The Houston Ship Channel (HSC) is working around the clock to keep liquefied petroleum gas (LPG) cargoes moving, thanks to a recent change in local maritime rules. Several midstream names are benefiting as LPG exports continue to hit new records.
In November 2023, the Houston Pilots Association, the organization representing marine pilots who ferry boats into and out of the HSC, amended its navigation safety guidelines. The group struck its “no night transit” restriction previously imposed on LPG tankers, allowing all-night pilotage services through the Houston channel. 
Targa Resources (TRGP) and Enterprise Products Partners (EPD) will benefit the most from the change in channel operations, according to East Daley’s NGL Network Model. During 4Q23, TRGP shipped 435 Mb/d of LPGs from its export dock, operating at ~98% utilization (nameplate capacity is ~445 Mb/d). EPD had more room at its Enterprise Hydrocarbons Terminal (EHT), shipping almost 700 Mb/d in 4Q23 vs capacity of 835 Mb/d (84% utilization).
There is some ambiguity around the true operational capacity of LPG docks. Targa notes its monthly export capacity is dependent on propane and butane demand and vessel size, for example. What we know is that capacity is very tight.
The figure shows LPG exports and dock capacity data available in the NGL Network Model. Historical LPG exports out of PADD 3 (the blue-shaded area in the figure) near dock capacity (the black line, all owned by midstream companies) in 2H23. The result is high spot loading fees earned by dock owners, and downside risk to propane prices if growing US NGL supplies cannot reach international demand.
The newfound ability to move LPG vessels 24 hours a day out of Houston is helping mitigate the insufficient dock capacity. Targa said the change to piloting hours will increase the effective capacity of its own dock by 5-10%. Enterprise also acknowledged the ability to move more vessels after the daylight restriction was removed. A 7.5% increase in dock capacity (see the red dashed line in figure) would add ~100 Mb/d of capacity for TGRP and EPD on a combined basis.
This effective capacity increase will alleviate temporary dock tightness next winter before EPD and Energy Transfer (ET) increase dock capacity in 1H25 by 120 Mb/d and 250 Mb/d, respectively. – Rob Wilson, CFA Tickers: EPD, ET, TRGP.
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