A wholly owned subsidiary of Anadarko Petroleum Corp. (NYSE: APC) exercised its option to purchase a 20% equity interest in Saddlehorn Pipeline Co., said Magellan Midstream Partners LP (NYSE: MMP) and Plains All American Pipeline LP (NYSE: PAA) on March 18.

The equity ownership in Saddlehorn will be 40% Magellan, 40% Plains and 20% Anadarko, the companies added.

Saddlehorn is a limited liability company that will construct, own and operate the Saddlehorn Pipeline.

Magellan will be the construction manager and pipeline operator.

The project will cost between $800 million and $850 million.

The pipeline, roughly 550 miles long, will transport crude oil from the D-J Basin to storage facilities in Cushing, Okla., owned by Magellan and Plains. It might also transport crude from the broader Rocky Mountain-area resource plays, the companies added.

The 20-inch pipeline will transport up to 400,000 barrels per day (Mbbl/d), but initially will transport about 200 Mbbl/d.

An extension to Carr, Colo., is also under consideration for connection to existing crude oil assets owned by Plains in that region.

The pipeline is scheduled to be operational in mid-2016, pending permits and approvals.

"Magellan and Plains are pleased to have Anadarko as a partner in the Saddlehorn pipeline," said Michael Mears, Magellan's CEO, and Greg L. Armstrong, chairman and CEO of Plains All American.

"Anadarko is a committed shipper and has a significant production presence in this region, adding further value to the pipeline project to deliver crude oil to the Cushing hub."

Anadarko Petroleum Corp. and Plains All American Pipeline LP are based in Houston.

Magellan Midstream Partners LP is based in Tulsa, Okla.