The proposed US$2 billion, 600-mile (966-km) Permian Gulf Coast pipeline is “unlikely” to proceed as originally planned, a Magellan Midstream Partners vice president, Suzanne Costin, said. This was reported in a filing with the US Securities and Exchange Commission (SEC).
The partners in the pipeline, Magellan along with Energy Transfer Partners and Delek US, held an open season for the pipeline in September 2018.
The 30-inch (762-mm) pipeline was originally set to carry 1 million bpd of crude from multiple origin points in the Permian Basin to several destination points on the US Gulf Coast. The latter would have included Magellan’s terminal in Houston and Energy Transfer’s terminal in Nederland, Texas.
“The partnership continues to actively develop a crude oil pipeline project in the Permian Basin, but the probability of success is unknown at this time,” Costin, who is also Magellan’s corporate secretary, told the SEC.
“There were conditions that needed to be met in order to proceed with the project that weren’t satisfied,” another Magellan vice president, Bruce Heine, said in a statement after the contents of the SEC filing emerged.
Magellan is scaling back its 2019 capital expenditure budget because of the change in plans for the Permian Gulf Coast pipeline. The company now estimates that it will spend US$1.1 billion on active expansion projects in 2019 and US$150 million in 2020, Costin told the SEC. That includes a cut in spending on the Permian Gulf Coast pipeline by US$200 million in 2019 and US$250 million in 2020, according to the filing.
However, there is still talk of combining the Permian Gulf Coast project with another crude pipeline from the Permian to the Gulf Coast, according to comments from Magellan’s CEO, Mike Mears, in a fourth-quarter earnings conference call in January.
“We will continue to go down parallel paths in order to evaluate and achieve the most efficient and accretive project for our partnership,” Energy Transfer’s chief financial officer, Tom Long, told investors in February.
The Wink to Webster Pipeline has been proposed by ExxonMobil – which is expanding rapidly in the Permian – in partnership with Plains All American Pipeline and Lotus Midstream. The project would enter service in mid-2020.
Takeaway capacity in the Permian has been in short supply as oil production has kept rising, but so many projects have been planned that some pipelines will likely be cancelled or merged with other projects.