Phillips 66, Kinder Morgan and HF Sinclair have taken a final investment decision on the Western Gateway Pipeline, a $5.0 billion joint venture that will carry up to 230,000 barrels of refined products a day from Texas into Arizona and California. Phillips 66 holds 49.9% of the venture, Kinder Morgan 35.1% and HF Sinclair 15%.

The proposed system runs about 1,300 miles, creating a new fuel supply path from St. Louis, Missouri, and expanded Gulf Coast origin points into Arizona and California. Phillips 66 chairman and chief executive Mark Lashier said the project would connect the company's Central Corridor and Gulf Coast refining assets to its West Coast and Southwest marketing assets, calling it "a more cost-effective, resilient path for growing markets across the West."

Deal structure and money

The $5.0 billion enterprise value is split between cash and contributed assets. Once the new-build pipe from Borger, Texas to Phoenix is finished, Kinder Morgan will fold in its existing SFPP East Line, which runs from El Paso, Texas to Phoenix and Tucson, Arizona, and its SFPP West Line, from Colton, California to Phoenix, at a combined value of about $1.5 billion. Phillips 66 is putting in roughly $2.5 billion in cash, HF Sinclair about $750 million and Kinder Morgan about $250 million. Kinder Morgan chief executive Kim Dang said the company expects "attractive returns" on the investment, based on incremental project earnings above what its contributed assets already generate.

Route and construction

Phillips 66 will build and operate the new roughly 900-mile stretch of 20-inch and 24-inch pipe running from Borger to Phoenix. Kinder Morgan will keep operating its contributed SFPP lines, including the West Line, which will be reversed to move product east to west into California. Supply into the system will also draw on Phillips 66's Gold Pipeline, which connects to the Explorer Pipeline; Gold will be reversed too, so refined products can flow toward Borger. The design leaves room for future expansion without adding new pipe.

Contracts and timeline

The system is underpinned mainly by 10-year take-or-pay contracts, agreements under which the shipper pays for pipeline capacity whether or not it ships the full volume. HF Sinclair chief executive Franklin Myers called Western Gateway "a transformational endeavor shaping the fuels markets of the West." The project is targeting completion in 2029, pending permits and regulatory approvals.