Magellan Contemplates Extending Longhorn Pipeline Due to Increased Demand
In the heart of the United States, the Permian Basin is experiencing a significant surge in crude oil production, with output currently surpassing 1.3 million barrels a day. This growth, which has seen a roughly 50% increase from its 2007 low, has led to a high demand for pipeline shipments, particularly in Texas.
One company at the forefront of this pipeline expansion is Magellan Midstream Partners. They have announced plans to expand the capacity of their Longhorn Pipeline system, potentially increasing it by 50,000 barrels per day. Currently, the pipeline's capacity stands at 225,000 barrels per day. If the expansion occurs, it would take between a year and 18 months to complete and cost an estimated $80 million.
Magellan isn't alone in its efforts to connect Permian production to refining markets. Other companies, such as Sunoco Logistics Partners (now part of Energy Transfer Partners), have also been expanding their infrastructure to serve Houston-area refineries. In the first quarter of this year, Sunoco Logistics Partners started shipping oil from the Permian Basin to these refineries, after reversing the flow of its Permian Express pipeline.
Meanwhile, Plains All American is building a new pipeline, the Cactus pipeline, to bring Permian Basin oil to refining markets in Corpus Christi and Houston. The Cactus pipeline is expected to start shipping as much as 200,000 barrels of oil per day in the first quarter of 2015.
The Motley Fool recommends Magellan Midstream Partners and offers a thorough expert analysis of Energy Transfer Partners in its premium research report. Both companies are investing heavily in pipeline infrastructure that will serve the nation's energy companies for decades into the future.
It's important to note that much of the growth in crude oil production comes from the Permian Basin, an expansive play spanning western Texas and eastern New Mexico. The Motley Fool's contributor Arjun Sreekumar has no position in any stocks mentioned, and The Motley Fool has a disclosure policy.
As the Permian Basin continues to produce at record levels, it's clear that pipeline expansion will play a crucial role in getting this oil to market. The future of energy in the United States may well be shaped by the success of these pipeline projects.
