Pre-dawn, mid-July, deep in the Eagle Ford: Sturdily built guys grip 20-pound bags of ice in each hand and, with straight arms, keep them close to their sides as they quickly shuffle from the convenience store entrance across the gravel of a brightly lit parking lot.

They wear dusty boots and faded jeans and plaid, lots of plaid, and they grunt as they heave the ice into the backs of near-identical pickup trucks and go back for more. By midmorning the sun will be high in the broad, clear South Texas sky, and the Eagle Ford will bake and these workers will squint and sweat and build.

Just like yesterday. And tomorrow.

The Eagle Ford, its roads lined with mesquite and cactus, its herds of cattle quietly sharing pasture with drilling rigs, may appear on the surface to be laid back, but consider it a laid-back economic juggernaut.

Midstream and the stock market

A stock/unit index of major midstream players in the play, selected from Midstream Business rankings and weighted by market capitalization, shows a 21.3% increase from Aug. 1, 2013, through Aug. 1, 2014. By comparison, the NASDAQ posted a 20% increase and the Dow Jones industrial average advanced just 5.5%.

Midstream has muscled its way into the planet’s most celebrated unconventional play, establishing an elaborate system that will keep the hydrocarbons flowing for decades. Export is next on the agenda for the Eagle Ford players, and the infrastructure they’re building that helped establish the current geopolitical playing field will be instrumental in rewriting the rules of how that game will be played.

Some 1,400 miles northeast of the wilds of Eagle Ford, commanding the corner of 14th Street and Constitution Ave. Northwest in Washington, D.C., sits the imposing Herbert C. Hoover Building, home to the U.S. Department of Commerce as well as the National Aquarium and White House Visitor Center. Somewhere behind the Doric columns of this neoclassical landmark, a legal determination was made and a document approved and issued in early summer that sources tell Midstream Business was of little to no consequence. Or, it changed the world.

Depends upon your point of view.

The private clarification by the Commerce Department’s Bureau of Industry and Security (BIS) allowed Enterprise Products Partners LP and Pioneer Natural Resources Co. to export a certain type of condensate that they produce. No one doubts that the initial mainstream media depiction of the Obama administration loosening the crude oil export ban was inaccurate, but the ultimate impact remains shrouded in bureaucratic mystery.

What happened?

“Bottom line, they have not made a policy change,” John Kneiss, Washingtonbased director of government affairs and U.S. policy for Hart Energy Research & Consulting, told Midstream Business. “They have not undertaken a regulatory change. They have issued a confidential clarification to the two companies.”

Then again, maybe the midstream sector just turned upside down.

“I think that this new ruling could spur a new round of buildout,” said Greg Haas, director of midstream at Hart Energy Research & Consulting, who described it as a “relief valve” for the play to Midstream Business.

“I believe that the Eagle Ford is large enough that it has barrels going in many directions—California, Mont Belvieu, Texas. We expect many of those barrels of fractionated NGLs to ultimately get exported out,” he said. Haas and his research and consulting colleagues have just released their comprehensive multiclient “2014 U.S. NGL Study,” which forecasts regional supply, demand, infrastructure and export balances and prices for condensate and five other NGL streams to 2018.

That the BIS documents remain private and unavailable to the public is not a matter of suspicion. Kneiss likened it to personal ruling correspondence employed by the Internal Revenue Service (IRS) to confront a specific question that a taxpayer might have about a tax return and how it is handled.

“The IRS evaluates it and sends a letter back, specifically stating conditions or whether it meets tax code or tax regulations,” he said. “Those are private correspondences. They are not released to the public. I know the IRS—if it gets many, many petitions that are almost exactly alike—it will then prepare or put out what are called notices.”

Kneiss was unaware of a similar practice by Commerce of posting notices to industry, “but I would think that they would consider some kind of clarity through a federal registry notice that says: Here’s what’s involved. If they get enough petitions—I suspect that they’ve got a number of them now—then the bureau will likely issue public clarifications.”

