Record demand for natural gas liquids (NGL) capability in the Gulf Coast region has moved Enterprise Products Partners LP to expand its NGL import/export terminal on the Houston Ship Channel (HSC). It was one of a handful of deals/projects Enterprise announced last week as a strong outlook for NGLs helped to move one analyst following the partnership to reinforce his “positive view.”

The HSC expansion is expected to nearly double the fully refrigerated export loading capacity for propane and other NGLs at the facility to more than 10,000 b/hour, while enhancing its ability to load multiple vessels simultaneously, Enterprise said Tuesday. The project is expected to be completed in the second half of 2012.

“During the past two years, we have had record demand for our NGL export services driven by increased global demand for NGLs in substitution of more expensive crude oil derivatives,” said Enterprise CEO Michael A. Creel. “Capacity at our NGL export terminal…is sold out for 2011 and virtually sold out for 2012.”

A recent Enterprise investor meeting sent at least one analyst away feeling good about the partnership and its prospects. Wells Fargo analyst Michael Blum and his team have an “outperform” rating on Enterprise.

“We believe the partnership has a best-in-class set of midstream assets with significant growth opportunities across most of the developing shale plays and across all the major commodities (crude oil, NGLs and natural gas)…” Wells Fargo said.

Among services sought by Enterprise customers at HSC is the ability to handle propane containing less than 2.5% ethane, the partnership said. Upon the completion of its fifth NGL fractionator later this year, the partnership will have 375,000 b/d of NGL fractionation capacity at Mont Belvieu, TX. The partnership has 100 million bbl of NGL storage capacity at Mont Belvieu, which it said will allow it to load large quantities of low-ethane propane at HSC.

“Our existing NGL storage and pipeline infrastructure is sufficient to support the export terminal expansion, which will be key in allowing us to meet the projected demand growth and further solidifying the Enterprise terminal as the preferred NGL export location throughout the Gulf Coast,” Creel said.

Blum noted that Enterprise has grown more bullish on NGLs, specifically ethane. “The partnership increased its expectations for both future ethane demand and supply (primarily on the demand side) and now anticipates ethane demand could exceed supply by as much as 93,000 b/d (i.e., midpoint) by 2015,” he wrote. “We would note that management’s ethane supply-demand projections are generally more positive than ours and [Wall] Street expectations for a potential oversupply of ethane by 2012-2013.”

Also last week, Enterprise announced another midstream services deal with Anadarko Petroleum Corp. to handle growing production from the Eagle Ford Shale of South Texas. The parties signed a six-year agreement, which is in addition to a similar arrangement they made last September (see NGI, Sept. 27, 2010). Under the new contract, Enterprise will provide gas processing as well as natural gas liquids (NGL) fractionation and transportation services to accommodate Anadarko’s liquids-rich production from the Eagle Ford.

“The brisk pace at which we have been executing long-term deals is further indication of the positive outlook for the Eagle Ford Shale,” said Enterprise COO Jim Teague. “The strong demand for our services also reflects an understanding on the part of Eagle Ford producers that our integrated system can assist them in maximizing the value of their natural gas, NGL and crude oil production.”

Enterprise plans to construct a 46.5-mile, 24-inch diameter pipeline through LaSalle County, TX, to expand its rich gas gathering system. The new pipeline, along with portions of the partnership’s previously announced pipeline expansions, will be utilized to handle the additional volumes under the new contract.

Current gas processing capacity at the partnership’s South Texas facilities is 1.5 Bcf/d. With the completion of a new cryogenic processing plant in Lavaca County, TX, which is expected to begin service in mid-2012, Enterprise will add 600 MMcf/d of incremental capacity.

Blum said in his research note that Enterprise management told analysts it believes basis differentials across Texas could widen over the next year or two. “The partnership sees East Texas and South Texas Eagle Ford Shale production flooding the Houston Ship Channel (HSC) market with no commensurate pickup in demand or takeaway capacity,” he wrote. “As a result, HSC prices could come under pressure relative to West Texas (i.e., Waha) pricing, creating wider basis differentials. Over time [Enterprise] believes as much as 25% of Eagle Ford Shale production could ultimately be transported toward the Waha market.”

Finally, Enterprise said last week it is tying in more natural gas production from the Gulf of Mexico (GOM) to be carried on its Independence Trail pipeline. The partnership has signed up LLOG Exploration Co. LLC and LLOG Deepwater Development Co. LLC for interconnect and transportation agreements for gas production from four blocks in the Mississippi Canyon area, including LLOG Exploration’s Who Dat Field.

The volumes will be delivered into Independence Trail through a new 10-inch diameter, 17-mile pipeline originating from the LLOG-operated Opti-Ex production platform that will be installed at Mississippi Canyon Block 547. The export pipeline will be owned by LLOG Deepwater Development. Independence Trail will transport the gas to an interconnect with Tennessee Gas Pipeline at Enterprise’s West Delta 68 platform.

©Copyright 2011Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.