Magellan Midstream, Valero form JV to expand Pasadena marine terminal

Magellan Midstream Partners LP and Valero Energy Corp. noted the expansion and joint development of the marine storage facility currently under construction along the Houston Ship Channel in Pasadena, Texas. The Pasadena facility, which will handle petroleum products, including multiple grades of gasoline, diesel and jet fuel, and renewable fuels, will be owned by a limited liability company that is owned 50/50 by Magellan and Valero and will initially include 5 million barrels of storage, truck loading facilities and 2 proprietary ship docks.

Phase 1 of the facility is under construction, which includes approximately 1 million barrels of storage and a new marine dock capable of handling Panamax-sized ships or barges with up to a 40-foot draft. This first phase will now be owned by the jointly-owned company.

Further, this facility will be expanded by an incremental 4 million barrels of storage, a 3-bay truck rack and a second marine dock capable of handling Aframax-sized vessels with up to a 45-foot draft (Phase 2). After completion of this expansion, the Pasadena facility will be connected via pipeline to Valero's refineries in Houston and Texas City, Texas and the Colonial and Explorer pipelines in addition to the already planned connection to Magellan's Galena Park terminal facility.

Combined, Phases 1 and 2 of the Pasadena marine terminal are currently estimated to cost approximately $820 million, which will be funded equally by capital contributions from Magellan and Valero. With the new arrangement, Magellan's incremental capital spending will be approximately $75 million more than its previous spending estimates of $335 million for phase 1 alone. Both phases are fully contracted with long-term customer commitments.

Magellan currently serves as construction manager and will serve as operator once construction is complete. Phase 1 of the new terminal is expected to be operational in early 2019, with Phase 2 expected to come on-line in early 2020, subject to receipt of necessary permits and regulatory approvals.

If warranted by additional demand, the new Pasadena facility could be expanded to include an incremental 5 million barrels of storage, another 3 docks and expanded truck loading capacity, for a maximum footprint of up to 10 million barrels of total storage and up to 5 docks. All future expansions are expected to be owned by the jointly-owned company.

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