Koch Pipeline Company and NuStar Logistics have agreed on a pipeline connection and capacity lease agreement that will give Koch Pipeline future additional capacity to transport Eagle Ford Shale crude oil to Corpus Christi, Texas.
The project involves reactivation of NuStar’s previously idled Pettus South Pipeline, which runs 60 miles from Pettus, Texas to Corpus Christi. NuStar will operate the pipeline; Koch Pipeline will lease the capacity and combine it with its existing gathering systems to move growing crude oil production from South Texas Eagle Ford Shale fields to Corpus Christi refineries and terminals.
“This agreement with NuStar is another step in our strategy to expand our pipeline capabilities in South Texas,” said Kim Penner, president of Koch Pipeline. “We expect to tie this line into our system within the next six to eight months, adding at least 30,000 barrels per day of new capacity. As Eagle Ford production grows, the line’s capacity can be increased to about 50,000 barrels per day.
“In addition, we are working on several more opportunities to increase pipeline capacity to the Corpus Christi refining center and Ingleside waterborne terminal,” Penner said.
“This is an exciting opportunity because NuStar and Koch Pipeline have pipeline and gathering systems that are uniquely located to jointly develop a quick and economical solution to get the Eagle Ford crude oil into Corpus Christi to supply local refineries and other customers,” said NuStar President and CEO Curt Anastasio. “It is a win for the producers because they will soon have an effective means to transport their crude production; a win for the refiners because they will have access to another crude oil supply source; and of course a win for Koch Pipeline and NuStar based on the increased throughput in our systems.
“NuStar’s existing pipeline and terminal infrastructure in South Texas also provides the foundation to pursue and develop other logistics opportunities in the Eagle Ford Shale region,” Anastasio added.
Koch Pipeline and NuStar expect the project to be completed and in service in the second quarter of 2011.
Expanded activity in the Eagle Ford production formation has allowed Koch Pipeline’s customer Flint Hills Resources to receive more domestically produced crude at its Corpus Christi refinery. In May, Koch Pipeline completed projects that allowed it to increase its crude oil and gas condensates transportation capacity by about 25,000 barrels per day.
Koch Pipeline is building a line to expand delivery capability to Flint Hills Resources’ Ingleside waterborne terminal. In addition, the company is further increasing transportation capacity by 40,000 barrels per day from its existing system in the northern Eagle Ford counties. This increase will be final during the first half of 2011.
Last month, in conjunction with Arrowhead Pipeline, L.P., Koch Pipeline announced an agreement and joint tariff to add 50,000 barrels per day of crude and condensate capacity during 2011 from the western counties of the Eagle Ford.
Koch Pipeline is the largest transporter of South Texas crude and operates about 540 miles of active crude oil transportation lines in Texas. The company also has ongoing relations with other crude distribution systems that further its ability to provide services in this growing production area.