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Rapid oil and gas production in the United States necessitate
new infrastructure projects thatsupport upstream activity,
increasing the production rates of oil, natural gas, and natural
gas liquids (NGL) while simultaneously connecting suppliers to
end-use markets. In response to elevated 2018 prices, crude oil
production and associated natural gas production increased. US
natural gas production rose from 76 billion cubic feet per day
(Bcf/d) early in the year to 87 Bcf/d at year's end, a net 14.5% or
11 Bcf/d rise equivalent to the net gain realized between 2012 and
2017.
The prolific, highly economic unconventional oil sub-plays in
the Permian basin and other unconventional oil plays such as the
South Central Oklahoma Oil Province (SCOOP) and Sooner Trend
Anadarko Canadian Kingfisher (STACK) were focal points in the oil
drilling activity boom, bringing associated natural gas and NGLs.
Other unconventional oil plays like the Bakken and Niobrara shales
have also provided incremental associated natural gas and NGL
volume and production support. This trend is expected to continue
over the next three to five years, necessitating infrastructure
capacity additions.
Correspondingly, pipeline capacity constraints developed for
crude oil, natural gas, and the NGL infrastructure. Upstream
companies' volumetric needs do not always match midstream asset
capabilities, and at times infrastructure investment lags upstream
activity. For example, in the first half of September 2018, ethane
prices spiked from 41 cents per gallon (cpg) to 61 cpg over a
two-week period, thanks to a shortage of NGL fractionation capacity
in Mont Belvieu. Midstream capacity additions are needed across the
NGL supply chain, connecting increasing supplies with rising
demand. Figure 1 illustrates new NGL supply chain projects, which
are described in the following sections.
Permian Basin
NGL produced in the Permian and delivered to the US Gulf Coast
will be greatly affected in the coming months by major projects
from Enterprise Products Partners, Targa Resources, and EPIC
Pipeline.
Enterprise Products Partners - Enterprise is cementing its
dominance in West Texas with intense growth projects. The Shin Oak
NGL pipeline is a 550 thousand barrels per day (MBPD) pipeline
connecting production from the expanding Orla gas plant to Mont
Belvieu. Orla will be expanding by 200 million standard cubic feet
per day (MMscfd) just as Shin Oak comes online in second quarter
2019. Further, Enterprise is in the process of commissioning their
Seminole NGL conversion project. The 260 MBPD Seminole pipeline
runs from the Permian to Mont Belvieu. The conversion is expected
to be complete by April 2019 with limited service in February and
March 2019. Moreover, two 150 MBPD fractionators under construction
in Mont Belvieu are scheduled for completion in 2020. This brings
Enterprise to a nameplate fractionation capacity of 1 million BPD
in Mont Belvieu and 1.5 million BPD company-wide (see Figure
2).
Targa Resources - Targa is strategically increasing its
presence in the Permian with investments from Stonepeak
Infrastructure Partners. Targa's NGL growth projects include the
300 MBPD Grand Prix pipeline, which is expandable to 550 MBPD and
expected in service by second quarter 2019. Targa will construct
over 200 miles of high-pressure rich gas-gathering pipelines in the
Delaware basin as well as four 250 MMscfd gas processing plants
from first quarter 2019 to second quarter 2020. Targa is also
constructing three new fractionation trains in Mont Belvieu, which
will add 320 MBPD of capacity. These fractionators will come online
in stages from second quarter 2019 to second quarter 2020.
EPIC Pipeline - EPIC was formed in 2017 to meet infrastructure
needs in the Permian Basin and Eagle Ford Shale. EPIC announced two
pipelines dedicated to crude oil and NGL service to Corpus Christi,
Texas. Phase one of the pipeline runs from the DLK Black River gas
plant to the Delaware Basin Midstream terminal and came online in
March 2018. It is served by five gas plants with a combined
capacity of 1 Bcf/d. Phase two, which started in June 2018, extends
the line to Benedum, Texas. Phase three will run to Corpus Christi,
Texas and is scheduled to be in interim service in third quarter
2019. When finished, the pipeline will have a throughput capacity
of 440 MBPD.
Soaring crude oil transportation demand led EPIC to designate
phase three for crude service until construction on the EPIC Crude
Oil Pipeline and first EPIC NGL fractionator is complete in early
2020. A second fractionator is expected in service in 2021. Both
fractionation trains are in Corpus Christi and have capacities of
100 MBPD each.
Cushing Hub - SCOOP/STACK Oklahoma and
Mid-continent NGL production from Mid-continent will see
significant near-term increases from projects by DCP Midstream and
ONEOK, Inc.
DCP Midstream - DCP completed major projects in
the DJ Basin in 2018. The 200 MMscfd Mewbourn 3 and 300 MMscfd
O'Connor 2 gas plants will increase the company's processing
capacity in the region to more than 1 Bcf/d by second quarter 2019.
DCP plans to expand its existing NGL pipeline capacity at the same
time. The partnership announced a 100 MBPD expansion for the Front
Range pipeline, bringing total takeaway to 250 MBPD. An expansion
of 90 MBPD was also announced for the Texas Express pipeline,
bringing nameplate capacity to 370 MBPD. In May 2018, DCP announced
that the Southern Hills NGL pipeline will connect the DJ Basin to
Cushing, Oklahoma and beyond via the White Cliffs pipeline. The
White Cliffs pipeline, formerly in crude service, is expected to
have a total capacity of 90 MBPD and is scheduled to be in service
in fourth quarter 2019. White Cliffs is expandable to 120 MBPD.
ONEOK, Inc - ONEOK announced multiple new
infrastructure projects in 2018 with a capital expenditure of over
$2B, including:
The 400 MBPD Mid-continent to gulf coast Arbuckle II NGL
pipeline slated for first quarter 2020 with a 100 MBPD expansion in
first quarter 2021
The 240 MBPD Williston Basin to Conway Elk Creek NGL pipeline,
expected in service at the end of 2019
Two 200 MMscfd gas processing facilities at its Demicks Lake
complex in McKenzie County, North Dakota, slated for first quarter
2020 and first quarter 2021 service
A 60 MBPD expansion of its West Texas LPG (WTLPG) pipeline
system, planned for first quarter 2020.
Two 125 MBPD fractionators in Mont Belvieu, Texas, expected in
service first quarter 2020 and first quarter 2021
Thus, 2019 will register net additions of 1.3 million BPD of NGL
pipeline capacity and 305 MBPD of fractionation capacity on the US
Gulf Coast. In 2020, another 900 MBPD of pipeline capacity is
scheduled, with 1.2 million BPD of fractionation capacity on the US
Gulf Coast.
Posted 01 May 2019 by Cynthia Poynter, Executive Director, Midstream, IHS Markit and
