(Adds details on construction, Plains blending)
By Kristen Hays
HOUSTON Aug 21 Plains All American Pipeline LP
will build a crude oil pipeline from its terminal at the
U.S. futures hub in Cushing, Oklahoma, to Valero Energy Corp's
Tennessee refinery, helping the largest U.S. refiner cut
transportation costs to tap cheap inland oil.
Plains said on Thursday it will build the 440-mile (708 km),
200,000 barrels per day (bpd) Diamond Pipeline to the 180,000
bpd refinery, which is configured to process light crudes. The
$900 million project is expected to be completed in late 2016,
Plains said, adding startup would come after that.
The two companies have been evaluating the project for
several months as Valero considered ways to cut its crude
The refinery typically runs Light Louisiana Sweet WTC-LLS,
but last year received up to 100,000 bpd of North Dakota Bakken
crude that was moved via rail to Louisiana, then transported to
the refinery via the Capline pipeline, operated by Marathon
Those Bakken volumes have declined as more of the North
Dakota crude flows to the U.S. East and West Coasts via rail,
Dan Collier, vice president of commercial optimization for
Valero, said at a recent energy conference in Houston. He
declined, however, to disclose current volumes.
The Diamond pipeline will connect Valero's Memphis refinery
with domestic sweet crude from Plains' terminal that receives
crude from various U.S. oilfields, cutting transportation costs
and the distance covered to receive Bakken crude via rail and
the Capline. Plains is a major blender of crudes at its Cushing
Valero agreed to a long-term shipping contract with Plains
as well as related storage and terminal services.
Valero also holds an option until January 2016 to buy a half
interest in the Diamond Pipeline.
(Reporting by Kristen Hays; editing by Chris Reese, G Crosse)