NGLs Standing By - The Fractionation Crunch Continues, But Help Is on the Way

Fractionators at the Mont Belvieu hub operated at or near full capacity through the second half of 2018 as they struggled to deal with a deluge of mixed NGLs from the Permian and other key production areas. This situation — barely enough capacity to keep pace with rising demand for fractionation services — is likely to continue through 2019, even as a number of new fractionators come online. But NGL producers and the midstream sector are on the case: a slew of additional frac capacity has been announced since last fall, all of it slated to begin operation in 2020 or early 2021, and all of it backed by long-term contracts. Today, we discuss ongoing efforts to make the most of existing frac trains and to add new capacity pronto.

The fractionation of mixed NGLs (or y-grade) into purity products like ethane, propane, normal butane and natural gasoline has been a regular topic in the RBN blogosphere. Last May, we kicked off a blog series — Magical Mystery Tour — in which we warned that soaring NGL production may soon overwhelm available frac capacity in Mont Belvieu, the NGL/fractionation hub located just east of Houston. By September, in Hotel Fractionation, we said that Mont Belvieu fractionation capacity was, for all intents and purposes, maxed out. Well, it still is, and midstream companies (backed by NGL producers) are scrambling to add new frac capacity, mostly in Mont Belvieu.

In our recent Drill Down Report on NGLs and fractionation (also issued in September), we cited plans by the leading frac-train owners in Mont Belvieu to build four new trains there with a combined capacity of 525 Mb/d. The first project — a 150-Mb/d facility developed by Energy Transfer’s Lone Star NGL subsidiary — started operating in February (2019) and is expected to be at full capacity in the next month or so. The three other projects are under construction. They include a 100-Mb/d train at Targa Resources’ Cedar Bayou Fractionators complex (scheduled to start up in the second quarter of 2019), a 150-Mb/d Enterprise Products Partners plant and a 125-Mb/d ONEOK unit (both slated to come online in the first quarter of 2020). Incremental NGL production — aided by new pipelines, like Enterprise’s Shin Oak Pipeline from the Permian to Mont Belvieu, which began operation on February 28 — is all but certain to ramp these new frac trains up to full capacity in no time.

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