Plains All American Pipeline Tuesday announced it’s formed a joint venture with Delek Logistics Partners in the existing Red River Pipeline system, with Delek paying $128 million for a 33% share in the line.
Plains retained a 67% interest in the JV and will continue to operate the Red River crude oil system, Kallanish Energy reports. In conjunction with the deal, Delek increased its long-term throughput and deficiency (take or pay) agreement on the Red River system from an existing 35,000 barrels per day, to 100,000 Bpd.
The expansion enables additional volume pull-through from Cushing, Oklahoma, and the Permian Basin to the U.S. Gulf Coast markets, providing additional supply optionality for shippers, the partners say.
“This is a win-win deal that fits our strategy of optimizing and expanding existing systems while exercising capital discipline,” stated Jeremy Goebel, executive vice president–Commercial with Houston-based midstreamer Plains.
“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.”
The interstate Red River pipeline system extends from Cushing to Longview, Texas. The expansion will increase the total system capacity from roughly 150,000 Bpd to approximately 235,000 Bpd through the addition of pumping capacity and is expected to be completed during the first half of 2020.
Roughly 30% of the expanded Red River system capacity from Cushing to Hewitt, Oklahoma, is owned by a third party in an undivided joint interest structure.
