Paradigm, Phillips 66 in midstream joint ventures

Stonepeak’s portfolio company and Phillips 66 will invest $300m in two joint ventures that will develop midstream infrastructure in N Dakota.

Paradigm Energy Partners and Master Limited Partnership (MLP) Phillips 66 Partners have agreed to form a pipeline joint venture and rail joint venture that will develop midstream logistics infrastructure for the transportation of crude oil in North Dakota’s Bakken region, the two Texas firms said in a joint statement.

The joint ventures, which have an estimated capital cost of $300 million, will be associated with two previously announced projects – the Sacagawea Pipeline and the Palermo Rail Terminal.

The Pipeline JV will own 88 percent of the Sacagawea Pipeline, a 76-mile pipeline being developed to deliver crude oil from various points in McKenzie County to destinations with take-away options for both rail and pipeline in Mountrail County, according to the statement. Paradigm, which will construct the pipeline, and Phillips 66, which will operate it, will be equal partners. Grey Wolf Midstream will own the remaining 12 percent in Sacagawea Pipeline.

As for the Rail JV, Phillips 66 will own between 50 and 70 percent, while Paradigm’s percentage will depend on “certain milestones associated with the Pipeline JV,” the companies said. The Rail JV will own the Palermo Rail Terminal, a crude oil rail-loading facility that will have an initial capacity of 100,000 barrels per day and the potential to expand to 200,000 barrels.

Phillips 66 will construct and operate the rail terminal, which will have direct access to the Sacagawea Pipeline and provide East and West Coast rail access for third-party shippers through the BNSF railway.

Both projects are expected to begin commercial operations in the first quarter of 2016.

The transactions for the creation of the two joint ventures are expected to close in the fourth quarter of 2014.

Headquartered in Houston, Phillips 66 Partners was formed by Phillips 66 – an energy manufacturing and logistics company – to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and natural gas liquids pipelines and terminals and other transportation and midstream assets.

A midstream services company based in Dallas, Paradigm Energy Partners develops and operates oil and gas infrastructure focusing on the Bakken Shale in North Dakota and Eagle Ford Shale in Texas.

New York-based Stonepeak Infrastructure Partners partnered with Paradigm in March, committing an initial $200 million to fund the midstream company’s expansion of the Charleson Field gathering and transport system, also located in North Dakota’s McKenzie County.

In addition to the energy sector, Stonepeak invests in energy, power and renewables, transportation, utilities, water and communications with a focus on North American mid-market infrastructure.

In October 2013, the firm closed its debut fund on $1.65 billion, beating its original $1 billion target.