Silence

The Commerce Department has been silent on the matter, other than to reiterate that no changes have been made to the policy that bans crude oil exports. Nor are the companies involved eager to discuss the issue.

James Teague, COO of Enterprise, deflected it head-on during the company’s second-quarter conference call with analysts. He credited William Ordemann, group senior vice president, as architect of the company’s strategy for negotiations with the BIS.

“Bill and his people were focused on facts, not loopholes,” Teague said. “These discussions led to a proper ruling on the export of processed condensate that is consistent with current regulations and did not require a change in law or a change in policy.

“This has generated a mountain of questions and policy conjecture that frankly we’re not going to address, and as you’ve read, these rulings are private, and I hope you can appreciate that at this time, we consider the privacy of our ruling to be commercially sensitive.”

Fair enough, though it did not dissuade a series of analyst queries that began with variations of “I know you don’t want to talk about condensate export, but …” that Enterprise executives were forced to sidestep.

And the critical questions remained: How does the private clarification from the BIS define condensate that qualifies for export? And can other midstream players get in on the action?


The terminal at Howard Energy Partners’ Live Oak, Texas, Stabilizer, under construction in midsummer, can handle six trucks at a time.

Not so simple

“Obviously what [the BIS is] looking for is beyond just a simple distillation,” Kneiss said. “They’re looking for something more. What that exactly is, I’m not familiar with Enterprise’s process for wherever its collection points are or were.”

Jacob Dweck, partner in the Washington office of Sutherland Asbill & Brennan LLP, the law firm that represented Enterprise, downplayed the chances of a dramatic increase in condensate exports when he spoke at the recent Energy Information Administration 2014 Energy Conference.

“The rulings requested classification of a particular product using a certain type of feedstock, running it through a certain type of distillation technology and having a certain type of yield,” Dweck told the Houston Chronicle. Any company assuming that its process replicates the one approved by BIS, without access to the technical specifications included in the private clarification issued to Pioneer and Enterprise, would be rolling the dice, Dweck hinted. He made clear that the process was more than a straightforward stabilization and that the companies’ Eagle Ford condensate in question had been run through a distillation tower.

Industry seers are forced to examine the tea leaves of obscure bureaucratic rituals because of the ban on exports of crude oil.

The U.S. Congress responded to the 1973 energy crisis brought on by the Arab oil embargo with the Energy Policy and Conservation Act of 1975 (EPCA). Introduced by Sen. Henry Jackson, D-Wash., and signed into law by President Gerald Ford, the act created the Strategic Petroleum Reserve and Corporate Average Fuel Economy standards. With the memory of angry voters lining up to fill their tanks still fresh in their minds, members of the House and Senate sought to ensure that hydrocarbons would remain within the nation’s borders:

“The President shall exercise the authority provided for in subsection (a) to promulgate a rule prohibiting the export of crude oil and natural gas produced in the United States, except that the President may, pursuant to paragraph (2), exempt from such prohibition such crude oil or natural gas exports which he determines to be consistent with the national interest and the purposes of this Act.”

Exporting crude oil to Canada became permissible under an executive order signed by President Ronald Reagan in 1985, an action that allowed U.S. crude to flow north to Canadian refineries and further aligned the North American energy strategy. The BIS is engaged in this issue because its definition of crude oil has been expanded to include condensate.

But no one in 1975 could imagine the emergence of a new American oil and gas resource like the Eagle Ford. Nor could they in 1995, nor even in 2005. Petrohawk Energy Corp., now a part of Australian energy giant BHP Billiton, did not announce the play’s initial drilling success in La Salle County until October 2008—less than six years ago.

Now the future is open to imagination.

Early in 2014, Hart Energy Research & Consulting projected an increase of about 213,000 barrels per day (bbl/d) of condensate coming out of the Eagle Ford between 2012 and 2017. This forecast was published in its “2014 North American Unconventional Oil” report. At that time, analysts noted some upside because of the expectation of increased downspace drilling or more liquids-rich drilling. Just a few months later, the research team has revised its projection to 248,000 bbl/d of incremental growth for the same time period, or an anticipation of 16.4% more combined plant and lease condensate.

