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Enterprise Gearing Up for Ethane, LPG, Condensate Export

Enterprise Products Partners LP's Houston Ship Channel ethane export terminal is almost fully contracted, and expansion of the not-yet-finished facility is planned. Meanwhile, the midstream giant is feeling clever for how it has played the condensate export game.

New firm, long-term contracts for ethane storage, transportation, refrigeration and loading services at the terminal mean capacity is about 85% sold, the partnership said Thursday.

During an earnings conference call, Jim Teague, COO of Enterprise's general partner, said Enterprise executives began discussing the ethane export terminal concept two years ago and that three years ago, he wouldn't have thought such a project would happen.

"To be honest, three years ago I didn't think this was something that we would pursue," he told analysts. "When we first started talking about this, we knew that the opportunity needed time to be evaluated by the markets, but we felt the supply and demand fundamentals were in favor of U.S. ethane exports.

"Over the last two years, our folks have spent countless hours on airplanes and with potential customers around the world, and ultimately they secured the commitments to baseload a project. Even after we announced our ethane export project, many still doubted its viability; however today, just three months [after the terminal was announced], our project is 85% subscribed and I expect it to be fully subscribed in a matter of weeks. And we'll go one step further and tell you we believe given the continued interest, an expansion is imminent. And that expansion will be a lot cheaper than a newbuild."

The ethane terminal would be "seamlessly" integrated with Enterprise's existing natural gas liquids complex at Mont Belvieu, TX, the company said, helping to ensure market access for the growing surplus of ethane (see Daily GPIApril 23).

Scheduled for completion during the third quarter of 2016, the terminal at Enterprise's Morgan's Point facility on the Houston Ship Channel would have the capability to load fully refrigerated ethane at about 10,000 bbl/hour. An 18-mile, 24-inch diameter ethane pipeline would be constructed from Mont Belvieu to supply the terminal.

Enterprise also is making headway on its liquefied petroleum gas (LPG) expansion (see Daily GPIJan. 7). A 1.5 billion bbl per month expansion is expected to come online in the first quarter, and a 7 million bbl per month expansion is due online during the fourth quarter of 2015, Teague said. "When both are completed, we'll have LPG export capacity of approximately 16 million bbl a month. These are exporting both propane and butane and are fully committed for the next several years, and we have some contracts that go out to 2024," he said.

And when it comes to condensate export, Enterprise is sitting in the catbird seat, having recently received a ruling from the U.S. Commerce Department's Bureau of Industry and Security (BIS) that it may export processed condensate under existing regulations (see Shale DailyJune 25).

Teague said Enterprise management had "taken an untold number of questions in the past" about when the partnership would announce a condensate splitter. "If you follow the news, you now know why we weren't building the splitter," he told analysts during the conference call.

"Bill Ordemann [group senior vice president for unregulated liquids, crude and natural gas services] had other ideas. Bill and his folks did their homework and did a great job of laying out facts that facilitated focused and thoughtful discussions with the BIS through normal channels. Bill and his people were focused on facts, not loopholes. These discussions led to a proper ruling on the export of processed condensate that is consistent with current regulations and did not require a change in law or a change in policy."

The BIS ruling "generated a mountain of questions and policy conjecture that frankly, we're not going to address...[T]hese rulings are private and...we consider the privacy of our ruling to be commercially sensitive."

Enterprise net income for the second quarter was $647 million (68 cents/unit) versus $553 million (60 cents/unit) for the second quarter of 2013. Distributable cash flow for the second quarter provided 1.4 times coverage of the distribution that is to be paid Aug. 7.

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