Magellan Midstream taking legal action against Trafigura
Reuters
Published Feb 02, 2017 12:15PM ET
Magellan Midstream taking legal action against Trafigura
By Liz Hampton
HOUSTON (Reuters) - Pipeline and terminal operator Magellan Midstream Partners (N:MMP) said on Thursday it has started legal action against Trafigura [TRAFGF.UL] after the commodity trader said it would terminate a contract to use Magellan's condensate splitter in Corpus Christi, Texas.
Trafigura is the only customer that uses the condensate splitter, under a contract it signed in 2014. Magellan said it is negotiating with Trafigura, but is also talking with other potential customers for use of the splitter.
"Magellan believes this notice is in breach of the agreement and has initiated legal action," the midstream operator said in its fourth-quarter earnings release. It did not disclose details on the legal move.
Midstream companies rushed to build condensate splitters, which break light oil into products such as naphtha and unfinished distillates, during the shale boom. Those products could be exported or sold domestically.
The United States began allowing exports of light condensate in 2014, making the splitters less necessary. A year later, the country lifted a decades-long ban on exporting crude oil.
Trafigura in 2014 signed a fee-based, take-or-pay agreement for Magellan's 50,000 barrel-per-day splitter in a project valued at $250 million.
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