EUR 850.00 For Business Accounts Only

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.