Magellan sees heavy demand for U.S. Gulf condensate splitters

Thu Nov 21, 2013 5:57pm EST
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By Kristen Hays and Terry Wade

HOUSTON (Reuters) - The U.S. Gulf Coast may need more than half a dozen facilities to turn condensate - a very light form of crude oil - into exportable products and handle a growing glut of output from the Eagle Ford field in Texas, Magellan Midstream Partners LP (MMP.N: Quote) Chief Executive Michael Mears said.

Splitters, or very basic distillation towers, give condensate a minimal level of processing. Without that processing, condensate is considered crude oil under U.S. law and therefore cannot be exported.

Mears told Reuters that Magellan - the country's largest refined products pipeline system - has its eye on building a splitter in Corpus Christi, Texas, a coastal city with plenty of infrastructure for handling Eagle Ford output.

"We think there could be the need for up to six to eight splitters on the Gulf Coast to process all the condensate that's projected to come out of the Eagle Ford," he said.

Nearly half of the Eagle Ford's oil output is condensate. It can be blended into the crude supply or used by Gulf Coast refiners, most of which are configured to run heavy oil, but they have limited demand for it.

Petrochemical companies can use it as a feedstock, but it is much more expensive than other, abundant choices, such as ethane.

While it can dilute heavy Canadian crude so it will flow in pipelines, its quality varies and may not meet specifications that other diluents meet.

So the Gulf Coast increasingly faces incoming condensate with no place to go unless it can be exported, Mears said.   Continued...