The 9-mile, 24-inch diameter pipeline would connect TransCanada's Houston tank terminal with Magellan's East Houston terminal. Each party would have a 50% ownership in the project.
The connector would provide Keystone and Marketlink shippers access to the Houston and Texas City crude oil distribution system owned by Magellan Midstream.
The project is estimated to cost about $50 million. Magellan Midstream would be both the construction manager and the operator of the pipeline, which is expected to commence operations in the latter half of 2016. The partnership plans to develop associated infrastructure at its East Houston terminal to facilitate additional flow from this new pipeline. Construction work at TransCanada's Houston tank terminal is likely to complete this year.
Tulsa, OK-based Magellan Midstream Partners owns and operates a diversified portfolio of energy infrastructure assets. The partnership primarily transports, stores, and distributes refined petroleum products and, to a lesser extent, ammonia.
Magellan's investment grade credit rating enables it to draw capital from the market at a reasonable cost. Moreover, the partnership has established a track of consistent distribution growth. However, Magellan is susceptible to lower demand for refined products, commodity price fluctuations and cost overruns on expansion projects.
Currently, Magellan Midstream carries a Zacks Rank #3 (Hold).
Better-ranked players from the oil and gas production and pipeline industry include Valero Energy Partners LP VLP and Energy Transfer Equity, L.P. ETE . While Valero Energy Partners sports a Zacks Rank #1 (Strong Buy), Energy Transfer Equity holds a Zacks Rank #2 (Buy).
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