Rangeland Energy has executed a long-term agreement with a subsidiary of Delek US Holdings Inc. (NYSE: DK) to be an anchor shipper of crude oil on the Rangeland Integrated Oil (RIO) pipeline, which will connect production from the Delaware Basin to the crude oil market center in Midland, Texas.
Delek Logistics Partners LP (NYSE: DKL), Delek US’ logistics arm, will own 33% of the RIO pipeline and supporting terminals.
Construction of the 107-mile pipeline is expected to begin in the second quarter of this year. Rangeland will also construct a terminal at each end of the pipeline. The pipeline will originate at the RIO State Line Terminal, which will serve as a crude oil gathering hub at the Texas–New Mexico border with storage tanks and truck unloading facilities. The pipeline will terminate at the RIO Midland Terminal, where there will be storage tanks and connections to various terminals and interstate pipelines to Cushing, Oklahoma, and Gulf Coast markets.
Rangeland expects the pipeline and the two terminals to come into service in the first half of 2016. The RIO pipeline will have an initial capacity of 55,000 barrels per day and an expanded capacity of 85,000 barrels per day or more, depending on the number of additional pump stations ultimately constructed.
The RIO pipeline is part of the RIO system, a multi-part system designed to provide crude oil producers, refiners, and marketers with pipeline, rail, and other logistics services to support regional production and downstream transportation of crude oil and condensate. The system’s rail facility is known as the RIO Hub and is located near Loving, New Mexico. The RIO Hub began operations in November 2014 and provides Halliburton (NYSE: HAL) and other customers with inbound frac sand services including unloading, storage, and truck loading. As demand increases, the RIO Hub will also offer storage, loading and outbound rail service for crude oil. Ultimately, an additional 30-mile pipeline will connect the RIO Hub to the State Line Terminal.