Downstream operator Phillips 66 has entered two joint ventures to develop crude pipeline systems from the prolific Permian basin and Rockies region to markets on the US Gulf coast, writes Caroline Evans.

One venture, with midstream operator Plains All American, is proceeding with construction on the $2.5 billion Red Oak system to transport crude from the Permian to the Texas coast.

Plains and Phillips 66 each own 50% of the venture. In addition to Permian crude, the system will transport oil from the Cushing hub in Oklahoma to US Gulf Coast markets.

The project is underpinned with long-term volume commitments from unidentified shippers, and initial service from Cushing could take place as early as the first quarter of 2021.

Permian producers are eager for new pipeline projects to come online, as prolific output in the basin has resulted in bottlenecks keeping a lid on regional prices.

The Red Oak joint venture will lease capacity in Plains’ Sunrise Pipeline system, which extends from Midland to Wichita Falls, Texas.

The joint venture also plans to construct a new 30-inch pipeline from Cushing to Wichita Falls and Sealy, Texas. From Sealy, the joint venture will construct a 30-inch pipeline segment to Corpus Christi, Texas, and Ingleside, Texas, and a 20-inch pipeline segment to Houston and Beaumont, Texas.

“Where feasible, Red Oak will utilise existing pipeline and utility corridors and advanced construction techniques to limit environmental and community impact,” it said.

Plains will lead project construction, while Phillips 66 will operate the pipeline.

The joint venture plans to hold a supplemental binding open season at a later date that will enable additional shippers to enter into long-term transportation services agreements.

“The pipeline provides a competitive outlet for shippers to access the key market centres along the Texas Gulf coast from Cushing and the Permian,” said Phillips 66 chief executive Greg Garland.

The other deal, with privately-held Bridger Pipeline, will see the $1.6 billion Liberty pipeline being built, which will carry crude from the Bakken shale and other Rockies plays to the Cushing hub.

“From Cushing, shippers can access multiple Gulf Coast destinations, including Corpus Christi, Ingleside, and Houston,” Phillips 66 said.

Liberty, like Read Oak, is underpinned with long-term shipper volume commitments, and the pipeline is expected to be in service as early as the first quarter of 2021. A supplemental binding season will also take place in the future.

Phillips 66 will lead project construction and will operate the Liberty pipeline.

“The Liberty pipeline is 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 US and around the world,” said Hank True, president of Bridger Pipeline.

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Phillips 66 links up for pipeline systems