Infrastructure in the Permian is about to receive a boost from Lone Star NGL, a joint venture between Energy Transfer Partners (ticker: ETP) and Regency Energy Partners (ticker: RGP).
The two companies have approved the construction of the Lone Star Express pipeline, which will connect the Permian Basin to Mont Belvieu, the world’s largest natural gas liquids (NGL) hub, located about 30 miles inland from the Gulf of Mexico. The pipeline will consist of both a 24 and 30-inch pipeline intended for the transportation of NGLs, while the existing 12-inch pipeline will be modified for crude transport. The targeted operational date is Q3’16 and Q1’17, respectively, and is expected to cost between $1.5 and $1.8 billion.
Lone Star NGL’s Position
The new pipelines include 375 MBOPD of takeaway capacity to Bosque County, Texas, and another 495 MBOPD of takeaway capacity from Bosque to the Mont Belvieu plant. The company said the pipelines can be expanded to handle additional volumes.
Energy Transfer Partners, the majority owner (70%) of Lone Star, says the entity owns more than 2,000 miles of pipelines, three NGL processing plants, two fractionalization facilities and NGL storage facilities with an aggregate working storage capacity of roughly 53,000 MBO. A third fractionalization facility is expected to be completed by December 2015, and the joint venture has enough acreage to build three additional fractionators if necessary.
The newest addition to the Lone Star network is intended to offset declining production in the Barnett Shale. Its position at Mont Belvieu provides the company access to a variety of markets, most notably of the export variety. In a company presentation, ETP said Mexico will import approximately 4.5 Bcf/d of natural gas by 2016 – up from approximately 1.8 Bcf/d in 2013. ETP anticipates petrochemical development in Texas and Louisiana will create additional demand, and the LNG market could require as much as 14 Bcf/d of incremental capacity by 2019.
The company has roughly $10 billion in future expansion projects, with $4.1 to $4.5 billion occurring to date in fiscal 2014. Included in the expenditures is the $1.8 billion acquisition of Susser Holdings (ticker: SUSS), providing ETP with access to one of the largest non-refiners in Texas. ETP gained exclusive access to roughly 630 Texas-based retail stores as a result of the acquisition. Energy Transfer Partners first established a stakehold in the retail business with the $5.3 billion acquisition of Sunoco LP (ticker: SUN) and its 4,900 retail locations in April 2012.
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