Best of 2024: The Daley Note: May 9, 2024. It may have flown under the radar of some investors, but Enterprise Products (EPD) has thrown a wrench into NGL markets. The midstream company quietly announced 450 Mb/d of ethane export commitments, scrambling the NGL outlook in two ways.
The whopping 450 Mb/d of ethane commitments were mentioned by CEO Jim Teague during EPD’s Investor Day on April 3. In a follow-up correspondence, EPD management did not dispute the number.
East Daley Analytics tracks LPG exports in the NGL Hub Model and the new Ethane Supply and Demand Report. We see two implications from the EPD announcement.
First, the potential contracts imply that EPD’s new Neches River NGL export facility would need to be used exclusively for ethane service, leaving overall LPG export capacity very tight.
Enterprise is planning the Neches River project near Beaumont, TX in two phases. Phase I includes a 120 Mb/d ethane refrigeration train, while Phase II would be a flex facility that could export ethane (+180 Mb/d) or propane (+360 Mb/d).
EPD currently exports about 200 Mb/d from its Morgan’s Point facility on the Houston Ship Channel (see figure). The facility can export up to 240 Mb/d of ethane. Morgan’s Point was underwritten with up to 180 Mb/d of commitments with Reliance Industries, the India-based conglomerate, as an anchor shipper when it went into service in September 2016.
Unless the contracts at Morgan’s Point roll off (a possible but not probable scenario in our view, based on Reliance’s desire for access to cheap ethane feedstock), the additional 270 Mb/d of commitments (450 Mb/d minus 180 Mb/d) would require the entire capacity at Neches River.
Under this scenario, the only LPG expansions in sight are 120 Mb/d from EPD (estimated in-service date of 1H25) and 250 Mb/d from Energy Transfer (estimated ISD mid-2025). This scenario would leave LPG export capacity (propane and butane) very tight in the NGL Hub Model.
The Enterprise announcement is important in another way. The 450 Mb/d of commitments introduces visibility into future international demand. As a result, EDA is revising our outlook on the ethane supply and demand imbalance in 2026.
We will cover this development in more detail next week. To learn more, check out the new Ethane Supply and Demand Report and Data Set. - Rob Wilson Tickers: EPD, ET.
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