Phillips 66, Paradigm Energy form Bakken midstream logistics JVs

Phillips 66 Partners and Paradigm Energy announce that they have executed agreements to form two joint ventures to develop midstream logistics infrastructure in North Dakota. 

Consisting of two previously announced projects, the Sacagawea Pipeline and Palermo Rail Terminal, the joint ventures are designed to enhance logistical options for crude oil transportation in the Bakken region.

"We are pleased to announce our ventures with Paradigm to develop these strategic transportation assets," said Greg Garland, chairman and CEO of Phillips 66 Partners.

"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," he added.

The Pipeline JV will own an 88% ownership interest in Sacagawea Pipeline, with the remaining 12% interest to be owned by Grey Wolf Midstream.

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.

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

Under the terms of the Pipeline JV Agreement, Phillips 66 Partners and Paradigm will each own a 50% interest in the joint venture and will fund their proportionate share of the construction costs. Paradigm will construct the pipeline and Phillips 66 Partners will be the operator.

"Paradigm is excited to be partnering with Phillips 66, a recognized global leader in refining, marketing and midstream," said Troy Andrews, CEO of Paradigm Energy.

"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. Further, these 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 basin."

Meanwhile, 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 bpd, with the flexibility to be expanded to 200,000 bpd.

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% 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.

The transactions are expected to close in the fourth quarter of 2014 with total capital cost for the joint ventures estimated to be approximately $300 million, subject to the terms set forth in the final agreements.

Both the pipeline and rail terminal are expected to commence commercial operations in the first quarter of 2016.

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