Kinder Morgan Energy Partners LP announced an acquisition and formation of a crude oil joint venture with Deeprock Energy Resources LLC and Mercuria Energy Trading Inc in Cushing OK.
KMP is investing approximately $25 million for a 50% stake in an existing crude oil tank farm that has storage capacity of 1 million barrels and for the construction of three new storage tanks that will have an incremental storage capacity of 750,000 barrels. The new tanks are expected to be in service in third quarter 2011. Deeprock will remain construction manager and will continue to operate the terminal. Mercuria will remain the anchor tenant for this capacity for the next five years with an option to extend. Additionally, KMP has entered into a development agreement with Deeprock that gives KMP an option to participate in future expansions on Deeprock’s remaining 254 acres of undeveloped land.
“This joint venture with Deeprock and Mercuria, in conjunction with our recently announced investment in the WATCO rail company, creates a great platform for future expansions in this key crude oil market,” said KMP Terminals President Jeff Armstrong. The transaction is expected to be immediately accretive to cash distributable to KMP unitholders.