week, according to Baker Hughes Inc. data, second only to Texas.

"We are excited to undertake this project with CVR Refining to add a crude oil pipeline project to our existing pipeline assets in the SCOOP," Velocity CEO Rick Wilkerson said. "The Woodford and Springer crude is attractive to Midcontinent refiners and, coupled with the reduction in crude transportation costs, provides the producers in the SCOOP with very strong and reliable markets."

The pipeline would also be able to transport crude and condensate to the Cushing Hub, where CVR maintains significant market outlets, crude storage and pipeline access to its other refinery. No cost estimate was provided for the projects.

Recent Articles by Jamison Cocklin