Right time, right place

Mike Howard, CEO of San Antonio-based Howard Energy Partners, betrays some exuberance about the promise of South Texas in general and the Eagle Ford in particular, but his company’s strategy is based on the long term. He also believes that the Commerce Department clarification will be hugely beneficial and comes at an ideal time, just as his company’s Live Oak Stabilizer in Three Rivers, Texas, starts up.

“It’s better to be lucky than good,” Howard mused in a recent conversation with Midstream Business. “We built that stabilizer to solve a different problem that we were having in the Eagle Ford. As the condensate markets were getting overwhelmed—they are overwhelmed; you can read everywhere about how this light condensate has surpassed the Gulf Coast’s refining capacity—the home for this high-pressure NGL pipeline drip has gone away.

“What we were having to do in the Eagle Ford is truck this stuff up to facilities over 300 miles away so they could handle it. What we were trucking it to is essentially this stabilizer that we have here,” he said.


Condensate moves through the Live Oak Stabilizer plant through a pipeline above this gangway.

When fully ramped up, the Live Oak natural gas liquid stabilizer will process 10,000 bbl/d. It will convert about 7,000 bbl/d into a 9-pound vapor pressure condensate product that is trucked out, and the rest will be dispatched via pipeline as Y-grade (mixed gas liquids) condensate or rich gas.

Howard Energy Partners has not announced the cost of this project. However, during Martin Midstream Partners LP’s second-quarter conference call, Joe McCreery, vice president of finance, estimated the cost for the 50,000 bbl/d crude condensate splitter his company wants to build in Corpus Christi, Texas, at between $175 million and $200 million.

Roads, rails and pipes

The new facility is near a convergence of four major roads as well as on top of or very near the major pipelines that feed crude oil and condensate to the Gulf Coast. Then there is Howard Energy Partners’ Live Oak Rail Park, which will offer a rail option to move product in the future. From the road, this location might appear to be the middle of nowhere, but from a business macro perspective, it could be ground zero for the next phase of the shale revolution.

The location in the play makes it easier and cheaper for producers, who now will have options besides Springtown, Texas, near Fort Worth, or the Gulf Coast. Live Oak also provides a new level of capability in the Eagle Ford.

“It’s a unique stabilizer in that you put a very hard-to-handle, high-vapor pressure condensate into it, and it splits it into three marketable products that are all easy to handle,” Howard said. “The price that we were receiving for each of those marketable products is what the market will bear. It is what it is.”

From Mike Howard’s perspective, the clarification issued by the BIS opens a new chapter in Eagle Ford economics because it raises the price potential of the product from the bottom of the stabilizer.

“The 9-pound product that was produced was going to go right into the overserved market on the Gulf Coast that doesn’t want the stuff, and so they weren’t going to pay a very good price for it,” he said. “Now, if it’s able to be exported—and we believe it is able to be exported based on the new classification of distillate—it opens the market for people to compete for product, and it raises the price of the product.”

In early August, Flint Hills Resources posted the price of Eagle Ford condensate, equal to or greater than 60° API gravity, at $82.50/bbl. By comparison, a barrel of light, sweet crude sold on the New York Mercantile Exchange for just under $98.

Meeting the guidelines

Haas leans toward Mike Howard’s assessment of the new plant’s ability to produce a product that meets export guidelines.

“I would think that [the Live Oak Stabilizer] qualifies in the sense that it uses reboilers and it uses a distillation process,” he said. “What goes into this process is not at all what comes out.”

“We understand that the BIS made a ruling based on such similar equipment,” he added. “So in the case of Howard Energy, they take out essentially everything but the pentanes plus. What remains is very similar to plant condensate, which is widely exported now.”

A stabilizer of Live Oak’s size is distinctive to South Texas and reflects the changing market environment.

