Phillips 66, Plains Sanction $2.5 Billion Red Oak Pipeline System

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(PLN) – Plains All American Pipeline and Phillips 66 will proceed with construction of the Red Oak Pipeline system in a new joint venture to transport crude oil from the Permian Basin and Cushing, Okla., to Houston and multiple locations along the Texas Gulf Coast.

The companies said Red Oak is underpinned with long-term shipper volume commitments and will begin service from Cushing to the Gulf Coast as early as the first quarter of 2021, subject permitting and regulatory approvals.

“Red Oak represents a capital-efficient industry solution that will utilize existing assets and provide pull-through benefits to our systems,” said Willie Chiang, CEO of Plains All American. “We look forward to working closely with Phillips 66 and our committed shippers to bring Red Oak into service and further optimize our assets upstream and downstream of the new pipeline system. We also look forward to creating jobs and supporting economic growth in Oklahoma and Texas.”

The Red Oak joint venture will lease capacity in Plains’ Sunrise Pipeline system, which extends from Midland to Wichita Falls, Texas. The joint venture 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 and Ingleside and a 20-inch pipeline segment to Houston and Beaumont.

Red Oak is one of two new joint-venture pipeline projects sanctioned this week by Phillips 66 with an estimated combined cost of $4.1 billion. On Monday, it announced plans to move forward with Bridger Pipeline on construction of the Liberty Pipeline, which will transport crude oil from the Rockies and Bakken production areas to the Cushing hub for delivery to the same Gulf Coast destinations.

Where feasible, the companies said, Red Oak will use existing pipeline and utility corridors and advanced construction techniques to limit environmental and community impact. Plains will lead project construction on behalf of the joint venture, and Phillips 66 will operate the pipeline. The project is expected to cost $2.5 billion.

“We are pleased to partner with Plains to build Red Oak,” said Greg Garland, Phillips 66 chairman and CEO. “The pipeline provides a competitive outlet for shippers to access the key market centers along the Texas Gulf Coast from Cushing and the Permian. 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.”

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