Energy Transfer Partners LP (ETP) expects construction on Rover Pipeline to be completed this month and plans to seek FERC approval to put the last portion of the 3.25 Bcf/d pipeline into service by June 1, CEO Thomas Long said Thursday.
All horizontal directional drilling (HDD) crossings have been completed and “we’re progressing with final hydrostatic testing and tie-in work to achieve mechanical completion,” Long said on a call to discuss first quarter 2018 earnings.
The Federal Energy Regulatory Commission on May 1 granted Rover authorization start up the remaining facilities listed in an April 13 in-service request, bringing the 713-mile project a step closer to full service.
FERC staff cleared the pipeline to start up its Vector Delivery Meter Station, Defiance Compressor Station and Market Segment, all part of the highly anticipated Appalachian takeaway project’s second and final phase. The May 1 order came just a week after the Commission authorized service for Rover’s Mainline Compressor Station 3 and part of its Mainline B.
Rover finished bringing its first phase online at the end of last year and has recently been flowing more than 1.6 Bcf/d east-to-west across Ohio to interconnects with the Panhandle Eastern and ANR pipelines, according to NGI’s daily Rover Tracker.
Once Rover is fully in service, ETP then expects to bring online its recently completed Revolution natural gas processing plant.
On the natural gas liquids (NGL) side, ETP’s Marine East 1 (ME1) pipeline is back up and running after receiving a unanimous vote last week from the Pennsylvania Public Utility Commission (PUC) to resume transporting NGLs on the line, Long said.
ME1 was out of service for nearly two months after the state ordered operations shut down to investigate sinkholes that formed near the system in Chester County.
The order came in response to a petition from ETP subsidiary Sunoco Pipeline LP to lift the emergency suspension that was issued in March after a recommendation by the PUC’s Bureau of Investigation and Enforcement.
Appalachian producers that rely on the line, such as Range Resources Corp. Antero Resources Corp. and CNX Resources Corp., managed to find other outlets for their NGLs and reported no significant impacts from the outage. But the PUC’s order restored a crucial outlet for 70,000 b/d of propane and ethane in a basin that lacks adequate liquids capacity.
Meanwhile, ETP continues to “make progress” on construction of Mariner East 2 (ME2), with 98% of mainline construction complete and 93% of HDDs completed or underway.
“At this time, we expect to place ME2 into service in the third quarter of 2018,” Long said.
Construction on ME2X also continues, with expectations it will be online in mid-2019. ME 2 and ME2X would run parallel for about 350 miles to move NGLs from processing facilities in Ohio, Pennsylvania and West Virginia to the Marcus Hook Industrial Complex for domestic and international distribution.
ETP also has a diesel pipeline project in the works. In April, the company launched a binding open season for a pipeline that would transport diesel from Hebert, TX, to a newly constructed terminal in the West Texas area near Midland. The diesel pipelines would utilize existing ETP pipelines, including the Lone Star 12-inch diameter line, and is currently projected to have an initial capacity of 30,000 bbl/d.
“Minimal incremental capital is required to convert this line from NGL to diesel service, and it is anticipated that the pipeline will be in service in the third quarter of 2020,” Long said.
Permian Expansions Eyed
With drilling activity showing no signs of slowing in the Permian Basin, ETP is planning to build a second 200 MMcf/d cryogenic processing plant near its existing Arrowhead plant, with the company targeting fourth quarter 2018 in-service, Long said.
The company’s 200 MMcf/d Rebel II processing plant in the Midland sub-basin of the Permian went into service at the end of April, and the plant is expected to ramp up through the remainder of 2018.
Meanwhile, ETP is also looking to expand its 1.4 Bcf/d Red Bluff Express pipeline, which runs through the heart of the Delaware sub-basin and connects its Orla plant as well as multiple third-party plants to its Waha Oasis Header providing residue gas takeaway.
ETP plans to add an additional 25 miles of 30-inch diameter pipeline supported by “a new long-term demand-based contract” recently signed with “an investment-grade counterparty,” Long said. “This new agreement effectively doubles the size of the commitments on the pipe.”
Red Bluff Express would now consist of about 100 miles of 30-inch, 36-inch and
42-inch diameter pipe, and “we will have a capacity of at least 1.4 Bcf/d with guaranteed fee-based long-term commitments supporting the project.”
Anadarko Petroleum Corp. is the anchor shipper on Red Bluff Express and its affiliate, Western Gas Partners LP, has an option to buy into the project. Even with the addition, Long said the project is still expected to cost just under $400 million. Red Bluff Express is expected to be online this month, with the expansion expected online in the second half of 2019.
Last week, ETP and Enterprise Products Partners LP also announced a joint venture to resume service on the Old Ocean natural gas pipeline. The 24-inch diameter pipeline, which originates in Maypearl, TX and extends south 240 miles to Sweeny,has an initial design capacity of 160,000 MMBtu/d and is expected to resume service in the second quarter of 2018.
Additionally, ETP and Enterprise are in the process of expanding the jointly owned 36-inch diameter North Texas pipeline, which would provide about 160,000 MMBtu/d of additional capacity from West Texas for deliveries into Old Ocean. The North Texas pipeline expansion is expected to be completed by the end of this year.
On the crude oil side, ETP is evaluating an additional expansion of its Permian Express 3 pipeline, the first phase of which entered service late in 2017. ETP is planning to hold an open season sometime “in the next month or so” for new capacity on the line that would begin service in October or November.
Given the rapid growth in the Permian,“it may make sense to move quicker on that to provide capacity quicker than any new project, even our 30-inch,” COO Matthew Ramsey said, noting it would not be “a material net amount of capital to create some capacity.”
Still, the company is “making significant progress” with its new 30-inch diameter crude oil pipeline from Midland to Nederland, which would now have extensions to the Houston Ship Channel (HSC), Long said.
Another Texas Oil Project Considered
ETP also developing an agreement with a strategic partner — and possibly other equity partners — for another crude oil project that would “initially transport up to 600,000 b/d of capacity, easily expandable to 1 million b/d,” Long said, adding he hoped to make an announcement in the “very near future.”
The new pipeline would provide “unprecedented flexibility” to the expansive HSC markets, as well as to significant markets in the refinery corridor or in the Nederland and Beaumont areas. It would also provide shipper capacity to ETP’s storage facilities and pipeline header systems as well as deliveries into Bayou Bridge.
ETP continues to build out the 24-inch diameter segment of the Bayou Bridge from Lake Charles, LA, to St. James, LA, and expects commercial operations to begin late this year. On the 30-inch diameter segment of Bayou Bridge from Nederland to Lake Charles, ETP transported an average of 160,000 b/d in the first quarter.
“Our earnings are already seeing a significant increase as a result of the management fees we’re collecting. First quarter volumes continued to average over 400,000 b/d, and we have already seen solid growth in the beginning of the second quarter, with peak volumes transported now reaching over 500,000 b/d,” Long said.
Meanwhile, ETP’s Lone Star’s 120,000 b/d Frac V is still expected to be in service in the third quarter of 2018. It is fully subscribed by multiple long-term fixed-fee contracts and includes NGL product infrastructure and a new 3 million bbll Y-grade cavern. Frac VI is expected to be in service in the second quarter of 2019, with the majority of the project fully contracted under demand-based contracts.
ETP reported net income of $879 million (24 cents/share) in 1Q2018 from $393 million (3 cents) in 1Q2017, primarily credited to increased operating income in addition to a $172 million pre-tax gain on Sunoco LP units that were repurchased by Sunoco from ETP in February. Operating income in 1Q2018 was $973 million, up from $683 million a year ago.
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