July 31, 2015 [OPIS] - Magellan Midstream Partners has reopened its Fort Smith, Ark., oil products terminal after shutting it for new pipeline construction in mid-May, a company spokesman told OPIS on Thursday.
The terminal operational restart is in line with the company’s original schedule for this project.
The Fort Smith terminal is currently loading X-Grade (ULSD), and X-Grade is the only product available to load for now.
Magellan expects to resume truck loading services at its Fort Smith rack for sub-octane gasoline (V grade) sometime early next week.
Loading services for premium gasoline (A-Grade) should be available late next week.
Magellan is constructing a new pipeline for fuel delivery to the Little Rock market from the Fort Smith terminal. The Fort Smith terminal had no gasoline or diesel for sale from mid-May to the end of July, and wholesale buyers would have to drive for a few more hours round-trip to Tulsa, Okla., or Little Rock to load products.
It is noted that the end-July terminal restart timing would allow Magellan to cater to the higher seasonal diesel demand for the fall harvest. However, the peak gasoline demand is expected to slow soon as the summer season winds down.
The Fort Smith-Little Rock products 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, introduced water and increased the pressure on the system to ensure its integrity.
The test in May-July was a regulatory requirement which would allow Magellan to increase capacity for the Fort Smith terminal, and ultimately the Little Rock market, the Magellan spokesman 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 in-state refiner Delek, which owns the 80,000-b/d El Dorado facility in southern Arkansas.
