Oil transportation and services related to the maintenance and storage have always been witnessing a substantial business growth owing to growing consumption. Increasing oil demands have laid down the foundation of growth for oil transportation and pipeline companies. To meet customer demands, the oil transportation industry is witnessing several acquisitions and collaborations globally.

Holly Energy Partners, an American petroleum product and oil transportation firm headquartered in Dallas, Texas, and Plains All American Pipeline, a renowned oil pipeline transportation and storage firm headquartered in Houston, Texas, announced the formation of a 50/50 JV, launching Cushing Connect Pipeline and Terminal LLC.

The joint venture is made for two prime reasons, first, the construction and development of a new crude oil pipeline carrying 160,000 barrel per day. This pipeline would link the Cushing, Oklahoma crude oil center to the Tulsa, Oklahoma refining complex that is owned by a subsidiary of HollyFrontier Corporation. Second, the operation and ownership of 1.5 million barrels of storage of crude oil at Cushing, Oklahoma.   

The JV Terminal is predicted to be in operation in 2020, during the second quarter, while the Pipeline is projected to be in operation during first quarter of 2021. Long-term commercial contracts have been signed to support the JV assets.

The total investment for the project would be shared between the partners and that it is estimated to be approximately $130 million, which also includes the existing JV Terminal that is contributed by Plains All American and is valued at approx. $40 million.

The new JV is expected to produce a primary annual EBITDA multiple of approx. 8x to 9x after the JV Pipeline and Terminal are positioned into Joint Venture service.

Executive Vice President for Commercial at Plains All American, Jeremy Goebel stated that this win-win JV aligns with the company’s strategy of enhancing existing assets to offer value-chain solutions for long-term business partners in a very capital efficient manner.

Chief Executive Officer of the general partner of Holly Energy Partners, George Damiris stated that the new JV would offer growth to HEP through insourcing logistics expenditure and provide the ability to supply entire HFC’s Tulsa Refinery crude oil throughput.

Source credit: https://www.rigzone.com/news/holly_energy_plains_all_american_launch_cushing_connect_jv-03-oct-2019-159972-article/