SemGroup looks to enter into crude storage agreement, use fees to fund pipeline project

By Jennifer Lanning Drey

Portland, Ore., March 9 - SemGroup, LP requested court approval to enter into a crude oil storage services agreement with Gavilon, LLC and segregate the related funds for construction of a delivery pipeline, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

Under the two-year agreement, SemGroup would provide Gavilon storage capacity within its facilities in Cushing, Okla., on a monthly basis. For the first two months of the term, Gavilon would lease capacity sufficient for 1.1 million shell barrels per month at $4 per barrel.

For the remaining months of the term, Gavilon would lease capacity sufficient for 1.1 million to 2.9 million shell barrels per month and pay $0.50 per shell barrel.

SemGroup said it wants to use a substantial portion of the storage fees paid in the first 60 days to fund a pipeline project to connect tanks in Cushing, Okla., to the Teppco Cushing terminal.

The balance of the cost of the project would be funded from the remaining term storage fees and would not be commingled with any other funds until the project is completed.

The company said completion of the project would allow it to meet the demands of its current and future customers by increasing storage and leasing capabilities.

A hearing has been scheduled for March 26.

SemGroup, a Tulsa, Okla., privately held limited partnership that provides midstream services to North America's energy industry, filed for bankruptcy on July 22, 2008. Its Chapter 11 case number is 08-11525.

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