Tallgrass Boosts Role in Crude Oil Basins with Pipeline Expansion

Researched by Industrial Info Resources (Sugar Land, Texas)--Tallgrass Energy Partners LP (NYSE:TEP) (Leawood, Kansas) is expanding the reach of its Pony Express pipeline system through a pair of acquisitions in Colorado and Oklahoma. Tallgrass Terminals, a subsidiary, expects to play a bigger role in key crude oil-producing basins. Industrial Info is tracking $1.06 billion in active projects involving Tallgrass, including proposed improvements to its Rockies Express pipeline and its proposed Cheyenne Connector pipeline.

The Pony Express pipeline, which began service in 2014, runs 760 miles from Guernsey, Wyoming, through Colorado, Nebraska and Kansas, before terminating in Cushing, Oklahoma. It sources oil from the Bakken, Denver-Julesburg and Powder River shale plays and can carry up to 320,000 barrels per day (BBL/d); with drag-reducing additives, it can transport up to 420,000 BBL/d.

The first of the two acquisitions is a 38% interest in Deeprock North LLC, which owns a crude oil terminal in North Cushing, Oklahoma, for $19.5 million, and signed a five-year contract extension with Pony Express' largest customer. For more information, see Industrial Info's plant profile, as well as a project report for next year's tank inspections and upgrades at the facility.

Tallgrass also acquired a 51% membership interest in a crude-oil terminal in Pawnee, Colorado, from Zenith Energy (Houston, Texas) for about $31 million. The facility will serve as an injection point for the Pony Express line's Northeast Colorado Lateral, with 300,000 barrels of storage capacity. Tallgrass also says it will connect directly with nearby producers, with a minimum volume commitment of roughly 90,000 barrels per day.

Tallgrass also is weighing its options for a bidirectional conversion on its Rockies Express Pipeline. As proposed, the project would prepare 1,000 miles of line for the bidirectional flow of natural gas between Meeker, Colorado, and Mexico, Missouri. It would include:

• a $190 million segment in Colorado; see project report
• a $190 million segment in Wyoming; see project report
• a $190 million segment in Nebraska; see project report
• a $90 million segment in Kansas; see project report
• a $190 million segment in Missouri; see project report

The proposed Cheyenne Connector Pipeline would link with the Rockies Express Pipeline's Cheyenne Hub in Weld County, Colorado, near the border with Wyoming, where it would receive up to 600 million standard cubic feet per day of natural gas from facilities in the Denver-Julesburg (DJ) Basin. Industrial Info currently gives the 70-mile, $110 million pipeline and a $25 million compressor station near Greeley, Colorado, a medium probability (70%-80%) of actually kicking off; for more information, see project reports on the pipeline and compressor station.

"These projects serve three strategic purposes; one, continuing the transformation of REX [Rockies Express] into the North America's premier northernmost natural gas header system; two, increasing volumes into REX in the long term; and three, providing DJ natural gas volumes and outlet for additional markets," said David Dehaemers, the chief executive officer of Tallgrass, in a recent quarterly earnings-related conference call.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.