Arbtrdr: I like to think in numbers...ATEX is 200,000 barrels/day capacity so far, Mariners East/West 120,000 b/d, and KMP/MWE JV pipeline will be at 400,000 barrels/d with new compressors. You have to figure Mariner East 2 for 200,000 b/d or why build it? Now,ATEX is the TEPPCO line reversed going from Houston(PA)to Mont Belvieu,TX. That leaves what I'll call TEPPCO NORTH going from Houston(PA) to New England carrying propane North as needed. With the right compressors it,too, can handle 100,000+ b/d. This bunch gets me to a million barrels/day. Next, let's think RR tankcars and distillate. Nobody is going to ship fractionation distillate to TX from the Marcellus. It mainly goes by RR tankcar to Canada to dilute bitumin for shipment to the USA. Keystone alone would be good for a unit train/day. Let's figure a minimum of four unit trains/day going west...260,000b/d. In addition the DCP Enterprise is building a propane export terminal at Hampton Roads to be supplied by unit train from the Marcellus..think another 65,000 b/d Butane is blended into gasoline for automotive fuel...more rail...add in a bunch of trucks and I am pushing 1.5 million b/d without Bluegrass. If Shell builds its' cracker and NOVA doubles its' capacity another 100,000 b/d is gone. So,you say is Bluegrass needed? I think not. You also have to ask is Williams willing to keep investing like this? Hard to believe it is scoring real big buying APL's dry Marcellus gas or Cayman..and no way can Bluegrass beat KMP/MWE financially IMO. Exciting,though!! I can't wait to see if KMP/MWE goes forward!!! Regards
The Bluegrass commitment date of Jan 17th is a tip off,too. The KMP/MWE closing date is in 3 weeks..assuming success , Bluegrass can just fade away...we also have Mariner East 2 soliciting binding commitments suddenly...so Bluegrass is IMO getting squeezed right now.
As exciting as these developments are, let us not forget the comment Semple made in the CC that the completion of the 60,000 barrel/day Hopedale fractionator is being brought forward to JANUARY,2014...like 30 days from now!! And with EPD now beginning line fill of ATEX and SXL finishing up Mariner West, the whole works will be cranking up in like six weeks. You have to believe the Cadiz RR yard is being finished,too. The addition to DCF by Feb 1 from depreciation alone is going to be a ton. Q1 CC should be a real eye opener...
According to Range Resources the big benefit in separating out ethane is that the much more valuable propane yield is improved by 8% or so...and since propane is some 4-5 times more valuable than ethane this is a big deal....
I don't think Marcus Hook with ethane is really in competition with Texas and the Gulf Coast To my knowledge the Gulf Coast exports are almost all propane with some butane going mainly to South America.etc..and I have not yet seen crackers in South America. That ethane will be shipped to Europe for all the crackers there is inevitable. You also have to consider the value and volumes of the products shipped. At 70,000 barrels/day Mariner East 1 only has a capacity of 25 million barrels /day. Throw in a few unit trains of propane and local Philadelphia are refinery propane and perhaps it is 40 million barrels of propane/ethane per year. And exports won't even hit that level until late 2014. EPD today is exporting 100 million barrels of propane and Targa another 40million barrels/year..ethane costs like $10/barrel and propane $40+/ barrel..so EPD/Targa ARE ALREADY SHIPPING $6 BILLION/year of propane/butane out of the USA..and SXL Marcus Hook is way behind. When the Panama Canal expansion is complete in 2015, the Panamax VLGC vessels will be carrying mega more tons of propane etc to Asia. And you can bet that the Asians will be building PDH plants converting propane to propylene like EPD will be doing in Mont Belvieu. Also, note this week that USA residential propane prices are up 14% and inventories are down 25% compared to last year as a result of EPD/TARGA propane exports...MWE and its' producer customers are going to make a ton!!