“South Texas historically hasn’t had to deal with it because we’ve always had a condensate market or a crude market that you could kind of slipstream this stuff into,” Howard said. “Now the markets are oversupplied, and you have to figure out something else to do with it.”

Where it’s going

Mike Howard’s sentiments were echoed by Eduardo Seda, New York-based managing director and senior midstream energy analyst for Ladenburg Thalmann & Co. Inc.

“As we now have an abundance of natural gas, crude oil and NGLs, due to the significant development of several shale plays in the U.S., the ability to export our newfound supplies to foreign markets has become the new growth trend that’s being developed over the next couple of years as the market supply and demand dynamics have changed,” Seda told Midstream Business. “That said, several MLPs have announced projects to create the necessary infrastructure, which includes gathering systems, fractionation facilities, storage fields, pipelines and export facilities (ports and terminals).”

The combination of ample supplies of natural gas, crude oil and NGL, and the overall sluggishness of a U.S. economy, creates the opportunity for the U.S. as a low-cost producer to become a low-cost supplier to the world markets, Seda said.

“We’ve never had the infrastructure for export because we were so dependent on importing everything we needed,” he said. “Now that that’s changed, the issue is: How fast can we build an export infrastructure? Little by little, the MLPs have made strides in creating the necessary infrastructure to bring everything to the Gulf Coast region where most of the export facilities (ports and terminals) are currently located and more are planned for development.”

Latin American markets

From there, Haas expects condensate to stay in the hemisphere and find customers in Latin America, particularly heavy crude oil producers in Venezuela and Brazil that value condensate as a diluent.

“I don’t see the floodgates opening for all this Eagle Ford condensate, once stabilized, to be pushed to the four corners of the globe,” said Haas. “I don’t see that happening quickly at any rate.”

Haas cites cost. The U.S. and Canada use a significant amount of crude and condensate and Hart Energy Research & Consulting projects increased use of heavy crude oil between now and 2030, meaning that higher volumes of condensate will be needed for blending and diluent purposes. Keeping the condensate in North America for use with oil sands in Canada means either a quick trip by pipeline or a $10 to $12 tariff if shipped by rail.

A more adventurous option would be to stabilize the condensate, move it by tanker or in dedicated condensate pipelines or batches between pipeline pigs to a port, load it onto a Panamax-grade or larger vessel, float it through the Panama Canal and sail all the way to Asia. For margins to make sense in this scenario, the price of oil would have to go up, but that is not the forecast.

“If you’re trying to make the most money possible by producing Eagle Ford condensate, would you rather sell to our nearby Canadian neighbors at a $10 to $15 per barrel discount or would you prefer to go through the extra hoops, including an empty tanker return trip, to sell it at a $20 to $30 discount in Asia?” Haas asked.

Plenty of oil, gas, cash

Brandon Beard, KPMG’s Dallas-based transaction services partner, is reluctant to make a mountain out of a condensate molehill, especially when considering the wider implications of moving hydrocarbons in the Eagle Ford.

“I don’t know that it’s going to have a huge impact,” he said. “You look at how they’re getting the crude out of the Eagle Ford. The capacity limitations have obviously been in pipelines, but they’ve also been in trucking. The trucking initially has gone to pipelines and with the divergence of Brent and WTI [West Texas Intermediate] to an extreme in the last couple of years, they have trucked it all the way to the Gulf.

“To my knowledge, it’s more of an outbound capacity issue and less of an export issue,” he said. “I don’t think that that ruling would have a significant impact on the ability to get crude out of the Eagle Ford.”

In fact, Beard sees the play as such an investment magnet at the moment that it is virtually impervious to threats.

“Right now, the Eagle Ford has close to 25% of the entire E&P spend in the United States [estimated by Barclays Capital to be $156.2 billion],” he said. “It’s a staggering figure, how much money is going into development in that play right now. So, with a number that big, it’s hard for me to say that anything can become a hindrance to the development of the Eagle Ford.”

