November 19, 2012 / 10:15 PM / 5 years ago

UPDATE 1-Oxy, Magellan to proceed with Permian-Gulf Coast pipeline

HOUSTON, Nov 19 (Reuters) - Occidental Petroleum Corp and Magellan Midstream Partners LP on Monday gave the go-ahead for construction of a previously proposed oil pipeline running from the Permian Basin in West Texas to the Gulf Coast.

The BridgeTex Pipeline will carry up to 300,000 barrels per day from Colorado City, Texas, to Houston-area refineries, with access to Texas City and the Houston Ship Channel. It will require about 400 miles (644 km) of new pipelines and an expansion by Magellan of its distribution system between East Houston and Texas City.

Armed with shipper commitments and a favorable tariff ruling, the pipeline will start in mid-2014 pending necessary permitting.

Pipelines out of the Permian now run mainly to the Cushing, Oklahoma, trading and storage hub, but new pipelines are popping up to carry crude oil to the Gulf Coast.

Crude oil production in the Permian basin -- a carbonate and sandstone prospect in Texas and New Mexico -- will rise by some 60 percent to reach at least 1.82 million barrels per day by the end of 2016, energy consultancy Bentek said in August. Output will surpass existing pipeline capacity by early next year, Bentek added, while noting some 1 million bpd of new takeaway capacity is slated to come online by the end of 2014.

In August, Plains All American brought a 15-mile (24-km), 50,000 bpd pipeline online and will start more lines with a total 100,000 bpd capacity by the end of 2012.

Sunoco Logistics’ “Permian Express” pipeline is also expected to add 90,000 bpd capacity by April 2013 and eventually ramp up to 150,000 bpd.

Oil pipelines in Texas, Oklahoma and Louisiana are undergoing a historic realignment in response to new production in the Eagle Ford development in south-central Texas, redevelopment of older production in the Permian Basin and new flows of oil from the Midwest and Canada that have over supplied Midwest markets. (see FACTBOX at )

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