Magellan Midstream: Key Projects in Line for Completion this Year

Researched by Industrial Info Resources (Sugar Land, Texas)--With a $900 million capital expansion program through 2017 and well over $500 million in highly probable projects, Magellan Midstream Partners L.P. (NYSE:MMP) (Tulsa, Oklahoma) is no slouch in the spending department. Executives with the crude and refined oil products pipeline and terminals company told investment analysts last week many of these investments will begin to pay off in 2017.

Several of the projects are on line for completion this year. Chief Executive Officer Mike Mears said the company's 75,000 barrel-per-day (BBL/d) refined products pipeline from Magellan's Fort Smith, Arkansas terminal to Little Rock, Arkansas is expected to be in operation this June. The $200 million project is the result of the desire of mid-continent region refiners to expand their markets, he said, adding Magellan is mulling the possibility of extending the pipeline on to Memphis, Tennessee.

Refiners in the mid-continent area have had limited market access due to geographical constraints, Mears said, so Magellan is looking at ways for them to move refined products to the east and south, such as in the Dallas region. The Dallas market has historically been supplied by Gulf Coast refiners, but those refiners may give up some of that market as they look to increase exports.

Work continues on the Saddlehorn pipeline, which will move crude oil 600 miles from the DJ Basin to storage facilities in Cushing, Oklahoma. Saddlehorn is owned by Magellan Midstream, Plains All American Pipeline LP (NYSE:PAA) (Houston, Texas) and Anadarko Petroleum Corporation (NYSE:APC) (Houston). Magellan's spending share for the $650 million pipeline is $260 million. Mears said he expects oil to begin moving from Platteville, Colorado to Cushing in the third quarter, and from Carr, Colorado to Platteville via a 50-mile extension in the fourth quarter. Magellan will report financial results from the pipeline beginning in 2017. For related information, see December 4, 2015, article - Denver-Julesburg-to-Cushing Crude Pipelines: Three Projects Enter, One Project Leaves.

Magellan's 50,000 BBL/d condensate splitter project in Corpus Christi, Texas is also expected to see completion later this year, with the start of commercial operations in the fourth quarter. Prior to the U.S. lifting its ban on crude oil exports (which also included condensate), condensate splitters were thought of as a means to turn condensate as saleable products (diesel, kerosene and naphtha) for export. Magellan maintains that even with the recent lifting of the export ban, splitters are important infrastructure to separate condensate into usable components to meet global demand. Mears said there has been no talk of delay or postponement for the project.

The East Houston, Texas crude oil storage expansion is yet another project slated for completion. Currently 3 million barrels of storage at East Houston are available for lease, with another 1.6 barrels under construction and expected to be operational by late 2016.

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