Still, what goes up …

“Permit activity is the leading edge of indicators for any play like the Eagle Ford,” Beard said. “We have seen permit activity in certain areas start to decline. That tells me that the growth rate is going to slow, which makes sense.

“Now keep in mind that the Eagle Ford has different areas concentrated in oil and gas, and activity in the gas areas is more moderate. When gas prices come back, you could see the development boom continue in the Eagle Ford purely on the gas side. I think we’re at a point where, in the coming years—call it the next five to 10 years—we’re going to start to see the spend moderate in the Eagle Ford and eventually start to trail its way down. Now, it’s going to be a development hot spot for many, many years, but I’m just talking about the growth trajectory. It’s going to slow in the near term.”


Hydrogen sulfide and CO2 are removed from condensate in Howard Energy Partners’ Live Oak Stabilizer’s amine contactor.

Keeping it going

“Dear Lord,” read a popular Texas bumper sticker from the mid-1980s, “please give me another oil boom ... I promise I won’t blow it next time.”

Next time is here. From inside the Eagle Ford, where husky vehicles lumber down highways in endless convoys bearing construction equipment and seemingly every business sports a “help wanted” sign, the entire world seems to be booming. It’s not.

Outside of the oil patch, economic doldrums linger. The global economy is more and more reliant on emerging Asian economies that have at least temporarily eased up on the accelerator.

Sustainability is the watchword.

“Instead of just focusing on gathering and processing, the stabilizer, the Port of Brownsville [Texas], the rail facility—all those are very deliberate actions by the management team to diversify our portfolio in midstream assets,” said Howard. “We want to touch the molecule in more than one way, and these are ways that we are able to still capitalize on the great drilling and hydrocarbon recovery that’s going on in the Eagle Ford and have businesses that will far outlast any drilling boom that could be going on. These are logistics facilities that will need to be in place whether there’s an oil drilling boom going on or not.”

That said, the industry expects another boom to follow Eagle Ford. In fact, there could very well be two if conditions pan out, and one will be Eagle Ford gas.

“Right now, there are a handful of our clients who have significant exposure to gas because they believe that gas prices are going to rise more rapidly than the strip [average price] forecast suggests, but that’s the contrarian view,” said Beard. “The vast majority of our clients is staying away from gas right now or is drilling only to maintain leaseholds until gas prices push past $5.”

Growth nearing peak

“It’s possible, when you look at the Eagle Ford, that the drilling could do nothing more than shift from oil to gas as you see the development on the oil side moderate,” he said. “I mean moderate. I don’t mean go down. It’s just going to grow at a slower pace. The investment in the Eagle Ford, I think, will be there for many years, and it could shift to gas when the prices return.”

What kind of movement will that take?

This summer’s Henry Hub price has hovered around $4 per thousand cubic feet (Mcf) and Bloomberg’s projected third-quarter price is $4.44/Mcf. In fact, Bloomberg doesn’t see Henry Hub prices averaging any higher than $4.75 in 2016 in its forecast—not necessarily a promising outlook for another immediate boom in drilling.

“Many bigger shale gas plays are going to require gas to be north of $5 to be economically viable, and some will require gas to be more than $6 to be economically viable,” Beard said. “If you believe the strip forecast right now, that’s not going to happen for several years.”

Building now

The midstream buildout, however, is happening now.

American Midstream Partners LP recently bought a full-well-stream gathering system in Gonzales County from an affiliate of ArcLight Capital Partners LLC along with a 50% interest in Republic Midstream LLC.

Southcross Energy Partners LP recently completed a deal to buy TexStar Midstream Services LP’s rich-gas system assets in the Eagle Ford, including a 300 MMcf/d gas processing facility and more than 230 miles of rich-gas and residuegas pipelines. Southcross also started to build its Webb Pipeline, which will extend its rich-gas pipeline system in the western region of the play.

Phillips 66 Co. has made agreements to refine up to 30,000 bbl/d of Eagle Ford crude at its Sweeny Refinery, south of Houston. Other refineries in the company’s Gulf Coast network handle Eagle Ford oil as well, and barges and tankers are used to move the play’s crude to the Phillips Bayway Refinery in Linden, N.J.

