Magellan Pipeline Company, L.P. (“Magellan”) has initiated an open season for pipeline capacity between Houston and Phoenix on September 9, 2025. Potential shippers can submit bids for capacity until November 7, 2025. The open season supports the construction of the Sun Belt Connector (“Sun Belt”), an approximately 440-mile pipeline between El Paso, Texas and Phoenix, Arizona.
At Stillwater, we see opportunities:
- Phoenix-area retailers, airlines, and other large, refined product consumers can diversify their current supply sources. While diversification can be profitable in and of itself, the current state of their California-sourced supply chains could come under increased pressure following the closure of the Valero Benecia and Phillips 66 Wilmington refineries.
- Texas refineries can supplement and potentially replace their current waterborne export markets with a pipeline-fed domestic market.
- Marketers and traders can capitalize on West Coast versus US Gulf Coast refined product arbs.
Market participants should be looking at Sun Belt as an opportunity to profitably expand their supply chain. Stillwater can help:
- What is the need? The Phoenix market is fast growing, and Texas supplies can directly or indirectly offset the expanding Southern California short. Stillwater has a deep understanding of the PADD 5 market and can help frame the requirement and identify risks that could arise.
- Will a Sun Belt commitment be economic? Texas refiners will need to evaluate Sun Belt netbacks and compare them with waterborne netbacks. Phoenix consumers will need to evaluate the delivered cost of Texas-sourced supplies with California-sourced alternatives. Stillwater can build custom economic models to help potential Sun Belt shippers and others understand their exposure over their commitment term.
- How will other logistics providers respond? Sun Belt would effectively restrict shippers’ opportunities to capitalize on an evolving logistics situation, and Stillwater can help identify and quantify the associated risk and develop a bidding strategy that mitigates exposure to these risks.
Stillwater Associates brings a wide-ranging skill set to the table. Stillwater has a deep understanding of West Coast supply and demand, energy policy, and markets. Many of our Senior Associates spent a large portion of their careers evaluating similar opportunities. Our deep experience working with commercial clients in refining, midstream and trade associations makes us well-equipped to evaluate the opportunity for those considering a bid and for those who want to understand the implications of Sun Belt even if they are not interested in making a commitment. We have extensive experience assessing market demand, determining and comparing alternative landed supply costs and netbacks, creating risk assessments and developing cost-effective mitigations.
Stillwater is well positioned to assist customers in making well-informed and economically sound decisions. Contact us today to learn how we can help.
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