Magellan Midstream Partners, a US midstream company with one of the longest refined product pipeline systems in the country, is shifting its focus to crude oil with the majority of its capital spending earmarked for crude projects.

In a presentation to investors, Magellan said of the $950 million it plans to spend between 2014 and 2016, 80 per cent will go to crude oil projects primarily in and around Texas and its shale oil plays.

“We’re really going through a transformation in terms of where the growth is coming for Magellan,” chief executive Mike Mears told investors.

“If you’re look at where we’re spending our capital ... 80 per cent of that is crude oil and only 20 per cent is on products.” Magellan operates 9,600 miles of pipelines carrying products such as gasoline and distillates from the Gulf Coast northwards to many Midwestern states.

But booming production from shale oil plays such as the Permian and Eagle Ford in and around Texas has convinced the company to invest and expand its far smaller 1,100-mile crude oil pipeline system.

Once it completes its BridgeTex and Longhorn pipeline projects later this year, Magellan would have contributed 575,000 barrels per day (bpd) in takeaway capacity at the Permian Basin shale oil play in Texas, out of an expected 1.285 million bpd of incremental capacity. Some $110 million will be spent on the Longhorn pipeline, which is now ramping up flows and had its capacity expanded to 292,000 bpd, according to documents submitted to the pipeline regulator and posted on Magellan’s website.