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Andeavor to Construct a Pipeline in Permian Basin for $225M

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Independent oil refiner and marketer Andeavor  – formed following the merger of Tesoro Corporation and El Paso-based Western Refining Inc. – recently announced plans to initiate the construction of Conan Crude Oil Gathering Pipeline in West Texas. The news came a couple of days after the company announced its first earnings release under the new name and delivered better-than-expected earnings.

The open season for this 130 mile crude oil pipeline in Delaware Basin (located on the western part of the lucrative Permian Basin) had been launched in May by Western Refining. Apart from bolstering its network of assets, downstream operator Western Refining’s buyout is likely to help Andeavor enhance its geographic footprint in the prolific Permian Basin, driving double-digit earnings growth in 2018. As it is, over the last two years despite the industry’s downturn, the energy companies including Exxon Mobil Corporation (XOM - Free Report) ,Noble Energy, Inc. (NBL - Free Report) and many othershave been increasing their investment in the prolific Permian Basin owing to its lower costs and widespread infrastructure.

The pipeline will begin in the Lea County and will extend to the Loving County, where it will join with other pipelines. Conan Pipeline is also expected to connect with the Wink Pipeline – owned by Kinder Morgan, Inc. (KMI - Free Report) – and supply the oil to the company’s El Paso Refinery. The first phase of the pipeline will have a transportation capacity of 250,000 barrels per day (bpd), expandable up to 500,000 bpd in the future phases. The company is expected to invest around $225 million in the first phase of the completion of the pipeline, out of which it is likely to spend $75 million this year. The commercial service of the Conan Pipeline is most likely to begin by mid-2018.

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