(Reuters) - Magellan Midstream Partners LP believes a proposed Midland origin point will attract sufficient commitments from shippers to proceed with a long-haul crude pipeline from the U.S. oil storage hub in Cushing, Oklahoma, to Houston, Chief Executive Michael Mears said on Wednesday.
The Houston pipeline operator decided not to pursue its Permian Gulf Coast pipeline project in March after it was unable to obtain enough commitments to proceed, but it has received “significant” market feedback its Midland origin would be attractive, Mears told investors in a conference call.
“We’re fairly optimistic the combined interest between Cushing and Midland will lead to sufficient commitments to proceed, which is what we were unable to obtain from PGC just out of Midland only,” Mears said.
The pipeline extension added two months to the Voyager pipeline’s open season, which could draw shippers to a system with an initial capacity of at least 300,000 barrels per day, the company said in March.
The pipeline, up to 24 inches (61 cm) in diameter, would run 500 miles (805 km) from its Cushing terminal to its East Houston terminal and is expected to come into service in late 2020.
Surging crude production from the Permian Basin of West Texas overwhelmed pipeline capacity last year, and a number of new pipelines set to come into service this year are expected to help clear the bottleneck. But output is forecast to continue to grow in future years, spurring demand for future pipeline projects.
Magellan is evaluating new projects that would require capital in excess of $500 million, including some large-scale projects, that the company may begin to discuss with investors in coming months, Mears said.
Reporting by Collin Eaton; editing by Jonathan Oatis and Richard Chang