Must-know: Why MLPs benefit from the crude oil shale boom (Part 7 of 8)
Enterprise Products Partners
Enterprise Products Partners L.P. (EPD) is a midstream oil and gas operator. In the Permian Basin, it has 674 miles of crude oil gathering and pipeline transmission. It has a storage capacity of 2.1 million barrels, including 1.4 million barrels at Midland. In the Permian plain, it currently has 466 rigs working. The company’s internal forecast shows that the production in the Permian Basin can grow up to 2.7 million barrels per day by 2020—a growth of around 59% from the current level.
EPD owns the Eagle Ford crude oil pipeline system. It transports crude oil and condensate for producers in south Texas. The system commenced operations in July, 2013. It is operated by Plains All American Pipelines (PAA). It has an initial transportation capacity of 300,000 barrels per day and 1.8 million barrels per day of storage capacity. The system also includes a marine terminal facility at Corpus Christi, Texas.
In September, 2013, EPD and PAA announced an expansion of the Eagle Ford pipeline. The expansion is aimed at accommodating higher volumes from the Cactus pipeline and will increase the pipeline system’s capacity to transport light and medium grades of crude oil from 300,000 barrels per day to 470,000 barrels per day. In addition, EPD is also constructing 2.3 million barrels of storage capacity at Gardendale and Corpus Christi, Texas, which is expected to be completed during 2Q15.
Jim Teague, the Director and chief operating officer (or COO) of EPD, commented in the annual conference call of 2013, “We are expecting to do it in 2014 and the Eagle Ford, our buildup is all but complete. The Eagle Ford continues to exceed our expectations and our assets are running at high utilization rates.”
In the Permian Basin in west Texas, EPD owns the Basin Pipeline that transports crude oil from the Permian Basin and southern New Mexico to the Cushing hub. EPD has net ownership interest of ~0.8 million barrels of crude oil storage in the Basin pipeline.
Unlocking crude oil storage and terminalling capacity boosts shale production
EPD’s Enterprise Crude Houston (or ECHO) owns a storage terminal in Houston, Texas as an expansion of its south Texas Crude Oil Pipeline system and Seaway Pipeline. Historically, refineries in southeast Texas imported crude oil before the oil shale boom. Following the growth of crude oil production in North America, especially from resource plays of Eagle Ford, Permian, Mid-Continent, and Bakken into the Gulf Coast market, there has been a storage capacity bottleneck and inadequate handling of distribution system for varying grades of crude oil flowing into the pipelines.
EPD has stepped up to meet the opportunities resulting from the lack in midstream infrastructure. It made plans to significantly increase its crude oil storage and distribution capacity in the southeast Texas refinery market. It has commenced constructions to add approximately 4.4 million barrels of new crude oil storage capacity at its ECHO terminal. This will increase ECHO’s capacity to approximately 6.5 million barrels. Also, it will connect the ECHO storage facility with several major refineries in the southeast Texas market. EPD plans to construct 55 miles of associated pipelines. The entire project is expected to come online in 2Q15.
Jim Teague, the Director and chief coordinating officer (or COO) of EPD, said in the conference call of 1Q14 earnings, “We are also going to growing on another 900,000 barrels of new storage into service at ECHO, over the next 18 months—12 months to 18 months we will continue to add capacity at ECHO, as we had to being adding more than $6 million barrels a day, and frankly I think that needs to be larger. That is in conjunction with ECHO. We also continue to buildout our crude oil delivery systems in the Houston Ship Channel and Texas City which is a key to our ECHO success.”
The midstream oil companies that engage in the transport and logistics of crude oil have been very active for the past five years, as a result of increasing production in the U.S. The master limited partnerships in the midstream space that have benefited the most from the shale oil boom are Enterprise Products Partners L.P. (EPD), Genesis Energy L.P. (GEL), Targa Resources Partners (NGLS), and Plains All American Partners (PAA). These are components of the Alerian MLP ETF (AMLP) and the Global X MLP ETF (MLPA).
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