East Houston Terminal

The major re-plumbing of the U.S. crude pipeline distribution network to get 4 MMb/d of new domestic production as well as incremental Canadian barrels delivered to refineries is getting close to completion. The price crash and an expected slow down in production will almost certainly slow the pace of infrastructure development. The result is likely to be intensified competition between rival midstream companies and industry consolidation. Today we look at the larger implications of a small pipeline project in Houston.

A new light sweet crude oil trading market is developing in Houston at the Magellan Midstream Partners East Houston terminal – delivery point for that company’s Longhorn and BridgeTex (50/50 owned with Plains All American) pipelines delivering crude from the Permian Basin. Light sweet crude from the Permian is also known as West Texas Intermediate (WTI) the domestic U.S. benchmark crude - widely traded at Cushing, OK where it underpins the CME NYMEX futures contract.  Today we review the developing market and the price relationships that underpin it.

Early next year (2013) the first phase of the Longhorn Reversal project will be completed and an initial 75 Mb/d of crude oil will begin flowing from Crane in the Permian Basin to Houston. Around the same time the Seaway pipeline from Cushing, OK to Houston will expand from 150 Mb/d to 400 Mb/d and the Double Eagle Pipeline in South Texas will start delivering 100 Mb/d of condensate to Corpus Christi. Today we look at how Magellan Midstream Partners has developed a leading position in crude storage and distribution in Cushing, Houston and Corpus Christi during the past two years.