Sure..and that's where the big numbers are. Ethane at 25 cents/gal is a drag to producers but,of course, profitable to fractionator a/shippers..propane at a buck plus per gallon makes a lot of sense to producers..and condensate or natural gasoline is pushing $3/gal..butane can be blended with gasoline for the winter driving season and therefore is a beauty,too. Both MMP and SXL blend a lot of butane. But this situation is really something..as I noted before IMO the folks at SXL screwed up by dragging their heels on Mariner East 2 and are now desperately trying to head off KMP/MWE.. The real issue is who is going to score big here: ETP/SXL or KMP/MWE or Williams/Boardwalk? Boardwalk hasn't done real good lately and needs a big boost. I'm guessing that once ETP took over Sunoco the ETP/SXL Team started pushing on MWE to control the downstream action..Since Marcus Hook was a refinery site a good assumption is that ETP/SXL told MWE that a big fractionation area would be built at Marcus Hook fed by a Y stream from the Marcellus via Mariner East 2. The KMP/MWE JV proposal was easy after that. Note that the 200 mile pipeline segment to be built in TX by the JV to connect the existing line with Mont Belvieu is a lot shorter and easier to build than Mariner 2 would be. Also, the KMP/MWE JV going with an existing fractionator in Mont Belvieu is a neat twist,too. If it is Targa, the big Phase Two Targa export terminal expansion at Galena Park would come on line in time for the JV pipeline service date of early 2015. Think of it: From drilling pad to ship in about a year!! If you go with Mariner East you a) have to wait 2 years and 2) you still have to have your stream fractionated in presumably the high cost NE. We'll know this one in 3 weeks when the KMP/MWE binding season closes. My single malt scotch is ready!!
This SXL announcement is terrific!! That SXL is doing a "binding season" on unbuilt Mariner East 2 right in the middle of the KMP/MWE Y pipeline to Mont Belvieu binding season shows that SXL is scared to death of KMP/MWE JV pipeline. What is really important to understand is that there is so much natural gas liquids coming out of the Marcellus/Utica that the propane and butane have to be exported because the NE market can't use it all. So, you either export them from Texas or Marcus Hook. Also, there are NO FRACTIONATION FACILITIES IN MARCUS HOOK. What this means is that you can't ship a Y stream to Marcus Hook via Mariner East 1 or 2. You have to ship propane or butane or ethane separately that were fractionated in Houston(PA) or Majorsville etc. KMP/MWE can ship a Y stream,propane,and butane in discrete sections. So, SXL is now in direct competition with the KMP/MWE JV ....Now, at the end of Dec we will hear if KMP/MWE JV is in business..it is really exciting!!!
What's fascinating here is that in many pipeline projects the project developer declares a "non binding season" to assess commercial interest..in the KMP/MWE case the JV simply went for a relatively brief "binding Season" from the Get Go indicating to me that it had the initial 150,000 b/d commitment wired. It also is a solid notice that the Macellus/Utica NGL potential is turning out to be a lot bigger than previously thought requiring fractionation facilities much bigger,faster than the NE can gear up for. Given a choice between building a pair of 100,000 b/d fractionation trains at Hopedale or Majorsville etc or moving the action to the GC I think MWE is making the right decision. The alternative IMO would be for SXL to install a big fractionation complex at Marcus Hook and a new 400,000 b/d Mariner East II to supply it. I think that one unlikely anytime soon.
If you ever wonder about value creation ask yourself what value the Sherwood complex with Antero as the lead customer has for MWE..the five 200 MM cuft/d cryo units at Sherwood cost roughly a $150 million each. The NGL line north another chunk of change,too. Call it a MWE investment of a $Billion perhaps..fully operational could MWE sell Sherwood for $1.5Billion+ ?? I should think so. You also have to wonder if the Marcellus extends further south than Sherwood....
Nice posts...thanks! My sense on all of this is that while MWE powers ahead the competition is trying to figure out where it can build a solid presence...clearly,MWE nailed the southern area of the Utica play is the best...and having Antero as the lead customer in both the Sherwood and Utica areas is a tremendous MWE asset. That said I think the key here is the binding season ending next month for the KMP/MWE JV Y pipeline to Mont Belvieu..Score that and the KMP/MWE cryo plants get firmed up...and competition will just have to adapt. I expect New Year will see KMP/MWE in the catbird's seat.
