Phillips 66 Partners open second season on Gray Oak Pipeline

By Patrick C. Miller | May 01, 2018

Houston-based Phillips 66 Partners has received enough binding commitments on an initial open season to proceed with construction of the Gray Oak Pipeline system, which will transport crude from west Texas to the Corpus Christi, Sweeny and Freeport markets in the state.

The pipeline is expected to be placed in service by the end of 2019, and is backed by long-term, third-party, take-or-pay commitments with primarily investment-grade customers. Origination stations will be constructed in Reeves, Loving, Winkler and Crane counties of west Texas, as well as from locations in the Eagle Ford production area in south Texas.

Gray Oak Pipeline LLC is a joint venture owned 75 percent by Phillips 66 Partners and 25 percent by Andeavor, which will own the pipeline system. Other third parties—including Enbridge Inc.—have an option to acquire up to 32.75 percent interest in the joint venture. If all options are exercised, Phillips 66 Partners’ ownership would be 42.25 percent and Andeavor’s ownership would remain 25 percent.

Gray Oak Pipeline received enough volume commitments from precedent agreements to hold a second binding open season, which began April 26. Interested parties must execute a confidentiality agreement to govern the receipt of the open season documentation.

This open season provides an opportunity for additional shippers to enter into transportation services agreements that provide long-term crude oil transportation on the Gray Oak Pipeline. The scope and capacity of the pipeline depends on the outcome of the second open season.

The Gray Oak Pipeline could transport up to 700,000 barrels per day or more of crude oil from the Permian Basin to downstream markets. Its capacity could be expanded to about 1 million barrels per day of long-haul takeaway.

In Corpus Christi, the Gray Oak Pipeline will connect to a new joint venture marine terminal under development by Buckeye Partners L.P. Buckeye will have a 50 percent interest in the terminal joint venture and serve as the operator, while Phillips 66 Partners and Andeavor each will have a 25 percent ownership interest. The terminal will have an initial storage capacity of 3.4 million barrels and is expected to begin operations by the end of 2019.