Plains All American Pipeline on Tuesday said it plans to expand the existing Red River Pipeline to carry more crude from the Midcontinent to the Gulf Coast.
The expansion, which would increase total system capacity to 235,000 b/d from 150,000 b/d, is set for completion in the first half of 2020.
To fund the growth, Plains and Delek Logistics Partners LP created Red River Pipeline Co. LLC. Delek bought into the joint venture for $128 million and would own a 33% stake. Plains retained a 67% interest and would continue to operate the system.
Subsidiary Delek US also increased its long-term throughput and deficiency agreement on Red River to 100,000 b/d from 35,000 b/d.
“This is a win-win deal that fits our strategy of optimizing and expanding existing systems while exercising capital discipline,” said Plains Executive Vice President Jeremy Goebel, who is in charge of commercial business.
“This transaction expands long-term alignment with a natural shipper, supports and funds the expansion of the system, increases Plains’ net committed annual cash flow, and provides proceeds to fund our capital program or lower debt.”
Red River now extends from the Cushing hub in Oklahoma to Longview in East Texas. The expansion then could feed crude into pipelines supplying Delek’s Tyler or El Dorado refineries, or via third-party pipelines to the Gulf Coast.
Houston-based Plains has been working on oil takeaway solutions from the Midcontinent and Permian Basin for the past few years. About 30% of the expanded Red River system capacity from Cushing to Hewitt, OK, is owned by a third party in an undivided joint interest structure.