Can Mont Belvieu Handle the NGL Supply Surge? - Part I

 

By 2013, nearly 300Mb/d of incremental NGL supply will flow to Mont Belvieu from the burgeoning U.S. wet gas shale plays. Belvieu continues to dominate the NGL universe because of its critical location at the center of NGL gathering systems, product distribution pipelines and the Gulf Coast petrochemical feedstock market.  Is this hub big enough to handle the huge production growth?  Who stands to benefit from all of the infrastructure expansion?   In Part I of our series on Mont Belvieu titled Can Mont Belvieu Handle the NGL Supply Surge? we’ll examine this thing called Mont Belvieu and look at the “Big Four” Belvieu players to see how their assets dictate trading terms at the hub.

Where is Mont Belvieu?

If you have followed RBN Energy’s NGL related blogs at all, you are probably familiar with the term “Mont Belvieu.” You might also have wondered just what and where Mont Belvieu is? Well, it’s a real place - a little town in Texas, about 30 miles east of downtown Houston, and home to about 3,800 people. Mont Belvieu sits 73 feet above sea level and covers approximately 14 square miles (see map below).

Since the 1950’s, Mont Belvieu has been the center of the universe for Natural Gas Liquids (NGLs). The town sits next to the Houston Ship Channel and on top of Barbers Hill, one of the largest underground salt dome formations in the world. This salt dome is about 2,000 feet below sea level and was originally “mined” (washed out with a water solution) by Warren Petroleum to create hundreds of individual wells used to store NGLs under pressure to maintain their liquid state.  Surrounding these storage wells is a mass of pipelines connecting NGL fractionators (plants that transform raw mix feedstock into constituent, “purity product” NGLs) and various other hydrocarbon and petrochemical facilities. This infrastructure includes everything an NGL molecule needs for its life cycle and is what ultimately drives the price of that molecule. 

Why is Mont Belvieu the Center of the NGL Universe?

Mont Belvieu owes its existence to the salt dome storage.  A lot of NGLs are not consumed when they are produced.  Propane in the heating market is stored in the summer and burned for fuel in the winter.  Butane is produced by refineries in the summer and used in the winter when vapor pressure requirements permit.  Other NGLs have similar usage patterns that require lots of storage to balance supply and demand.  Since storage is so important to the NGL business, and since Mont Belvieu had the perfect salt dome structure for NGL storage, it made sense to build infrastructure to process inbound NGLs, store them and then distribute the finished product when it was needed. 

Today Mont Belvieu can be considered a giant NGL processing hub. To start, most NGLs come into Mont Belvieu as a raw stream (y-grade) via pipeline. They are then treated, processed, fractionated (becoming purity product, ethane, propane, normal butane, isobutane and natural gasoline), stored, bought, sold, traded, and sent to end-use markets.

Fractionated purity NGL products are distributed to markets around the United States as follows:

  • Gulf coast ethane and ethane propane mix are delivered to petrochemical plants as feedstock
  • Propane typically goes to petrochemical production and to end users for home heating.
  • Normal Butane and Isobutane go to refinery blending, alkylation and petrochemical production.
  • Natural gasoline primarily goes to petrochemical production, refinery blending, oil sands diluent and ethanol blending.  

A number of major competitive advantages underlie Mont Belvieu’s position at the center of the NGL universe:

  • Extensive salt dome storage facilities
  • A network of pipelines gathering raw stream gas liquids into Belvieu from major production areas in Texas, Oklahoma, the Rockies and the Conway trading hub in Kansas
  • Numerous fractionation facilities that separate raw stream NGLs into products.
  • The proximity of petrochemical plants and oil refineries that consume NGL products as feedstock.
  • Connection to a pipeline distribution network delivering NGL products to end user markets in the Northeast (TEPPCO pipeline), the Southeast (Dixie Pipeline) and along the Mississippi delta.

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