Magellan projects Permian Gulf Coast pipeline cost at $2 billion

NEW YORK (Reuters) - Magellan Midstream Partners LP on Wednesday projected it would spend about $2 billion to construct a proposed crude oil pipeline from the Permian Basin in West Texas to the U.S. Gulf Coast.

“We have binding commitments that give us very attractive economics. But what we don’t know is the full demand,” which would dictate the project’s final cost, Michael Mears, Magellan’s chief executive, said at the Barclays energy conference in New York.

The project cost for the Permian Gulf Coast pipeline will be clear after shippers commit to volume capacity during the so-called open season, Mears said. The bidding process for additional shipper commitments will be launched later this week.

Production in the Permian basin, the biggest oil-producing region in the United States, has outstripped its pipeline transport, sending regional crude prices last month to the lowest levels in six years.

The 600-mile Permian Gulf Coast pipeline is expected to begin operation in mid-2020. Magellan and co-investors Energy Transfer Partners LP, MPLX LP and Delek US Holdings Inc will construct the pipeline.

Magellan said it is also is considering new refined products and crude oil investments in Texas, including additional pipeline, storage and export capabilities.

The Tulsa-based company expects to spend about $2.5 billion from 2018-20 on construction projects currently under way, primarily related to refined products, marine storage and the Permian Gulf Coast project.

Reporting by Devika Krishna Kumar in New York; Editing by Leslie Adler