June 2010 Vol. 237 No. 6


Magellan Evaluates Texas Pipeline Conversion

Magellan Midstream Partners L.P. is evaluating the reversal and conversion of a portion of its 18-inch Houston-to-El Paso pipeline (the former Longhorn Pipeline) to crude service.

Under consideration is reversing the segment from Crane to Houston to transport crude from West Texas to its East Houston terminal. Crane is 30 miles south of Odessa. The partnership is evaluating pipeline connections to transport crude and condensate from the Eagle Ford Shale formation to the Houston terminal. This system’s potential crude transportation capacity would be up to 200,000 bpd.

Officials say the East Houston site is ideally situated for distribution of crude to the Houston-area refining complex. In addition to the 2 MMbbls of crude storage available or under construction in East Houston, the partnership has the capability to add 7.5 MMbbls 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 bpd of refined petroleum products into El Paso 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.
Preliminary estimates for the potential reversal and conversion of this pipeline system are $100 million. The partnership also has signed a development agreement with a private investment group to construct jointly 2 MMbbls of storage in the crude oil hub of Cushing, OK. Magellan is in the final stages of negotiating a definitive agreement and expects its share of the project cost to be $40 million. The project has the potential to increase in size to 4 MMbbls.


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