Phillips 66 Eyes Bigger Midstream Role with DCP Acquisition

Researched by Industrial Info Resources (Sugar Land, Texas)--Phillips 66 (NYSE:PSX) (Houston, Texas) may be looking at an even bigger role in the U.S. oil and gas midstream markets, after it submitted a non-binding proposal to acquire all publicly held common units of DCP Midstream Partners LP (NYSE:DPM) (Denver, Colorado) for cash. Phillips 66's proposal to pay $34.75 for each outstanding DCP common unit likely is just an opening bid, but could end with a significant expansion of its pipeline business. Industrial Info is tracking more than $1 billion worth of active pipeline projects from Phillips 66, and is tracking progress at more than 480 facilities across the U.S. that are owned or co-owned by DCP.

DCP's holdings include natural gas-fired plants and gas pipelines across Texas, Louisiana, Colorado and New Mexico. These include the Latham Natural Gas Processing Plant in Platteville, Colorado, in which DCP holds a 20% ownership and Kerr McGee Gas Gathering LLC (Spring, Texas) holds 80%. Owners of the 450 million-standard-cubic-foot-per-day plant are considering the addition of a third train, which would add between 200 million and 225 million standard cubic feet per day of processing capacity in the Denver-Julesburg Basin.

Owners of the 600 million-standard-cubic-foot-per-day Discovery Cryogenic Natural Gas Processing Plant in Larose, Louisiana--in which DCP holds 40% and Williams Field Services Company, a subsidiary of Williams Companies Incorporated (NYSE:WMB) (Tulsa, Oklahoma), holds 60%--are considering a proposed solar-power unit addition, which would generate as much as 40 megawatts (MW) for the plant. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can read detailed reports on the Latham gas and Discovery solar projects, and can click here for a list of detailed profiles for plants owned or co-owned by DCP.

As part of a strategic overhaul, Phillips 66 also agreed to transfer its operatorship of the Gray Oak Pipeline in Texas, which connects the Permian Basin to Corpus Christi and the Houston area, to Enbridge Incorporated (NYSE:ENB) (Calgary, Alberta). The Gray Oak agreement is expected to be completed in the second quarter of 2023.

Earlier this week, Phillips 66 formed a joint venture with Enbridge that holds both P66 and Enbridge's indirect ownership interests in DCP Midstream and Gray Oak Pipeline LLC. Under the deal, Enbridge will increase its indirect economic interest in Gray Oak from 22.8% to 58.5%. In return, Enbridge will reduce its indirect economic interest in DCP Midstream from 28.3% to 13.2%.

Click on the image at right for a graph from Enbridge detailing the new joint-venture agreement between Phillips 66 and Enbridge.

Parties involved in Gray Oak have been considering a proposed expansion of the pipeline, which would carry up to 450,000 BBL/d of crude oil an additional 325 miles from Orla, Texas, which is in the western end of the Permian, to a third-party midstream system in Victoria County, Texas, which is north of Corpus Christi. The proposal remains in an early analysis phase. Subscribers can learn more from Industrial Info's project report.

Enbridge said in a press release it anticipates Permian oil supply will grow by an estimated 2 million BBL/d, "enhancing Gray Oak's utilization and driving increased oil exports off the Gulf Coast." The expansion currently is designed to be supported by three pump stations; subscribers can read detailed reports on the proposed facilities near the Texas cities of Orla, Ozona and Victoria.

Subscribers to Industrial Info's GMI Project Database can click here for a full list of detailed reports for projects mentioned in this article, and click here for a full list of related plant profiles.

Subscribers can click here for a full list of reports for active midstream projects from Phillips 66.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).