Cochin Pipeline

The recently (re)announced Kinder Morgan Utica Marcellus Texas Pipeline (UMTP) is that company’s second iteration of a natural gas liquids (NGL) pipeline from Ohio to the Texas Gulf Coast. If built – the project would facilitate delivery of mixed NGLs (y-grade) and purity NGL products from the Utica to the Gulf Coast - where the liquids could be further processed and/or exported. Those purity products could include both plant and lease condensates. But as we discuss today - the project might currently be more attractive to NGL shippers anxious to get better prices for stranded northeast production than it is to condensate producers.

Last winter a Midwest propane shortage of epic proportions caused prices at the Conway, KS trading hub to spike over $4/Gal in January 2014 (nearly twice the price of crude oil at the time). The shortage was caused by a perfect storm of events starting with high propane demand from farmers for crop drying in the late fall and ending with record retail and commercial heating demand during the Polar Vortex cold weather in January. The high demand was compounded by the partial closure of the Kinder Morgan Cochin pipeline supplying propane to the Midwest from Western Canada and a temporary shutdown of the Hess Tioga fractionation plant in North Dakota, not to mention booming Gulf Coast propane exports reducing domestic availability. This year the Midwest propane market appears to be much better supplied in spite of the loss of the Cochin pipeline that has now been reversed to carry diluent to Canada. Prices should therefore be less volatile than last year – unless Mother Nature throws another icy winter curve ball. Today we look Midwest propane prices and supply this year.