Houston-based Plains All American Pipeline said Thursday it plans to build a $900 million crude pipeline from its Cushing, Oklahoma terminal to Valero Energy’s Memphis refinery.
The 440 miles long, 20 inch pipeline will transport domestic sweet crude and have a capacity of up to 200,000 barrels per day.
The project, called the Diamond Pipeline, is expected to be completed by late 2016.
Under the deal, San-Antonio based Valero will also grant Plains access to its Collierville pipeline.
The Collierville pipeline is the primary crude supply source for Valero’s Memphis refinery and delivers crude from the Capline pipeline. The Collierville pipeline runs across the Tennessee-Mississippi border and has a capacity of 210,000 bpd.
Valero holds an option to buy a 50 percent stake in the Diamond pipeline until Janissary 2016.
Once Diamond is online, Valero can transport crude directly from Cushing to its 195,000 bpd Memphis refinery.
Currently, Valero delivers crude by rail to its terminal in St. James, Louisiana. The company then ships the crude to its Memphis plant by barge.
In a note to investors about the deal, Wells Fargo Securities’ senior analyst Roger Read said the Diamond pipeline will most likely lower crude costs and increase the refinery’s profit margins by providing a more direct transport route.