SemGroup, Gavilon, Chesapeake to Build Cushing Oil Pipeline

SemGroup Corp. (SEMG), Gavilon Midstream Energy LLC and an affiliate of Chesapeake Energy Corp. (CHK) will form a joint venture to build a pipeline to deliver crude oil to a storage facility in Cushing, Oklahoma, from production in western and north central areas of the state.

The project is expected to be in service in the third quarter of 2013, according to a statement today. The 210-mile pipeline will have an initial capacity of 140,000 barrels a day and can be expanded to 180,000 barrels.

Lateral lines from Alva and Arnett, Oklahoma, will intersect and bring crude oil to a 1 million-barrel capacity tank farm in Cushing.

Cushing is the largest U.S. oil-storage hub and delivery point for crude futures traded on the New York Mercantile Exchange. The hub’s total capacity in operation was 66.5 million barrels at the end of September, according to the Energy Department.

Oklahoma’s oil production was 211,000 barrels a day in September, department data show. It’s 8.8 percent higher than a year earlier and the most since August 1998.

“The pipeline and storage facility will meet growing midstream requirements resulting from the burgeoning drilling activity in western Oklahoma and the Mississippi Lime play,” according to the statement.

To contact the reporter on this story: Paul Burkhardt in New York at pburkhardt@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net

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