Plains All American will build a crude oil pipeline from its terminal at the US futures hub located in Cushing, Oklahoma and will run to Valero Energy Corp’s Tennessee refinery. This will help the refiner cut transportation costs to into cheap inland US oil.
The pipeline will be a 440-mile, 200,000 barrels-per-day (bpd) Diamond Pipeline to the 180,000 bpd refinery, which will be configured to process light crudes. The project is estimated to cost a total of $900 million and is scheduled to start production in 2016. Plains and Valero have been evaluating the project for several months. Valero usually runs Light Louisiana Sweet, but last year received up to 100,000 bpd of North Dakota Bakken crude that was transported via rail to Louisiana and then moved to the refinery in the Marathon Petroleum Corp.-operated Capline pipeline.
The Diamond pipeline will connect Valero’s Memphis refinery with domestic sweet crude from Plains’ terminal that receives crude from various US oilfields, cutting transportation costs and the distance covered to receive Bakken crude via rail and the Capline.