Magellan Midtream provided the project updates.
Magellan remains focused on expansion opportunities, spending a record $736 million on organic growth construction projects during 2016. Based on the progress of expansion projects already underway, the partnership expects to spend $550 million in 2017 and $350 million in 2018 to complete its current slate of construction projects.
These estimates include spending for recently announced projects, such as expansion of the Seabrook Logistics joint venture to construct an incremental 1.7 million barrels of storage and to connect the facility to Magellan’s Houston crude oil distribution system, expansion of the BridgeTex pipeline to 400,000 barrels per day and construction of a new pipeline segment from Magellan’s East Houston terminal to Holland Avenue to handle incremental volume.
HoustonLink is now operational, and the Powder Springs blending joint venture will commence operations during mid-February. The initial phase of Seabrook Logistics is also expected to be operational during the second quarter of 2017. Further, the Carr-to-Platteville segment of the Saddlehorn pipeline is nearing completion, with linefill expected to begin in late February. Project costs for the Saddlehorn pipeline have continued to be favorable, with Magellan’s share of the spending expected to be approximately $220 million.
Magellan’s Corpus Christi condensate splitter is mechanically complete, and the unit has been operating and generating products meeting market specifications. However, the sole customer, an affiliate of Trafigura, AG, has recently given notice to terminate its contract. Magellan believes this notice is in breach of the agreement and has initiated legal action. Magellan is continuing negotiations with Trafigura and has also initiated discussions with other potential customers regarding the future use of the splitter. Management believes current market conditions support the economic operation of the splitter and is optimistic that this investment will begin contributing positively to Magellan’s DCF in the future.
Magellan also continues to evaluate well in excess of $500 million of potential organic growth projects in earlier stages of development and acquisition opportunities, all of which have been excluded from the partnership’s spending estimates at this time. Examples of potential construction projects include further development of the partnership’s to-be-constructed Pasadena, Texas marine terminal, additional phases of its Seabrook Logistics joint venture and expansion of its Texas refined products pipeline system, pending the results of a currently in-process open season.
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