Ever-increasing production of natural gas liquids is driving another round of fractionation capacity expansions in Mont Belvieu, TX, which is—and will remain—the hub of US fractionation activity. But Mont Belvieu fractionators are not without competition. Huge increases in fractionator capacity are also coming on-line in Appalachia to handle the rising volumes of natural gas liquids (NGLs) coming out of the Marcellus and Utica. Mont Belvieu may be king of fractionation, but others want a share of the kingdom. Today we update the ongoing NGL production boom and plans to add fractionation capacity in Mont Belvieu and NGL-related export capability nearby.
Production of mixed NGLs has risen sharply in the past five years, and the pace of growth is only increasing. Almost all of these mixed NGLs are the product of natural gas processing plants, which have increased in number by about 125 or 25 percent over the five year period. Fractionation facilities separate mixed NGL streams (sometimes known as “y-grade”) into so called “purity” products - ethane, propane, normal butane, isobutane and natural gasoline (also known as C5+) that are used in a wide variety of petrochemical, heating, gasoline blending and other markets. Mont Belvieu (about 30 miles east of Houston) has traditionally been the center of the fractionation world because of geography and geology. It is located near several oil and gas production regions; it is in the heart of petrochemical production; it is along the coast (necessary for both importing and exporting); and it sits atop one of the world’s largest salt dome formations (which provide ideal storage capacity for all kinds of volatile hydrocarbon products that must be stored under pressure). Given the US’s new leadership in the availability of low-cost NGLs, another key reason for Mont Belvieu’s importance is its proximity to existing and planned olefin cracking capacity and to existing and planned export facilities for propane, butane and other NGLs. As we have said in many other blogs (see for example Changes in Longitudes—Ethane Exports to Europe), the US shale revolution is spurring a major revival of petrochemical production, particularly along the Gulf Coast, that will result not only in increased olefin production (petrochemicals such as ethylene, propylene, etc.), but in increased exports of olefins and their derivative products. Because of its leader status, Mont Belvieu prices for NGLs and purity products also serve as the benchmarks, or prices against which NGL prices in other parts of the US are referenced.
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US fractionation capacity totals about 4.4 MMb/d; of that, 1.6 MMb/d is in Mont Belvieu, and several expansion projects are under way or being considered there. Competition for fractionation business and market share is based on three primary factors: (1) the fractionation fee, (2) the ability of the fractionation company to provide the pipelines, storage capability and other key logistics needed to smoothly move product through the process, and (3) the demand (and prices) for purity products in the fractionator’s local market. In addition to competing with each other, the Mont Belvieu fractionators also compete on a more limited basis with fractionators in Conway, KS, a number of decentralized, smaller fractionation facilities around the country, and increasingly with fractionators in the Appalachia.
There are four big players in Mont Belvieu fractionation: Enterprise Products Partners (EPD), Targa Resources Partners, ONEOK Partners, and Lone Star NGL (Energy Transfer). EPD owns all or part of eight NGL fractionation plants in Mont Belvieu with a combined capacity of 670 Mb/d (EPD owns all but about 100 Mb/d of that), while Targa owns all or part of fractionators with a combined capacity of 538 Mb/d. ONEOK and Lone Star follow with 235 Mb/d and 200 Mb/d, respectively. Now we will begin our look at each of the Big Four individually, note their recent fractionator additions, and discuss expansions under construction or planned.
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