I kind of think on this one that SXL really dropped the ball and is now trying to play catchup. Recall that Mariner East original was announced as 70,000 barrels/day...but while MWE was ramping up cryo/fractionation volumes like crazy, we heard zip from SXL. ATEX gets announced for a 200,000 barrel capacity...we hear nothing from SXL...we start hearing about a second phase from Mariner East for SXL but no hard numbers..then comes the MWE/KMP announcement for 400,000 barrels/day heading for the Gulf Coast...and still no hard numbers from SXL. DPM announces a propane/butane export terminal on the Chesapeake to be supplied by RR tankcars from the Marcellus..and still no noise from SXL. SO, at this point we have like 50,000 b/day on Mariner West, 200,000 b/d capacity for ATEX,400,000 barrels/d for KMP/MWE, probably 50,000 barrels/d via RR to the Chesapeake for DPM, and 70,000 b/d for Mariner East for a total of 800,000 or so b/d. You have to figure Phase 2 for Mariner East at 150,000 b/d just for competitive purposes...but it will take a year or two at least to get it built...
I am pleased that TCAP is spreading out....and I hope it develops significant positions in Canada and Mexico in doing so. With or without Keystone the Canadian oil sands will bring in Mid East kinds of money..and that is well worth going for. In the case of Mexico once you look beyond the drug mayhem you will see a lot of reforms going on that will benefit the country and business scene.
KMP obviously was trying then to use its' size to go it alone...and I think it learned a Lesson when the MWE/SXL /Producer customers Team beat them..Also, KMP was proposing a lot of new pipe versus the simple retrofitting of existing pipeline by SXL. Flash forward to today. MWE.now a big,rapidly growing midstream operation and Market Leader in Marcellus/Utica. KMP competitors are big in midstream as well as pipelines: EPD,ETP,Williams. We're MWE to partner with EPD or Williams on the Y action to the Gulf, KMP would lose again. As it is KMP gets into midstream in a powerful way by JV with MWE. There is no doubt in my mind that KMP/MWE are going to chew on EPD, ETP,Williams,and the DCP Enterprise with this JV. MWE is now in the Big League of MLPs. In 2015, MWE will IMO have a unit price in the $90 to $100 range and a market cap pushing $20Billion. With Big Brother KMP our MWE will also forge a NGL fractionation/marketing position in the Mont Belvieu area. I can't wait to see which fractionator the KMP/MWE JV will be working with.
In the face of so much criticism of MWE's Q3 results and what I think of as a momentary unit price tumble why is it that I think the Q3 results are super? The reason is that even despite what we all recognize is a rapid,incredibly large buildup of infrastructure by MWE in the Marcellus/Utica the natural gas/NGL potential in those regions is now recognized as MUCH BIGGER than anyone including MWE could have foreseen. And guess which midstream company has established the Market Leader position in this growing El Dorado?? MWE's "Firstest with the Mostest" strategy/execution has made us all winners. Could anyone imagine that the fractionator a at Houston(PA) and Shiloam would be at capacity so soon? and,hey, that the Hoprdale fractionation unit completion has been accelerated so that it goes operational in 60 days or so? MWE obviously is spending more CAPEX to rush completion, but that's a real good move IMO. The second reason that all this delights me is that I have always worried about MWE being scarfed up by one of the behemoths running around. Think Williams,EPD,ETP,the DCP Enterprise(Spectra Energy/Phillips 66). I don't worry about it now. This Open Binding Season announcement on the Y Grade line to Mont Belvieu confirms all this. At this level you don't announce an open binding season unless you have the response wired. Either Antero or Range,for example, could commit the whole 150,000 barrels/day if they wanted to. So,what we have is a big $2Billion JV investment moving forward with tremendous strategic implications and our MWE is right there. You think Williams/Boardwalk or EPD are going to beat KMP/MWE? I don't. Richard Kinder is a big hitter and will make sure of that. And please realize that the biggest USA procucer of NGLs is DCP enterprise at 400,000 barrels/day. MWE will be at that level within the next two years and is growing faster than the DCP Team. I look forward to passing on my MWE units to the grand kids as a wonderful investment.