“Phillips 66 anticipates a strong need in the NGL market over the next several years, and we will pursue opportunities that fit with our strategy to grow our midstream business,” said Michael Barnes, the company’s Houston-based manager of communications and public affairs. “Phillips 66 has begun preliminary engineering and economic analysis for a condensate splitter and Sweeny Fractionator Two in the Sweeny area.”

Leading the way

And then there’s the Permian Basin, one of the first big things and widely considered again to be the next big thing.

“We do see the Permian grasping a greater capital share of midstream investment,” Haas said. “And it’s simply because the opportunity is so large. Horizontal drilling is still relatively in its infancy in the Permian. The Permian has had such a good run drilling vertical wells. Now when more producers migrate to directional and horizontal drilling, you can imagine what that may open up in terms of production.

“And as you have increased production, you’re going to need takeaway,” he said. “Plains All American [Pipeline LP] is proposing a condensate-only pipeline in the Permian. If you ask me, it sounds like they’re probably going to need a stabilizer, and they’re probably going to want to keep it segmented from anything that could possibly forfeit its exportability.”

Mike Howard, an Eagle Ford veteran from the start, is looking to leverage that expertise in the Permian.

“Permian, as a whole, is very underdeveloped at this point,” he said. “It is experiencing the same problems that we found in the Eagle Ford, where all the traditional markets are full of stuff that they’re just not used to seeing.

“A lot of things are hitting in the Permian. They’re finding stuff that’s high-gravity condensate. Well, they’re going to have the same problems we had. You start sticking that condensate into the market and trying to slip it into the crude market and the crude market starts getting full of it, and what that leads to is a condensate system separate for crude oil. And when those things start happening, you start looking at solutions to getting your producers a better market.”

Financing the next infrastructure buildout will not be an issue, nor will investors need to shift their funding fromthe Eagle Ford to the Permian. It’s already there.


Source: Hart Energy/Rextag

Ready capital

“Most of our bigger clients with reserves exposure have at least a $1 billion investment in the Permian already,” said Beard.

“There is plenty of capital out there right now. There is no shortage of it. In fact, we’re seeing quite the opposite. We’re seeing some of our private equity clients attempting to liquidate some of their investments in the areas and there’s a bit of congestion on the sell side for investments of that size, which has some of them forming an MLP and exiting through the public markets. I don’t think it’s a question of lack of investment, I think the investment is absolutely there,” he said.

Ironically, the Eagle Ford, launched one month before Barack Obama was elected president, will share its experience with the Permian, launched during the Coolidge administration.

“The ability for the Permian, a few years later, to piggyback on the infrastructure that began in the Eagle Ford and the major consuming marketplaces of the Gulf Coast, I think is a real benefit,” said Haas. “It’ll give longevity to the infrastructure that was built out for the Eagle Ford and it adds incremental takeaway to the Permian.

“The Eagle Ford may be peaking around 2021, 2022,” he continued. “What happens after that? Well, naturally, it would decline. If there’s nothing else after that, those pipelines in place may become underutilized. However, if you’ve got this ascendant Permian coming up a few years later and bigger, probably, than the Eagle Ford was, that could keep those pipeline assets around the Eagle Ford that can be connected to the Permian very, very happy for very many decades.”

See more images of Howard Energy Partners' Live Oak Stabilizer here: https://vimeo.com/104852936

Joseph Markman can be reached at jmarkman@hartenergy.com or 713-260-5208.

Condensate: A Condensed Version

By Joseph Markman, Associate Editor

Condensate is generally categorized as either lease or plant. Lease condensate is produced along with oil and gas from a well (on a producing lease) and literally condenses, turning into liquid. Typically, raw lease condensate is a mixture of all kinds of things. It can include methane, sulfur, CO2, ethane, propane, butane and pentanes plus. Lease condensate can be unstabilized or raw. When stabilized, it is referred to as stabilized field condensate.

