By BEN LEFEBVRE
Magellan Midstream plans to begin by 2013 its project to
ship oil from increasingly productive south Texas fields to the
refining belt along the US Gulf
Coast despite lacking enough shipper interest to fill the line,
the company said Tuesday.
Magellan plans to reverse the flow of its Longhorn fuels
pipeline, currently shipping fuel from Houston to El Paso, and
convert it to a crude oil pipeline.
The $245 million project is meant to bring crude oil
from the growing Eagle Ford region in south Texas directly to
refiners in Houston instead of shipping it to the country's
main storage hub in Cushing, Okla.
The lack of pipelines able to transport crude oil from
Cushing to the US refining belt along the Gulf Coast
last year helped push prices for West Texas Intermediate crude
nearly $30/bbl below its European counterpart, Brent crude.
The price disparity, and refiners' desire to gain access to
the growing glut of Cushing WTI, helped spark multiple projects to bring Cushing crude to
Enbridge and Enterprise Products announced plans to reverse
their 150,000 bpd, Cushing-to-Houston Seaway pipeline after
Enbridge bought ConocoPhillips' share in the line for $1.15
billion in November.
TransCanada also plans to build a pipeline bringing oil from
Cushing to the Gulf Coast as part of its controversial Keystone
Magellan formally announced in September it would pursue the
Longhorn project but has so far not been able to win enough
contracts to fill the pipeline with capacity, Magellan CEO
Michael Mears said.
Competition for shippers is high as the Seaway reversal
nears its planned June 2012 start date and TransCanada works to
win approval of its controversial Keystone pipeline expansion, which would also bring
Cushing crude to the Gulf.
"If all those pipes get built, it will be a competitive
situation," Mears said during a conference call with
The Longhorn line would have initial capacity of 135,000 bpd
after conversion and reversal, Mears said during a conference
call with investors.
Magellan could increase the line's capacity after start-up
if enough interest is shown.
Magellan has decided against using part of a pre-existing
line in the project, a move that would have cut the project cost but also reduced the
Magellan earlier in the day posted fourth quarter profit of
$110.3 million, up 25% from the year before.
The company expects gasoline shipments to rise 4% during
2012, reversing a downward trend in the fourth quarter of
Dow Jones Newswires