Morningstar | Permian Gulf Coast Pipeline Not Moving Forward
The Permian Gulf Coast pipeline, an estimated $2 billion joint venture with Magellan Midstream Partners, MPLX, Energy Transfer, and Delek Holdings, is no longer going forward. We do not expect to change our fair value estimates or moat ratings for any of the affected firms. The pipeline was initially announced in September 2018; it planned to move barrels from the Permian basin to the Gulf Coast and would be on line in 2021. It would take advantage of storage terminals from Energy Transfer and Magellan and access to their respective distribution systems. The ultimate capacity of the pipeline was to be determined after fully assessing demand via an open season. The project was canceled after an open season during which we believe not enough shipper interest was generated to ensure a viable return for the owners.Competing pipeline efforts such as the Gray Oak and Epic pipelines combined with our projection that the Permian would be well supplied from a crude oil pipeline perspective in 2020 also probably contributed to the project's failure. On the other hand, this does show financial discipline on the part of the project's backers, which is not a surprise, given Magellan's involvement and its Exemplary stewardship rating. The shippers and the joint venture partners could seek to become involved in another Permian project, such as the Wink to Webster pipeline, a joint venture of ExxonMobil, Plains, and Lotus Midstream.
Magellan Midstream Partners is engaged in the transportation, storage and distribution of refined petroleum products and crude oil. The company's segments are: refined products, which consists of its refined products pipeline system, independent terminals and ammonia pipeline system; crude oil, which comprises crude oil pipelines, condensate splitter and storage facilities and ships crude oil as a common carrier for customers including crude oil producers, end users such as refiners, and marketing and trading companies; and marine storage, which owns and operates marine storage terminals located along coastal waterways.
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