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Energy Transfer, Sunoco Sell Stake in Bakken Pipeline Project for $2B

Pipeline construction

Energy Transfer Partners (NYSE:ETP) and Sunoco Logistics Partners (NYSE:SXL) said on Tuesday they had agreed to sell 36.75 percent in the Bakken Pipeline Project to a company owned by Enbridge Energy Partners (NYSE:EEP) and Marathon Petroleum (NYSE:MPC) for US$2 billion in cash.

The minority stake in the project—which includes the pipelines Dakota Access and Energy Transfer Crude Oil (ETCO)—is being sold to Enbridge and Marathon Petroleum’s jointly-held company MarEn Bakken Company.

Energy Transfer and Sunoco’s joint venture, Bakken Holdings, is divesting 49 percent of its 75-percent interest—that is 36.75 percent—in the Bakken Pipeline Project pipelines Dakota Access and ETCO. Phillips 66 holds the other 25 percent in each of the Dakota Access and ETCO pipelines.

Once the deal is completed, the owners of the Bakken Pipeline Project will be Energy Transfer and Sunoco with a joint 38.25-percent stake, MarEn with a 36.75-percent interest, and Phillips 66 with the remaining 25 percent.

Closing is expected to take place in the third quarter this year, subject to some closing conditions, the sellers said. At closing, Energy Transfer will get US$1.2 billion in cash while Sunoco will receive the other US$800 million. The two companies will use the money to pay down debts and finance their respective projects for growth.

The Bakken Pipeline Project, expected to be ready for service at the end of 2016, consists of 1,172 miles of crude oil pipeline, Dakota Access, from North Dakota to Patoka, Illinois, and another 700 miles of pipeline converted to crude service from Patoka to Nederland, Texas.

Estimates put the delivery capacity of Dakota Access at more than 470,000 barrels per day of crude oil from the Bakken/Three Forks area in North Dakota to market centers in the Midwest. The ETCO pipeline, via an interconnection with Dakota Access at Patoka, is planned to transport crude from the Midwest to the Sunoco Logistics and Phillips 66 storage terminals in Nederland.

After the closing of the minority stake sale, Energy Transfer will continue to oversee construction of the pipeline which, once launched, will be operated by Sunoco.

Energy Transfer, however, may face some hurdles in buying land from owners in Iowa along the Dakota Access route on to Illinois. Pipelines are seen as the next step for the Bakken if it is to become a sustainable long-term oil-producing area.

By Tsvetana Paraskova for Oilprice.com

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