OPIS notes that the terminal restart date would stretch the terminal shutdown period to about two and a half months since it was shut, around May 18, for construction on its new pipeline for fuel delivery to the Little Rock market from the Fort Smith terminal. Magellan had said previously that the terminal would be shut for 60-75 days for testing and preparation for the new pipeline construction.

The Fort Smith terminal has had no gasoline or diesel for sale since mid-May, and wholesale buyers will have to drive for a few more hours round-trip to Tulsa, Okla., or Little Rock to load products.

It is noted that the early August terminal restart timing coincides with the relatively strong Group 3 gasoline market where the Fort Smith terminal typically sources its supplies for sales to buyers in Little Rock in the east.

Buyers at Little Rock have options to pick up supplies from either the Fort Smith terminal to the west or Delek’s 80,000-b/d El Dorado refinery in southern Arkansas, depending on rack prices and logistics costs.

In May, Magellan said it was in the final stages of right-of-way and permitting work for its Little Rock pipeline project, with construction expected to commence in mid-2015. The Little Rock pipeline is expected to be operational in mid-2016.

The new pipeline will accommodate shipping of various grades of gasoline, diesel and jet fuel to Little Rock from Fort Smith.

Generally, Magellan took the existing segment of the system out of service, introduce water and increase the pressure on the system to ensure its integrity.

The test is a regulatory requirement which will allow Magellan to increase capacity for the Fort Smith terminal, and ultimately the Little Rock market, the Magellan spokesman said.

The nearest terminals are Rogers, Ark., Tulsa and Oklahoma City, Okla., and Springfield, Mo. Each location will be prepared to handle additional gasoline and diesel fuel loading during this time period, he said.

Magellan had said that the new Fort Smith-to-Little Rock refined-products pipeline will provide an additional refined-products sales outlet for Midcontinent refiners. Currently, Midcon refiners do not have access to central Arkansas markets via pipeline, and this new service will allow them and Gulf Coast refiners access to the Little Rock market.

Besides Midcon, the new pipeline will also receive products from the Gulf Coast. The supply source for Arkansas will depend on seasonal arbitrage economics, with supplies likely to come from Midcon in winter and from the Gulf Coast in summer.

These Midcon refiners who could physically ship refined products to Arkansas by this Oklahoma-transit route include CVR Energy, HollyFrontier, Phillips 66 and Valero.

Magellan first saw the opportunity for this $150 million capital investment project when the Little Rock market faced a tight supply when Enterprise stopped interstate distillates shipping on its TEPPCO pipeline system in 2013. The new Arkansas pipeline project is backed by committed shipping volumes, but the long-term shipping economics for Midwest and Gulf Coast supplies are expected to face competition from instate refiner Delek, which owns the 80,000-b/d El Dorado facility in southern Arkansas.