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Magellan Midstream Partners, L.P. has announced that it plans to build an additional 1.5 million barrels of refined petroleum products storage at its Galena Park, Texas, marine terminal.

Magellan said the expansion would be supported by long-term customer contracts and that 0.8 million barrels of the new storage will be jointly owned with a third party.

Magellan added that it will also make improvements to increase the capacity at its existing terminal docks.

The storage and dock construction projects are expected to be operational towards the end of 2012, with Magellan’s portion of the cost expected to be approximately $65 million.

Magellan also announced that it has negotiated a long-term customer contract to transport refined petroleum products on its Houston-to-El Paso pipeline, formerly known as the Longhorn pipeline.

Through a volume incentive tariff, the third-party shipper will transport at least 20,000 barrels per day of refined petroleum products under a 12.5-year take-or-pay agreement to El Paso, Texas beginning in late third quarter or early fourth quarter 2010.

The product will subsequently be delivered to Juarez, Mexico via a newly-constructed third-party pipeline that connects to Magellan’s El Paso, Texas terminal.

Currently, the partnership’s Houston-to-El Paso pipeline can transport up to 90,000 barrels per day to the El Paso market.

Magellan said it is analyzing the potential reversal and conversion of a portion of this pipeline to crude oil service. If the reversal and conversion is pursued, the partnership would still be able to transport at least 60,000 barrels per day of refined petroleum products to the El Paso market by enhancing the operational connectivity of its nearby pipeline infrastructure.

“This contract reinforces our continued optimism about the long-term prospects for our Houston-to-El Paso pipeline, with strong interest being expressed by several potential customers,” said Don Wellendorf, chief executive officer.

“Regardless of whether we retain this system solely in refined products service or convert a portion to crude oil transportation, we believe this pipeline will play a key role in the transport of petroleum products in the Southwestern United States and to neighboring markets in Northern Mexico,” added Wellendorf.