March 15, 2012 / 2:50 PM / 6 years ago

Magellan ups west Texas oil pipe capacity to Houston

* Line to be built to handle 225,000 bpd

* Increased capacity is fully committed

By Janet McGurty

NEW YORK, March 15 (Reuters) - Magellan Midstream Partners LP said it will increase the capacity of its planned oil pipeline carrying crude from west Texas oilfields down to Houston and refineries along the U.S. Gulf Coast due to strong shipper commitment.

The Crane-to-Houston pipeline is one of several projects on the books for various companies that will help move crude out of the oversupplied oil hub in Cushing, Oklahoma down the nation’s largest refinery concentration along the U.S. Gulf Coast.

Magellan’s line will be built to handle 225,000 barrels per day rather than the initially planned capacity of 135,000 bpd.

“The market clearly confirmed the attractive fundamentals of our Crane-to-Houston crude oil pipeline, and we are pleased to increase the scope of our project in response to this strong industry demand,” said Michael Mears, Magellan chief executive.

He said the pipe will offer a direct, cost-efficient route to deliver growing west Texas crude production to refineries in Houston and Texas City and provide a transportation option that helps alleviate crude oversupply in Cushing.

That glut has depressed the price of the U.S. crude benchmark, West Texas Intermediate.

Oil production from the mature fields of west Texas has increased due to new drilling technologies developed in the tight shale oil plays.

The project includes a reversal of the pipeline from Crane to Magellan’s east Texas terminal.

The cost of the project is now $375 million. The pipeline is expected to start at partial capacity in early 2013, reaching 225,000 bpd by mid-year, based on receiving necessary regulatory permits and approvals.

Magellan said it was still assessing construction of a new pipeline segment using existing third-party line to carry oil from Midland to Crane. The company estimates the cost at $70 million.

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