EPA approves Magellan’s Corpus Christi splitter project

The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Processing LP, a wholly owned subsidiary of Magellan Midstream Partners LP, for a $400 million condensate splitter project to be located at the company’s existing bulk petroleum storage terminal in Corpus Christi, Tex.

The permit allows Magellan to build, in two phases, a 100,000-b/d splitting plant consisting of two 50,000-b/d trains that will process hydrocarbon condensate material to obtain propoare, butanes, light naphtha, heavy naphtha, kerosene, distillate, and resid, EPA said.

Each 50,000-b/d train will include a natural gas-fired hot oil heater, a natural gas-fired fractionator heater, storage tanks, and other associated equipment, which will require a total estimated capital cost of about $400-450 million, EPA said.

While the approval covers an entire 100,000-b/d proposed plant, Magellan currently intends to proceed with only Phase 1 of the project, which includes the first 50,000-b/d train in accordance with plans the company announced earlier this year (OGJ Online, Apr. 1, 2014).

“If warranted by additional demand, Magellan could proceed with Phase 2 of the project, which could provide an additional 50,000 b/d of capacity at our Corpus Christi facility,” Bruce Heine, director of government and media affairs for Magellan, told OGJ.

“We requested permits for the full 100,000-b/d project initially so that we are poised to proceed with the second unit, if warranted by incremental demand,” Heine said.

The first $250 million-phase of splitter construction, which is supported by a long-term commitment from Trafigura AG, will include 1 million bbl of storage, dock improvements, and two additional truck-rack bays and pipeline connectivity between Magellan’s terminal and Trafigura’s nearby facility, the company said in April.

EPA’s permit approval for the proposed condensate splitting plant means the project’s first phase remains on track with Magellan’s previously announced timeline for start-up.

“Today’s regulatory action moves our project one step closer towards our goal to begin operations in the second half of 2016,” said Heine.

The project follows a wave of industry moves intended to relieve rising stockpiles of US domestic light petroleum supplies amid a long-standing ban on US crude oil exports.

While recent private-letter rulings from the US Department of Commerce’s Bureau of Industry and Security ruling that processed condensate qualifies as an oil product eligible for export purposes have potentially eased those restrictions (OGJ Online, June 25, 2014), ongoing projected growth in North American crude production will further bolster US supplies as government officials continue to debate a lifting of the export ban (OGJ Online, Dec. 11, 2014).

In addition, despite recently lower crude oil prices, projected oil prices remain high enough to support development drilling activity in the Bakken, Eagle Ford, Niobrara, and Permian basin, all of which contribute to the majority of US oil production growth, the US Energy Information Administration said in its daily energy briefing for Dec. 12.

In a December presentation to investors, Magellan said it believes that, even with the private-letter rulings permitting condensate exports, some level of investment in splitter capacity still will be necessary at the US Gulf Coast to handle the influx of Eagle Ford production.

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