Aug 11 (Reuters) - Phillips 66, Kinder Morgan and HF Sinclair said on Tuesday they have decided to proceed with the proposed $5 billion Western Gateway Pipeline system and finalized a joint venture agreement for the same.
Phillips 66 will own 49.9% of the venture, Kinder Morgan 35.1% and HF Sinclair 15%.
Companies have been racing to build a major new fuel pipeline to the U.S. West Coast ahead of planned refinery closures in California, a relatively isolated fuel market with limited links to major refining
hubs that leave it vulnerable to supply disruptions and price spikes.
Western Gateway is a proposed 1,300-mile refined products pipeline system with a design capacity of 230,000 barrels per day that would establish a new fuel supply route from St. Louis, Missouri and Gulf Coast origin points to Arizona and California.
Phillips 66's Gold Pipeline, which currently runs from Borger, Texas to St. Louis, will be reversed to supply the proposed east-to-west system, as will Kinder Morgan's existing pipeline between Colton, California and Phoenix, Arizona.
Meanwhile, after the completion of a new pipeline from Borger to Phoenix, Kinder Morgan's existing SFPP East Line and West Line assets will be contributed to the joint venture at a value of about $1.5 billion, the companies said.
Phillips 66 will contribute nearly $2.5 billion in cash for the project — which has an estimated enterprise value of $5 billion — while Kinder Morgan will contribute about $250 million and HF Sinclair about $750 million.
The new system would be underpinned by primarily 10-year, take-or-pay contracts, they added.
(Reporting by Pooja Menon in Bengaluru; Editing by Jonathan Ananda)
