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UPDATE 1-Magellan says reversed Longhorn oil pipeline starting up

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Tue Apr 16, 2013 12:32pm EDT

HOUSTON, April 16 (Reuters) - Magellan Midstream Partners has begun shipping crude oil in its reversed Longhorn pipeline, wrapping up a project to bring cheaper West Texas crude oil to Houston-area refineries, the company said.

Spokesman Bruce Heine said on Tuesday that the pipeline linefill from Crane, Texas to east Houston was complete, so commercial operations could begin.

"We began shipments over the weekend from our terminal in east Houston to a third party pipeline. We expect to begin deliveries into our Houston distribution system later this week," he said.

The line will move 75,000 barrels per day in the first 45 days, and ramp up to its full capacity of 225,000 bpd in the third quarter.

Magellan's Houston distribution system is connected to refineries along the Houston Ship Channel and Texas City.

The Crane-to-Houston segment of the line, which had carried refined products to El Paso from Houston, was converted and reversed to move crude.

Crane, Texas, is near the oil-rich Midland area in West Texas, where Permian Basin oil production has been surging. The pipeline will send crude to Houston that had been flowing into the glutted U.S. crude futures hub at Cushing, Oklahoma.

The conversion and reversal is among projects aimed at reconfiguring U.S. pipeline networks to help alleviate distortions in global oil markets stemming from depressed U.S. crude prices at landlocked Cushing.

Last year the Seaway oil pipeline, which had carried crude from the U.S. Texas coast to Cushing, also was reversed to move crude from Cushing to Texas.

In January Seaway, a joint venture of Enterprise Products Partners and Enbridge Inc, was expanded to 400,000 bpd, and is slated to be expanded further to 850,000 bpd by early 2014.

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