SAN ANTONIO—Valero Energy Corp. (NYSE: VLO) and Magellan Midstream Partners LP (NYSE: MMP) announced on Sept. 14 the expansion and joint development of the marine storage facility currently under construction along the Houston Ship Channel in Pasadena, Texas.

The Pasadena facility, which will handle petroleum products, including multiple grades of gasoline, diesel and jet fuel, and renewable fuels, will be owned by a limited liability company that is owned 50:50 by Magellan and Valero Terminaling and Distribution Co., a wholly owned subsidiary of Valero, and will initially include 5 million barrels of storage, truck loading facilities and two proprietary ship docks.

As Magellan previously announced in July 2016, phase 1 of this facility, which is already under construction, includes approximately 1 million barrels of storage and a new marine dock capable of handling Panamax-sized ships or barges with up to a 40-foot draft. This first phase will now be owned by the jointly-owned company.

Further, this facility will be expanded by an incremental 4 million barrels of storage, a three-bay truck rack and a second marine dock capable of handling Aframax-sized vessels with up to a 45-foot draft (phase 2). After completion of this expansion, the Pasadena facility will be connected via pipeline to Valero refineries in Houston and Texas City, Texas and the Colonial and Explorer pipelines in addition to the already planned connection to Magellan’s Galena Park terminal facility.

Combined, phases 1 and 2 of the Pasadena marine terminal are currently estimated to cost approximately $820 million, which will be funded equally by capital contributions from Magellan and Valero. Both phases are fully contracted with long-term customer commitments.

Magellan currently serves as construction manager and will serve as operator once construction is complete. Phase 1 of the new terminal is expected to be operational in early 2019, with phase 2 expected to come online in early 2020, subject to receipt of necessary permits and regulatory approvals.

“Valero is excited about this opportunity to work with an exceptional organization like Magellan to jointly develop this flexible and well-positioned terminal,” said Joe Gorder, Valero chairman, president and CEO. “This project provides another example of our commitment to growing our portfolio of logistics capabilities to support our long-term strategy of expanding and extending our supply chain.”

“Magellan is pleased to join forces with Valero to combine our extensive pipeline and terminals capabilities with their world-renowned refining and marketing expertise to further expand the state-of-the-art marine facility being constructed in Pasadena,” said Michael Mears, Magellan’s chairman, president and CEO. “Demand for refined products from the Gulf Coast continues to grow, and together, we are well-positioned to continue expanding our marine capabilities to meet this demand from both domestic and international markets.”

If warranted by additional demand, the new Pasadena facility could be expanded to include an incremental 5 million barrels of storage, another three docks, and expanded truck loading capacity for a maximum footprint of up to 10 million barrels of total storage and up to five docks. All future expansions are expected to be owned by the jointly-owned company.