* $250 million project slated to start up second-half 2016
* Magellan plans 50,000 bpd capacity, can double that if
* Trafigura signs fee-based, take-or-pay agreement for
* Targa Resources also planning smaller, $115 million
splitter near Houston
(Adds details on Targa Resources' splitter project)
By Kristen Hays
HOUSTON, March 31 Magellan Midstream Partners LP
has linked up with commodity trader Trafigura AG to
build a $250 million facility at its south Texas terminal that
will process a very light form of crude oil so it can be sold or
exported, Magellan said on Monday.
Last year, Magellan said it was on the hunt for a partner to
build a condensate splitter at its Corpus Christi marine
terminal, particularly after its joint-venture 100,000 barrels
per day (bpd) Double Eagle condensate pipeline started up in
2013. Double Eagle, with partner Kinder Morgan Energy Partners
, moves Eagle Ford condensate to Magellan's Corpus
On Monday, Magellan said it had forged a take-or-pay
agreement with Trafigura for the 50,000 bpd splitter project,
and said the company could build a second 50,000 bpd splitter if
demand warrants. Pending permit approvals, the project will
start up in the second half of 2016.
Later on Monday, Targa Resources Partners LP also
announced plans to build a smaller $115 million, 35,000 bpd
condensate splitter project at its Channelview Terminal on the
Houston Ship Channel.
Like Magellan, Targa said it was working with a customer -
in Targa's case, Noble Group - to support the project
with a long-term, fee-based contract. Targa said the project was
expected to start up about 18 months after the necessary permits
A condensate splitter "splits" the very light oil into
different components, such as naphtha and distillates, which can
be blended into refined products, sold or exported.
About half of Eagle Ford's growing output is condensate, a
very light form of crude oil that has limited demand from
refineries and petrochemical plants. The U.S. Energy Information
Administration projects Eagle Ford output to reach 1.36 million
bpd in April.
Under current U.S. law, condensate is considered crude oil
and cannot be exported without a license unless it has undergone
at least minimal processing. Surging onshore output of crude oil
has prompted some energy companies to call for a lifting of U.S.
restrictions on crude oil exports.
But any policy shift may take years. Magellan Chief
Executive Mike Mears late last year told Reuters that he saw
demand for as many as six to eight condensate splitters along
the U.S. Gulf Coast to turn condensate into exportable products.
In addition to the splitter, Magellan's project will include
more than 1 million barrels of new storage, dock improvements
and two more truck bays at Magellan's terminal and a pipeline
connection to Trafigura's nearby storage and marine terminal.
Targa said that once its splitter is built, its Channelview
terminal will handle condensate as well as asphalt, blendstocks,
marine diesel oil, used motor oil, vacuum gas oil and crude oil.
Trafigura also has another deal to take incoming crude and
Last year, Trafigura forged a 10-year deal with pipeline
company Energy Transfer Partners to take 100 percent of
throughput from its Rio Bravo pipeline, an 84-mile (135 km)
natural gas line from McMullen County to Corpus Christi, being
converted to move crude and condensate.
In a February investor presentation, Energy Transfer
described the Rio Bravo project, saying it would connect to a
Trafigura "splitter and terminal" in Corpus Christi.
Rio Bravo is slated to start up late in the third quarter or
early fourth quarter of this year.
Trafigura spokeswoman Marisol Espinosa declined to say
whether Trafigura had planned its own splitter, but noted that
investing in a facility with crude and condensate processing
capability was "certainly one of various options we have
Kinder Morgan is building two 50,000 bpd splitters at its
Houston Ship Channel complex, with the first slated to start up
this summer and the second in early 2015. The company expects to
add a third 50,000 bpd facility as well.
Other companies planning splitter projects along the Gulf
Coast include Phillips 66, Martin Midstream Partners
and privately held Castleton Commodities International.
(Additional reporting by Ashutosh Pandey and Swetha Gopinath in
Bangalore; editing by Terry Wade, Maju Samuel, Matthew Lewis
and G Crosse)