ONEOK (OKE) is rebuilding a 210 Mb/d fractionator in Medford, OK damaged in an explosion in July 2022. Medford is far away from the bustling Mont Belvieu NGL hub in southeastern Texas. Nevertheless the move makes sense to East Daley Analytics, allowing OKE to use its NGL assets more effectively connecting Conway, KS to Mont Belvieu.
EDA monitors Mont Belvieu and Conway activity in the NGL Hub Model, as well as the Ethane and Propane Supply & Demand purity product forecasts. Most of what is fractionated at the Conway hub is delivered in the Midwest as propane, butane and natural gasoline. The regional demand market is relatively flat, aside from modest fluctuations from weather or consumer-driven variability. By contrast, Mont Belvieu takes center stage for NGL demand growth, given its exposure to Gulf Coast petrochemicals and international exports.
So why rebuild in Medford? Here is the logic we see:
ONEOK’s Arbuckle pipelines (shown in pink and orange lines in the map) ship Y-grade (mixed NGLs) from Conway to Mont Belvieu, moving supply from the Bakken, Rockies, Midcon and Permian. The Arbuckle system is highly utilized at 83% over the latest 12 months ending 1Q24, according to the NGL Hub Model. By contrast, OKE’s Sterling purity product system is woefully underused at 36% utilization over the 12 months ending 1Q24.
The new 210 Mb/d frac will be able to separate ethane from propane more effectively than the old Medford frac. The new frac could be a gamechanger for OKE, allowing the company to more effectively use the Sterling pipes to deliver purity product to the growing Mont Belvieu market.
At the same time, pulling more Y-grade from Arbuckle to Sterling via the new Medford frac will create more effective capacity on Arbuckle for future supply growth.
East Daley will address where this supply growth will come from, and potential sources of demand for purity product, in The Daley Note next week. Clients can review our follow-up in the latest weekly Data Insights delivered every Monday morning. – Rob Wilson Tickers: OKE.
NEW Webinar – Fast and Furious: Production, Constraints and Opportunity
East Daley will host our latest MCAP webinar on September 25th at 10 am MT. In “Fast and Furious: Production, Constraints and Opportunity,” we will look at opportunities across the energy complex:
- Crude: Double H Conversion's impact on crude fundamentals, and who can capture that upside.
- Gas: What the Blackcomb pipeline means for TRGP's G&P growth in the Permian.
- NGLs: The fight for barrels in the Permian, and the implications of OKE's acquisition of ENLC.
Register here to join us.
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