M2 Infrastructure, a subsidiary of Lone Star Capital, has agreed with TransCanada Corporation to build a crude oil storage facility in Cushing, Oklahoma.
The deal creates a partnership between the energy developers to construct facilities capable of holding 6.2 million barrels of crude oil.
The location, in one of the most active crude oil trading hubs in the world, is a delivery point for West Texas Intermediate futures contracts listed on the Chicago Mercantile Exchange.
The memorandum of understanding signed by the companies calls for M2 Infrastructure to build and own the facility, and TransCanada to operate it. M2 Infrastructure has the option to build additional storage for up to 20 million barrels at a later date.
M2 Infrastructure said it plans to work with Matrix Global Holdings, an industrial manufacturer, to sell crude storage to customers through online auctions of future contracts.
“We are excited to continue transforming the way midstream operators bring efficiencies to their clients,” said M2 Infrastructure co-founder J Robert Collins.
Construction is set to begin in late 2017 provided closing conditions are met, like obtaining land rights.
Macquarie Capital is acting as M2 Infrastructure’s financial advisor.
TransCanada has recently gained permission from US President Donald Trump to restart development of the $8 billion Keystone XL Pipeline. The 1,179-mile pipeline is planned to be laid from oil drilling sites in Canada down through the US to the Gulf Coast.