Tallgrass Energy and Kinder Morgan have announced plans to partner on boosting takeaway capacity in the Powder River and Denver-Julesburg (DJ) basins in the US Rockies.
“This combination of assets creates a significant growth opportunity for both companies,” said Tallgrass’ chief operating officer, Bill Moler. “Shippers benefit by gaining access to a pipeline system that can source from multiple basins and access numerous demand markets including existing refinery connections on Pony Express and Tallgrass’ downstream options. Other shipper benefits include a quicker in-service date and the ability to batch a greater variety of common streams.”
Under the agreement, Tallgrass will contribute the 320,000 bpd Pony Express system to the partnership, while Kinder Morgan will commit portions of its Cheyenne Plains Gas pipeline and Wyoming Interstate assets. In addition, around 200 miles (322 km) of new pipeline will also be built for crude deliveries to the Cushing oil hub in Oklahoma.
The two companies also agreed to add incremental capacity in the Williston Basin and some parts of Western Canada.
“There are a number of competitive advantages to jointly developing this project,” said Kinder Morgan’s chief commercial officer for product pipelines, Don Lindley. “Chief among them is the ability to quickly and efficiently place an additional 550,000 bpd of crude transportation takeaway capacity in service from the Rockies, which helps domestic producers and offers near-term relief for Canadian producers.”
Co-operation between the two midstream operators is aimed at helping to alleviate pipeline constraints that have been plaguing the US and Canadian oil industries amid rising production.
The value of the combined project has not been revealed. Subject to state and federal regulatory approvals being granted, it could come online by the second half of 2020.