UPDATE 1-Magellan mulls products pipeline in Arkansas

HOUSTON Thu May 23, 2013 11:22am EDT

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HOUSTON May 23 (Reuters) - Magellan Midstream Partners LP may build a pipeline extension connecting its network to its terminals in central Arkansas, where the imminent shutdown of a separate distillate pipeline has raised serious concerns about supply in the state.

Magellan said on Thursday that the company was "exploring the feasibility" of building a new pipeline to connect its network to its terminals in Little Rock, Arkansas, to move up to 75,000 barrels per day of refined products into the area.

Magellan's announcement comes five weeks before Enterprise Products Partners plans to shut down its 230,000 bpd TE Products distillate pipeline that runs through Little Rock. The line, which carries ultra-low sulfur diesel and jet fuel from Texas through Indiana, will be converted to move ethane from Pennsylvania to Texas to feed petrochemical demand.

Enterprise says flows on the line are too low to justify spending $50 million to modify a parallel gasoline and natural gas liquids pipeline to also carry distillates.

But the Arkansas Attorney General's office is challenging the shutdown, saying it will have a "significant, damaging effect" on business in the state. Other challengers include airlines that operate at Clinton Airport in Little Rock, and the Arkansas Oil Marketers Association.

Magellan did not specify whether the new pipeline would carry distillates, or whether the company was considering the project in response to the pending TE Products line shutdown.

However, the company noted that its terminals in Little Rock are currently supplied by a third-party pipeline, and that the expansion of its system to include a new line would give customers "the flexibility to adapt to changing market conditions" in Little Rock.

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