Sunoco Logistics Partners LP (NYSE: SXL) said on Nov. 9 it is forming a joint venture (JV) with ExxonMobil Corp. (NYSE: XOM), giving the midstream company strategic assets near the Dakota Access line while expanding its West Texas footprint for the second time in less than two months.
The JV, called Permian Express Partners, will consist of assets owned by both companies, according to a statement. Sunoco Logistics will take a stake of 85%, while ExxonMobil will control the remaining 15%.
Sunoco Logistics will contribute its Permian Express 1 and 2, Permian Longview and Louisiana Access pipelines to the JV. ExxonMobil's contribution includes its Longview to Louisiana and Pegasus pipelines, Hawkings gathering system, an idle pipeline in southern Oklahoma and its Patoka, Ill., terminal.
The JV expands the footprint of Sunoco Logistics in West Texas, home to the prolific Permian Basin shale play. It comes less than two months after an announcement to buy Vitol's crude oil unit in the Permian for $760 million.
Oil companies in recent months have rushed to secure acreage and assets in the Permian Basin, considered "a sweet spot" for U.S. shale producers. This has driven up dealmaking among both exploration and production companies and midstream operators.
The access to ExxonMobil's terminal gives Sunoco a "foothold" in Patoka an important oil hub in the Midwest that connects to the Dakota Access pipeline, said Dominic Haywood, an analyst at Energy Aspects in London.
Under the deal, Sunoco Logistics will operate the proposed Dakota Access pipeline, which has been delayed by regulatory issues and intense opposition by environmentalists and Native American groups. Construction was halted in September, but the election of Republican Donald Trump as U.S. president may give the project a boost, as he is expected to support energy development.
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Part of ExxonMobil's Patoka to Nederland, Texas, Pegasus pipeline, is currently shut. The line leaked about 5,000 barrels of oil in a residential neighborhood in Arkansas 2013, resulting in a $2.63 million fine for ExxonMobil.
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