“We focus on building systems, not just collecting assets…We call it a value-chain approach, and it has served us well in that we are the largest publicly traded energy partnership…We have an integrated system serving producers and consumers,” Jim Teague, executive vice president and chief operating officer of Enterprise Products Partners LP, said at the recent Barclays CEO Energy Power Conference in New York.
Teague explained that this value-chain approach means that it offers contiguous integrated services for natural gas, NGLs, crude oil and refined products from the point of production to the point of consumption. This approach has seen Enterprise expand to include more than 50,000 miles of pipeline for various products, 192 million barrels of liquids storage, and 19 NGL and propylene fractionation facilities that will have a total capacity of 800,000 barrels per day (b/d) by the end of this year. In addition, the company also owns other midstream assets including an NGL import/export facility and offshore pipelines.
The depth of these assets provides Enterprise with a presence in nearly every major producing region of the country. Its pipelines also provide customers access to every ethylene plant and 95% of the refining capacity east of the Rocky Mountains.
“You can build a supply system, but duplicating that distribution system would be all but impossible…This system is designed to generate revenue in every step of the value chain and we continue to add to that value chain. We added $1.7 billion of completed projects last year and we have more than $6 billion of projects under construction today. We think that enhances our ability to focus on flow assurance to market choices for the producer and source diversity and flexibility for the consumer,” he said.
Teague said that this growth is generated from providing support for the development of shale plays, be they natural gas, NGLs or crude oil. This growth is primarily focused on the Haynesville, Eagle Ford, Rockies, Permian, Avalon Bone Springs, and the Marcellus. Further growth opportunities are rising from the petrochemical market converting from naphtha-based cracking to ethane-based cracking.
In order to ensure it has a presence in the most active shale plays, both today and tomorrow, Enterprise has a fundamentals group that evaluates every shale play to help determine opportunities in each and what the best course of action for the company to penetrate them is. “We are not going to build or acquire anything that doesn’t fit what we already have,” he said.
This strategy resulted in the company entering the Haynesville through an acquisition of a DeSoto Parish gathering system less than two years ago. This was followed by the company building two more systems in the play to create a contiguous system that covers roughly 500,000 acres. Half of the rigs currently operating in the Haynesville are surrounding this footprint, which has the capacity to deliver 1 billion cubic feet per day (Bcf/d) into its 240-mile Haynesville extension pipeline. This pipeline is expected to begin flowing this month and will cross 12 interstate pipelines.
Enterprise was already strong in the Eagle Ford region as it had seven cryogenic processing plants and multiple gathering assets in the play. The company is enhancing these assets through the addition of a wet gas pipeline that will run through the heart of the shale.
“We think there is not enough appetite in south Texas to accommodate the gas, so you have to get it out. We are also building a cryo plant in Yoakum. We approved it as a 600 million cubic feet per day (MMcf/d) cryo plant, and we have already approved a 300 MMcf/d expansion,” Teague said. He added that the plant’s capacity will be full on day one and be able to provide customers with access to the entire ethylene industry through access to eight pipelines rather than a single cracker or pipeline.
The company is not yet in the Marcellus and this is likely to remain the case, because the location doesn’t really fit the company’s asset base as far as gathering and processing go, according to Teague. “What we already have doesn’t fit in the Marcellus, so that’s why you haven’t seen us up there trying to do gathering and processing deals and you won’t.”
However, the company is exploring a solution to the region’s ethane problem by building a pipeline to ship ethane from the region to the Gulf Coast. “We are going to loop 600 miles of our TE Products Pipeline with 16-inch pipe from Beaumont to New York and Pennsylvania. We are going to reverse the existing 16-inch pipeline to Beaumont, build a new 16-inch pipeline from Beaumont to Mont Belvieu. It will have initial capacity of 125,000 b/d and an ultimate capacity of 175,000 b/d,” Teague said. Should this project be brought into development, it could open up opportunities for the company in the Marcellus since they will have established themselves in the market.
The company will continue to explore new projects to build infrastructure to support ethylene producers’ conversions from naphtha cracking to ethane cracking. “We have the opportunity to build an ethane header system that literally runs from Corpus Christi, Texas to the Mississippi River. Seventy-five percent of that pipe is in the ground already; we’re just going to do some service switching,” he said. As part of this strategy the company intends on building a 16-inch pipeline from Mont Belvieu to Lake Charles, La., so that any ethylene plant can tie into the header system.
In addition to the huge benefits posed from the influx of ethane that has made it more preferred than naphtha, Enterprise is also benefitting from increased demand for propane. Its propane export terminals have been full since mid-2009, will export 40 million barrels in 2011, are sold out for 2012 and close to that for 2013. Such usage is causing the company to expand its export terminals by 50%.
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