Phillips 66, Kinder Morgan and HF Sinclair have made a final investment decision (FID) and completed a joint venture agreement for the proposed $5bn Western Gateway Pipeline in the US.
The planned 1,300-mile system would transport refined fuel products from the Midcontinent and Gulf Coast to the western US.
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Under the terms of the agreement, Phillips 66 will hold a 49.9% interest in the system, with Kinder Morgan owning 35.1% and HF Sinclair holding 15%.
The pipeline system is designed to transport up to 230,000 barrels of fuel per day.
It is intended to improve the reliability of gasoline and diesel supplies to communities in the West by creating a new route from St. Louis and Gulf Coast locations to Arizona and California.
Phillips 66 chairman and CEO Mark Lashier said: “The final investment decision reflects the strength of this industry partnership. By combining the capabilities of Phillips 66, Kinder Morgan and HF Sinclair, Western Gateway is expected to strengthen fuel supply reliability and deliver a more cost-effective, resilient path for growing markets across the West.
“This project will connect our Central Corridor and Gulf Coast refining assets to our West Coast and Southwest Marketing assets and demonstrates the value of our integrated business model and the opportunities it creates.”
Plans for the Western Gateway project include a new-build, approximately 900-mile, 20-inch and 24-inch pipeline running from Borger, Texas, to Phoenix, Arizona.
Phillips 66 will be responsible for constructing and operating this segment.
In addition, Kinder Morgan will contribute its existing SFPP East Line pipeline, running from El Paso, Texas, to Phoenix and Tucson, Arizona, and its SFPP West Line, which will be reversed to allow for product transport from Phoenix into Colton, California. Kinder Morgan will continue to operate these pipelines.
Kinder Morgan CEO Kim Dang said: “This project brings together strategic supply access, existing infrastructure and experienced operators to improve affordability and assurance of supply for customers in the Western US.
“Kinder Morgan is proud to contribute its long-standing presence and decades of experience safely and reliably serving the region’s energy needs.
“We expect to earn attractive returns on our investment based on the incremental project earnings above those of our contributed assets.”
The Western Gateway Pipeline system will also receive supply from Phillips 66’s Gold Pipeline, which will be reversed to enable refined product flows towards Borger and connect to the Explorer Pipeline.
Following the completion of the Borger to Phoenix section, Kinder Morgan’s SFPP East Line and West Line assets will be contributed to the joint venture at an approximate value of $1.5bn.
Cash contributions will include $2.5bn from Phillips 66, $250m from Kinder Morgan, and $750m from HF Sinclair.
The project will be supported primarily by 10-year, take-or-pay contracts.
Completion of the new system is targeted for 2029, contingent upon securing the necessary permits and regulatory approvals.
The design of the pipeline allows for potential future expansion to meet increasing demand, with limited capital investment required and no additional pipeline construction anticipated.