Stabilized condensate is the liquid product that comes out of a stabilizer plants and is known as pentanes or C5+. Mixed streams of NGL are produced at a processing plant before they are pipelined or railed to a fractionation plant for separation into purity products. Fully equipped fractionation plants, like many in the massive complex at Mont Belvieu, Texas, are able to produce five streams of purity NGL products, including plant condensate.

C5+, the heaviest NGL, has numerous uses. One of its most endearing characteristics is that it is easy to move. In most of its incarnations, it is in liquid form. That makes it easy to move in a pipeline, a rail car, a seaborne tanker or a truck. The liquid form also makes C5+ easy to store and easy to use. Among the common uses:

  • Gasoline: C5+ is also known as natural gasoline. If you stabilize it, process it, clean it up, get the sulfur out, the product can be blended or used directly as motor engine fuels.
  • Diluent: Heavy crude producers, like oil sands operators in Canada, use it as a diluent—akin to a paint thinner for heavy crude oil—to help move heavy bitumen crudes in pipelines. Condensate is a perfect thinner for crudes with molasses-like consistency. When this diluted bitumen crude, or dilbit, arrives at the refinery, the C5+ is separated and available for use as a feedstock for gasoline along with the remainder of the crude that is refined for other products.
  • Petrochemicals: C5 has both a lower boiling point and lower cost compared to other chemicals. It is used in the manufacturing process of polystyrene foam. Its lower boiling point makes it useful in the heat exchanger that heats fluid to make turbines spin in geothermal plants, and its added value is that it can be re-used. It is also commonly used as a solvent in the pharmaceutical, petrochemical, paints and coatings industries.

How The Plant Works

By Joseph Markman, Associate Editor

Want to build a stabilizer? Take your plans and hit the road.

And make sure that road you hit has direct access to the shale fields. That was Howard Energy Partners’ strategy when it positioned its Live Oak Stabilizer in Three Rivers, Texas, on U.S. 281. The Live Oak plant’s location at the convergence of four major highways doesn’t hurt, either.

Brandon Burch, Howard’s vice president of operations and engineering, discussed his new plant with Midstream Business.

“When you kick off a project, there are three things that get checked off real quick,” he said:

  • Powering it: Either buy from a utility or generate in-house;
  • Environmental and permitting process; and
  • Right of way or site facility.

Live Oak Stabilizer expects to take 100% of its inbound condensate and ship 70% of its outbound product by truck, so easy access to the road is critical. What sets this new 10,000 barrel per day plant apart is that it is equipped to handle off-spec condensate, which many competitors cannot.

The two parcels of land that comprise the plant—the terminal and the stabilizer—are joined by pipeline. Trucks enter the terminal and off-load raw condensate from the field. It is then pumped over to feed tanks on the stabilizer side.

Live Oak employs a two-tower stabilizer process:

  • Raw condensate enters the first tower, which distills off methane by utilizing a hot oil system to meet design temperatures.
  • The bottoms from that distillation column (mainly C3+ or propane plus), still in liquid form, move on to the second tower, called a debutanizer, where additional energy provided by another reboiler allows the butane and lighter components to be distilled off.
  • The debutanizer overhead is condensed and sent through a liquid amine treater. Amine is an aqueous solvent with an affinity for H2S and CO2. When the amine comes in contact with those components of the oil, it separates them out, leaving a clean NGL product to be piped out.
  • The bottoms of the debutanizer—stabilized condensate—is pipelined over to the terminal site.
  • At the terminal, the stabilized condensate is loaded onto trucks and hits the road again.

In short, one product—lease condensate—is trucked into the Live Oak Stabilizer. Three products—9-pound vapor pressure condensate, NGL and rich gas—are sent out and sold separately. Condensate leaves in segmented batches by truck; NGL and rich gas depart by pipeline.


Source: Hart Energy Research & Consulting, Howard Energy Partners LP tour 07/14/14