Phillips 66 late Monday with separate partners sanctioned two projects costing $4 billion-plus total that would move crude from the Rockies, Bakken Shale, Oklahoma and Permian Basin to the Texas coast and beyond.
In one 50-50 joint venture (JV) with Plains All American Pipeline, Red Oak Pipeline LLC’s system is designed to carry crude from Cushing, OK, and the Permian in West Texas.
Phillips 66 and Liberty Pipeline LLC JV partner Bridger Pipeline LLC also late Monday sanctioned Liberty Pipeline, a 24-inch diameter system that would stretch from the Rockies and Bakken to Cushing, enabling supply to move south.
Red Oak would transport oil from Cushing to Corpus Christi, Ingleside, Houston and Beaumont.
“The pipeline provides a competitive outlet for shippers to access the key market centers along the Texas Gulf Coast from Cushing and the Permian,” Phillips 66 CEO Greg Garland said. “This investment aligns with our long-term strategy to grow our midstream business with projects generating stable, fee-based earnings while further enhancing integration across our value chain.”
Red Oak “represents a capital-efficient industry solution that will utilize existing assets and provide pull-through benefits to our systems,” said Plains CEO Willie Chiang.
The Red Oak JV plans to lease capacity in Plains’ Sunrise Pipeline system in West Texas, which extends from Midland to Wichita Falls. A recently announced expansion of Sunrise would increase takeaway from the Permian by around 300,000-350,000 b/d.
In the Red Oak system, a 30-inch diameter pipeline is to be built from Cushing to Wichita Falls and to Sealy. From Sealy, a 30-inch segment would be built to Corpus Christi and nearby Ingleside, while a 20-inch segment would move oil to Houston and Beaumont.
“Where feasible, Red Oak will utilize existing pipeline and utility corridors and advanced construction techniques to limit environmental and community impact,” executives said.
Plains is to lead Red Oak project construction, and Phillips 66 would operate the pipeline. The project is expected to cost around $2.5 billion.
Growing Bakken, Rockies Output
The sanctioned Liberty system “presents us with a great opportunity to serve producers in the growing Bakken and Rockies production areas,” said Garland. “The pipeline adds to our integrated infrastructure network that serves the key shale oil producing regions with connectivity to major Gulf Coast market centers.
“Our pipeline network has strategic alignment with our Central Corridor and Gulf Coast refineries, further enhancing value across our assets.”
Bridger CEO Hank True said Liberty would be “an important undertaking on the part of our company to ensure that oil from Wyoming, the Rockies and the Bakken can get to markets in the U.S. and around the world. Our commitment to the Liberty Pipeline will give producers confidence to grow oil production in these important regions.”
Phillips 66 would lead project construction on behalf of the Liberty JV and operate the pipeline, which is expected to cost about $1.6 billion. Where feasible, Liberty plans to use existing pipeline and utility corridors and advanced construction techniques to limit environmental and community impact.
Red Oak and Liberty each are underpinned by long-term shipper commitments, and both possibly could begin initial service as soon as 1Q2021. Supplemental open seasons are planned for each project to solicit additional customer support.
The “long-discussed” final investment decisions represent “the first among several proposed projects for new takeaway capacity out of Cushing (Red Oak) and incremental takeaway out of the Bakken/Rockies (Liberty),” said analysts with Raymond James & Associates Inc.
Tudor, Pickering, Holt & Co. (TPH) analysts said “hats off” to Phillips 66 “for getting these projects across the finish line against fierce competition from major midstream players…
“With Red Oak in the fold, we add up more than 5.1 million b/d of new pipeline capacity hitting the Gulf Coast in 2019-22,” versus a TPH estimate of 4.3 million b/d of inland supply growth over the period.
Phillips 66 also is working on companion projects in Texas, TPH noted, including a pair of 150,000 b/d fractionators in Sweeney and additional expansions of its Beaumont terminal.