Magellan Midstream Partners LP has negotiated a long-term customer contract to transport refined petroleum products on its Houston-to-El Paso TX pipeline, formerly known as the Longhorn pipeline. Through a volume incentive tariff, the third-party shipper will transport at least 20,000 barrels per day of refined petroleum products under a 12.5-year take-or-pay agreement to El Paso beginning in late third quarter or early fourth quarter 2010. The product subsequently will be delivered to Juarez, Mexico via a newly constructed third-party pipeline that connects to Magellan’s El Paso terminal.
Currently, the partnership’s Houston-to-El Paso pipeline can transport up to 90,000 barrels per day to the El Paso market. As previously announced, Magellan is analyzing the potential reversal and conversion of a portion of this pipeline to crude-oil service. If the reversal and conversion is pursued, 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 nearby pipeline infrastructure.
Magellan plans to build an additional 1.5 million barrels of refined petroleum products storage at its Galena Park TX marine terminal supported by long-term customer contracts. Of this new storage, 0.8 million barrels will be jointly owned with a third party. Magellan also will make improvements to increase capacity at its existing terminal docks. The storage and dock construction projects are expected to be operational beginning in late 2012, with Magellan’s portion of the cost expected to be approximately $65 million.