Although Magellan primarily transports and stores refined petroleum products, the partnership owns almost 2 million barrels of crude oil storage that is available or under construction at its East Houston terminal and also owns a 50% interest in and operates the Osage pipeline, which transports crude oil from Oklahoma to Kansas.
Potential Texas pipeline conversion.
Magellan is currently evaluating the reversal and conversion of a portion of its 18-inch Houston-to-El Paso pipeline (the former Longhorn pipeline) to crude service. Specifically, the partnership is considering the reversal of the pipeline segment from Crane, Texas to Houston to transport crude oil from West Texas to its East Houston terminal. Crane is approximately 30 miles south of Odessa, Texas. In addition, the partnership is evaluating pipeline connections to transport crude oil and condensate from the Eagle Ford Shale formation to its East Houston terminal. This pipeline system’s potential crude transportation capacity would be up to 200,000 barrels per day.
Magellan’s East Houston facility is ideally situated for the distribution of crude oil to the Houston-area refining complex. In addition to the 2 million barrels of crude storage already available or under construction in East Houston, the partnership has the capability to add another 7.5 million barrels of storage for crude and condensate blending and segregation. Connections from East Houston to the Houston-area refining complex already exist with expansions under evaluation. Connections from East Houston to outbound pipelines for condensate movements are also under consideration.
If the reversal and conversion move forward, the partnership would still be able to transport at least 60,000 barrels per day of refined petroleum products to the El Paso market by enhancing the operational connectivity of its existing pipeline assets and using the western portion of the 18-inch pipeline from Crane to El Paso.
Although the project scope remains under review, preliminary estimates for the potential reversal and conversion of this pipeline system are approximately $100 million.
A diagram of the potential Texas pipeline conversion is available at http://www.magellanlp.com.
Cushing storage.
The partnership also has signed a development agreement with a private investment group to construct jointly 2 million barrels of crude oil storage in the crude oil hub of Cushing, Oklahoma. Magellan is in the final stages of negotiating a definitive agreement and expects its share of the project cost to be approximately $40 million. This project has the potential to increase in size to 4 million barrels if warranted by customer demand.