August 23, 2012 / 5:27 PM / 7 years ago

UPDATE 1-Kinder Morgan to carry Eagle Ford crude for Phillips 66

* Kinder Morgan to build lateral crude line to Phillips’ Sweeny, Tx refinery

* Initial line capacity will be 30,000 barrels per day

NEW YORK, Aug 23 (Reuters) - Kinder Morgan Energy Partners L.P will build a pipeline to carry crude oil from the Eagle Ford formation in southwest Texas to Phillips 66’s refinery in Sweeny, Texas, giving the refinery pipeline access to cheaper, domestic crude.

Under the terms of the deal, the largest U.S. midstream company Kinder Morgan will build a 27-mile, 12-inch lateral line off its Kinder Morgan Crude Condensate pipeline to Phillips’ 247,000 barrel per day refinery in Brazoria County.

The initial capacity of the lateral line carrying the very light, sweet grade crude will be 30,000 bpd, with Sweeny receiving a significant portion of the delivery.

“This pipeline lateral will provide yet another attractive delivery point for customers of our KMCC pipeline while providing Phillips 66 with enhanced access to price-advantaged Eagle Ford crude and condensate,” said KMP Products Pipelines President Tom Bannigan.

The KMCC pipeline came in service on June 14, 2012 with the capacity to carry 300,000 bpd from the Eagle Ford region to the Texas Gulf Coast.

The lateral line will be expandable to 100,000 bpd.

The cost of the lateral line project will include a five-bay truck loading facility and three new storage tanks with the ability to hold 360,000 barrels of crude and condensate at Kinder’s DeWitt Station and Wharton Pump Station.

Kinder expects to invest $90 million on the project. Construction is expected to begin in the fourth quarter of 2012.

Kinder Morgan is a major player in the development of infrastructure to carry the newly discovered Eagle Ford formation including joint ventures to build both gathering and transportation lines for natural gas, condensates and crude oil.

The Eagle Ford formation is located close to the U.S. Gulf Coast and the largest concentration of U.S. refineries. Eagle Ford crude was priced at $93.75 a barrel on Wednesday, about a $3 discount to U.S. crude benchmark West Texas Intermediate and a $19 discount to Louisiana Light Sweet .

This proximity and growing production from the region - 283,292 bpd in June - was a jump of 195 percent from year-ago figures. 

Units of Kinder Morgan were trading at $81.69, down 21 cents while shares of Phillips 66 were down 17 cents at $41.31.

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