Magellan Midstream Could Further Expand Houston, Corpus Christi Presence

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Researched by Industrial Info Resources (Sugar Land, Texas)--Magellan Midstream Partners LP (NYSE:MMP) (Tulsa, Oklahoma) Chief Financial Officer Aaron Milford talked about the expansion of its Houston-area presence and potential further expansion in Corpus Christi as part of last week's investor conference held by the Master Limited Partnership Association (Washington, D.C.) in Orlando, Florida. Milford said the two areas remained strong assets in Magellan's portfolio and also hinted at future projects that the company had in its "shadow backlog."

Magellan is under way with construction of a grassroot refined petroleum products and ethanol marine terminal in Pasadena, Texas, on the Houston Ship Channel. The facility is being built with at least 10 tanks to store petroleum products, gasoline and diesel fuel. The site will have a marine dock capable of holding Panamax-sized ships and barges.

Speaking of the project, Milford said, "Currently we're working on terminals opportunities to export refined products--that would be our Pasadena terminal. You may recall that we have Phase I of that project under way, where we'll build a million barrels of storage and a ship dock that will allow us to move refined products from the Houston area to other areas of the United States and also to the world. The fundamentals behind that is that, through time, the U.S. will export more and more products, and to do that, we'll need additional infrastructure." The project is being built on a 200-acre site. Milford said the facility could eventually hold 10 million barrels of product and contain five ship docks, with capital spending eventually exceeding $1 billion, although this remains a very long-term figure. For more information, see Industrial Info's project report.

Also in the Houston area, Magellan is adding tanks to its East Houston Refined Products Terminal. At the existing 2 million-barrel terminal, Magellan is constructing four 350,000-barrel tanks and two 275,000-barrel tanks to increase storage capacity. Smith Tank & Steel (Gonzales, Louisiana) and Atec Steel Fabrication & Construction (Baxter Springs, Kansas) are acting as contractors on the project, which is expected to be completed in the fourth quarter of this year. For more information, see Industrial Info's project report.

The company is interested in expanding its light crude and condensate footprint in the Corpus Christi area. "We've got a landing point in Corpus Christi for condensate that we think is very robust," said Milford. Last year, the company completed mechanical construction of a 50,000-barrel-per-day condensate splitter at its Corpus Christi terminal. Commercial operations are expected to begin this quarter. For more information, see Industrial Info's project report. The company is under way with a $30 million upgrade of the splitter to adjust the end products of naphtha, diesel, jet fuel and gasoline, which is expected to be completed this summer. For more information, see Industrial Info's project report.

Milford said Corpus Christi is a good point for transporting condensate because much of the buildout in the area that occurred as the Eagle Ford Shale developed was aimed at lighter crude and condensate production. Milford said Magellan could add 5 million barrels of storage and proprietary ship docks to the company's presence in the area.

Outside of the Texas Gulf Coast, Magellan is soon to begin work on a grassroot crude oil/condensate storage terminal in Gibson, Louisiana. The terminal will comprise two 65,000-barrel internal floating roof tanks with 50,000-barrel working capacity. Construction on the $15 million project is set to begin this summer and be completed in the second quarter of next year. For more information, see Industrial Info's project report.

Magellan has plans for $600 million in capital spending this year and $350 million next year, although this figure could increase. When questioned about a potential increase in capital spending in the future, Milford hinted at other projects, including a possible Houston-to-Dallas crude oil pipeline and said, "Many of these projects that are in our shadow backlog literally take years to develop. One year, two years, some of the marine strategy things we're working on now are taking five years. So the probability that any of these gets done moves around day to day, week to week, month to month."

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