Shell and Phillips 66 are reportedly planning to sell their stakes in the Explorer Pipeline, a key US fuel transportation system, with the entire asset valued at approximately $3.5 billion, according to people familiar with the matter.

This move highlights surging demand for energy infrastructure assets, particularly from financial investors, which is driving up valuations and prompting existing owners to consider cashing out at elevated prices to reallocate capital to core businesses or high-growth areas.

Shell and Phillips 66 collectively hold about 61% of the legal entity that operates the Explorer Pipeline. The system primarily transports gasoline, jet fuel, and other refined products from Texas through the Midwest, reaching markets including the Chicago suburbs.

Greenhill, a unit of Mizuho Financial Group, and RBC Capital Markets have been hired to launch a bidding process for the stake sale, though discussions remain in early stages.

Energy Transfer and MPLX hold the remaining equity in Explorer. While potential buyers are currently making initial inquiries about the shares held by Shell and Phillips 66, the other shareholders may eventually sell their holdings if a buyer expresses strong interest in acquiring the entire asset, sources said.

The sources cautioned that there is no guarantee a deal will be reached, and they requested anonymity due to the confidential nature of the private discussions. Shell, Phillips 66, and MPLX declined to comment, while Explorer, Energy Transfer, Mizuho, and RBC did not respond to inquiries.

The Explorer Pipeline, a critical infrastructure asset, has been in operation since the early 1970s and spans more than 1,800 miles. According to its website, the southern segment has a daily capacity of 660,000 barrels, while the northern segment can handle 450,000 barrels per day.

Alongside the Colonial Pipeline, which transports refined products from Texas to the Northeast, Explorer is considered one of the most important fuel pipeline systems in the United States. The Colonial Pipeline was sold last year to Brookfield Infrastructure Partners for approximately $9 billion. In that sale, some shareholders initially listed their stakes, and other shareholders later joined, eventually selling the entire pipeline to the investment firm.

In recent years, pipelines and other energy infrastructure assets have continued to attract significant buyer interest. Industrial companies are looking to expand their asset portfolios and diversify product lines, while financial investors are drawn to the stable cash flows generated by midstream assets.