There Are Storage Hubs and Then There is Mont Belvieu

In a report (DOE Report) issued to Congress in late 2018, the U.S. Department of Energy reviewed the status of the natural gas liquid (NGL) hubs in North America. The report identified three hubs, Sarnia, Ontario; Conway, Kansas; and Mont Belvieu, Texas. The report noted that Sarnia has over 20 million barrels of NGL storage capacity, Conway has 21 million barrels, but that Mont Belvieu, the largest NGL hub in North America, has over 240 million barrels of NGL storage capacity, which makes it equal to 12 of the other hubs.

With the recent and planned additions to the pipelines that are designed to deliver NGLs to Mont Belvieu, today we look at the storage assets that are currently there and identify the storage providers that are well situated to grow with the increase in pipeline capacity. As noted in the DOE Report, storage plays a critical role because it mitigates production volatility and reduces risk for those end users that need a steady and reliable stream of feedstock.

The bottom line is that while the current storage capacity at Mont Belvieu is large, there is still substantial room for growth. Of the major players in the region building new pipelines to Mont Belvieu, Enterprise Products is currently in the best position, primarily because it has already received regulatory approval for substantial additions to its currently utilized capacity. However, Targa and ONEOK may be looking to further increase their previously approved cavern storage capacity to handle the increasing volumes as their pipelines fully ramp up.

Increases in Pipeline Capacity to Mont Belvieu

Our customers that receive our monthly Permian Edge for NGLs know that there are two recent pipeline additions that have the potential to increase delivery of NGLs to Mont Belvieu by over a million barrels per day (bpd). Enterprise Products’ Shin Oak pipeline began interim service in February at a capacity of 250,000 bpd and is expected to be fully operational by the end of this year at a capacity of 550,000 bpd. Targa’s Grand Prix Express went into service in August and is scheduled to ramp up over the coming months to its full 450,000 bpd capacity. Targa has indicated that the pipeline is ultimately capable of moving 950,000 bpd with additional pumping stations.

There is also a third pipeline scheduled to bring more barrels to Mont Belvieu, ONEOK’s Arbuckle II pipeline. That pipeline is designed to move 500,000 bpd from ONEOK’s NGL gathering lines in Oklahoma to the Mont Belvieu hub. The Oklahoma portion of that pipeline was completed earlier this year, and, just this month, ONEOK began requesting authority to hydrotest portions of the pipeline located in Texas. This project is supposed to be in-service in the first quarter of 2020.

Some Mont Belvieu Storage Providers Seem Ready But Others May Need to Expand

As described in the DOE Report, Mont Belvieu sits above a salt dome. Since the 1950s, oil companies have built enormous underground storage caverns that are leached out from the salt dome. Currently, over 240 million barrels of NGL storage capacity is available there, making it the largest underground storage field in the world. These storage caverns are regulated by the Texas Railroad Commission (TRRC). Set forth below is the total storage capacity of the caverns that has been permitted by the TRRC, broken down into the capacity that has been permitted and is currently being used and the capacity that has been approved but is not yet in active use.

As can be seen, the total currently approved capacity is much greater than the 240 million barrels mentioned in the DOE Report. The productive capacity of the storage domes appears to be much less than the total capacity approved by the TRRC. For instance, Enterprise Products’ Mont Belvieu Caverns has a total approved active capacity of 311 million barrels, but a reported working capacity of only 130 million barrels. Similarly, Targa reports that the operating capacity for its field is only 50 million barrels, but its total approved capacity is 95 million barrels.

Each of the storage operators affiliated with the new pipelines coming to the area has already received approval from the TRRC to operate additional amounts of storage fields in the Mont Belvieu complex. Assuming only half of that additional capacity will be working capacity, then Enterprise Products has approximately 75 million of additional working capacity already approved, which equates to about 136 days of throughput for the Shin Oak line once it is in full service. Targa has about 12.5 million barrels of additional approved capacity, which is about 27 days of throughput for the Grand Prix line that went into service in August. ONEOK has only about five million barrels of additional approved capacity, which equates to only ten days of throughput from its Arbuckle II line once it is fully in service next year.

Tariffs Tell You Where the NGL Can Easily Go

With the information found in our oil rate and route platform, it is easy to determine the possible sources for NGLs and how they can get to the storage fields at Mont Belvieu. Not surprisingly given the overall size of its working capacity, the storage fields that have the most connections, and thus optionality, are the ones owned by Enterprise Products. Set forth below is a map showing all of the origin points in the country from which there are pipelines that offer service to Enterprise Products’ storage fields at Mont Belvieu.

Pipeline Transport to Enterprise Products’ Mont Belvieu Storage

With the tariff search capabilities our platform offers, you can determine that the base rates for those paths vary from a low of $1.52 per barrel for some of the origins in Texas to over $9.46 for shipments originating in Colorado. You can also quickly compare various special charges that may apply, such as re-consignment, demurrage, off-spec penalties and minimum tender requirements.

If you are not currently receiving our Permian Edge report for NGL pipelines, please let us know. And if you would like more information on determining the pipelines providing services and tariffs applicable to or from a key origin or destination, please ask to see our new oil rates and routes platform.