PS One other thought strikes me...The DCP Enterprise USA biggest producer of NGLs...400,000 barrels/day. Also controls pipelines going to Mont Belview San hills etc. as well as NGL marketing fror APL. EPD brings NGLs from Eagle Ford etc etc. Targa doesn't have a lot of pipeline control, and getting first crack at a torrent of up to 400,000 barrels/day of NGLs from the ne like manna from heaven. Can't wait to see response from Williams/Boardwalk with Bluegrass!!!!
Nymarv:,in 2014, fractionation capacities at Mont Belvieu in Mbarrels/day will be Oneok 275, EPD 610, Gulf Coast 155, Targa 390, and Lone Star (ETP 200). 20% of Oneok operation owned by DCP Enterprise. 12.5% of EPD fraction owned by DCP Enterprise and 12.5% owned by Phillips 66. OK, who will it be working with KMP/MWE. I rule out E PD because of ATEX. I rule out Oneok because DCP guys are building a propane/butane export terminal in Hampton Roads aimed at Marcellus/ Utica RR shipments. I rule out Lone Star because ETP is kind of bulking up with SXL,Regency,PVR etc and I kinda think that KMP/MWE are going to use their JV to beat EPD and ETP to death. So, in my opinion the new KMP/MWE partner will be Targa. Note that Targa not only has lots of fractionation but it also has export capacity at Galena Park and in the future at Patriot. Targa also has zero interests currently in the NE. Producers signing up with targa would thus get access to immediate export,too. Having just finished a 100,000 b/d fractionator Targa looking to build another. Working with KMP/MWE would allow them to do it IMO. Disclosure I own units in MWE,DPM,EPD,and Targa. DPM run by DCP. Regards
Couple of comments...first is that our Gulf Coast refinery complex is the biggest in the world and is a USA National Treasure..it's now bringing in tons of money from the export of refined products to South America and even to Europe and Asia. You want to get Canadian crude to the Gulf Coast to protect us and keep China from building even more refineries. Second. Who cares if Keystone is built? Railroads can handle the action fine. It's more dangerous, but a unit train carries a finite amount in the 70,000 barrel range that can be contained/burned more easily than dealing with pipeline leaks/seepage. Third: we have 300 million people in the USA all of whom feel that they deserve cars,AC,refrigeration etcetera.Takes fuels. Want environmental purity? Cut the population drastically.
You gotta love the enviro wackos: "Keep fracking out of my backyard, but do bring California refineries all that fracked oil from the Bakken, the Permian etc etc and if there are no pipelines available use RR tank cars to do it." Killing Keystone is another example...the Canadian oil will arrive via RR tank cars anyway...and Obama can take credit for all those new RR jobs!tank car manufacturing jobs, and clean up jobs when RR tank cars derail!!
You raise a really good point..it's easy to cite the "Company line" of no big deal...you got to figure that any pipeline in this day and age has all sorts of insurance,especially one in the rugged WV hills. And I can't imagine Antero getting uptight about Sherwood after the monster IPO it had...MHR has problems of its' own,and probably welcomes insurance cash. And it's not like anyone is venting unprocessed natural gas,either..but I agree with you that there is a $ hole that's fairly large that I suspect will be papered over somehow. It's also noteworthy that MWE is remarkably close mouthed when it comes to operational details. You really have to check the line items in the corporate presentations to see if cryo units etc are on schedule or not...I was surprised when they even put out the press release on the line break. It was supposed to be repaired in mid October, but I haven't seen anything on that yet,either. Hopefully, this CC will be a good one.
From MWE 9/30 press release:."Mgmt is not expecting financial report to be impacted owing to the pipeline incident". Also MHR didn't expect Mobley shutdown to make much difference,either. MWE was trucking a lot of SHerwood NGL production until the pipeline was repaired. What is interesting is that MWE is getting big enough that taking 200Million cuft/day or so out of production for a month or so is kind of inconsequential! We shall see,however...it's a great excuse if they need one!