Another New Pipeline to Carry Crude Oil Out of Permian Basin

Another big pipeline is being proposed in West Texas in a move that will likely affect the significance of the Cushing crude oil hub.

This time, it’s Phillips 66 Partners planning to construction the Gray Oak Pipeline system to provide crude oil transportation from West Texas to destinations in the Corpus Christi and Sweeny/Freeport markets.

The company announced Wednesday it will build origination stations in Reeves, Loving, Winkler, and Crane counties in West Texas and from locations in the Eagle Ford production area of the southern part of the state.

The pipeline is expected to be in service by the end of 2019 and is already backed by long-term third-party commitments. Gray Oak Pipeline, LLC is a joint venture owned 75 percent by Phillips 66 Partners and 25 percent by Andeavor.  Other third parties including Enbridge Inc. will have an option to acquire up to 32.75 percent interest in the joint venture.

Once built, the line will be capable of moving up to 700,000 barrels a day of crude oil from the Permian Basin to downstream markets.  The company said if the pipeline is fully subscribed, its capacity could eventually be expanded to nearly 1 million barrels a day.

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 will be 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.