Phillips 66, Paradigm Energy launch $300 million projects

By Patrick C. Miller | November 26, 2014

Two joint venture projects between Phillips 66 Partners and Paradigm Energy Partners totaling $300 million are aimed at developing midstream logistics in the Bakken.

The previously announced projects—the Sacagawea Pipeline (Pipeline JV) and Palermo Rail Terminal (Rail JV)—are joint ventures designed to enhance logistical options for crude oil transportation in the Bakken region.

The transactions are expected to close in the fourth quarter of 2014 with a capital cost of approximately $300 million. Both the pipeline and rail terminal are anticipated to begin commercial operations in the first quarter of 2016.

"The projects supported by the joint ventures provide organic growth opportunities to further strengthen and diversify our asset portfolio, while allowing us to continue to deliver top-quartile distribution growth," said Greg Garland, chairman and CEO of Phillips 66 Partners.

Troy Andrews, Paradigm Energy CEO, said, "Phillips 66 Partners pairs quality, safety and reliability with Paradigm's flexible custom gathering, storage and transport solutions for crude oil and natural gas producers in the Bakken shale of North Dakota,”

The Pipeline JV will own an 88 percent ownership interest in Sacagawea Pipeline LLC, with the remaining 12 percent interest to be owned by Grey Wolf Midstream LLC. Additionally, the Pipeline JV will own and construct a crude oil storage terminal and central delivery point for various crude gathering systems located in Keene, North Dakota (Paradigm CDP).

The 76-mile-long Sacagawea Pipeline project is being developed to deliver crude from points in and around Johnson's Corner and the Paradigm CDP in McKenzie County to destinations with take-away options for both rail and pipeline in Palermo and Stanley in Mountrail County. Paradigm recently extended an open season for the pipeline, which is expected to close Dec. 15.

The Rail JV will own the Palermo Rail Terminal. Located on a 710-acre site in Palermo, the crude oil rail-loading facility is designed to have an initial capacity of 100,000 barrels per day, with the flexibility to be expanded to 200,000 barrels per day. The terminal will have direct access to the Sacagawea Pipeline and provide East and West Coast rail access for third-party shippers through the BNSF railway.

Under the terms of the Rail JV Agreement, Phillips 66 Partners will own between a 50 to 70 percent interest with Paradigm's ownership percentage subject to the achievement of certain milestones associated with the Pipeline JV. Final ownership interests will be determined prior to closing, and each party will fund their proportionate share of the construction costs. Phillips 66 Partners will construct and operate the rail terminal.

Andrews said the projects will provide long-term, reliable and cost-effective-take away options, increased flow assurance, additional outbound capacity and market optionality for producers and marketers in the Williston Basin.

Headquartered in Houston, Phillips 66 Partners was formed by Phillips 66 to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and natural gas liquids pipelines and terminals and other transportation and midstream assets.

Paradigm Energy Partners in Dallas is a midstream services company formed to develop and operate oil and gas infrastructure and related facilities. Paradigm is focused on the development of midstream assets in the Bakken Shale in North Dakota and Eagle Ford Shale in South Texas.