If James Teague was tight-lipped in July about his company’s clearance to export processed condensate, the COO of Enterprise Products Partners LP was noticeably chattier during the recent third-quarter earnings call.

“Demand for U.S.-processed condensate is robust, as evidenced by the fact that we are sold out through the end of the year,” Teague said. “Furthermore, work is underway, in combination with our waterfront position, that will result in our processed condensate export capabilities being over currently available supplies. Consequently, we’re working closely with condensate producers in the Eagle Ford, the Permian and north and west of Cushing [Oklahoma] to close that gap.”

Plans to increase the volume of condensate traveling to the Gulf Coast include an extension of the Rancho II Pipeline between Houston and Sealy, Texas, about 50 miles to the west, said Bill Ordemann, group senior vice president. “The middle to early third quarter next year, we’ll have a new pipeline in place,” he said. “We’re currently very, very close to being constrained in moving these Eagle Ford barrels into Houston.”

When it comes to the company’s capital allocation, Teague said the key to providing producers with market choices is giving them options for aggregation of product supply. “As we look at the Eagle Ford, for example, you can bet we’ve got one heck of an initiative to identify processed condensate opportunities,” he said.

The company expects the Rancho II Pipeline to answer the question of how that supply aggregation will be brought about. “[The pipeline is] going to open up a lot more capacity,” Ordemann said. “We think we have some dock capacity available to handle that. How much we can handle, we’ll see. … [I]t’s going to be around the supply aggregation, how much supply we can aggregate.”

“Now others do have some ways to get that processed condensate to other locations where it could potentially be exported as well, so I’m not going to speak to them, but I think we’re in the process, in the Eagle Ford anyway, looking ahead at getting that taken care of,” he said. “It’s pretty much substantially increasing our volume of exports come maybe around August of next year.”

The completed pipeline will clear the path to export, Ordemann said, with almost no additional capex needed to expand export facilities.

Pipeline uncertainty

The company’s authorization for exports from the U.S. Department of Commerce is a bright spot in the outlook for the company, but not everything is looking up for Enterprise. Its ambitious, first-of-its-kind planned project to construct a pipeline for crude oil transport from the Williston Basin in North Dakota to the hub in Cushing is facing uncertainty along with declining crude prices.

“If [the volatility of crude] has impacted anything we’re doing … it’s probably that Bakken project because I mean, it’s kind of simple,” Teague said. “It’s the furthest from the market.”

The pipeline would be 30 inches in diameter and extend for about 1,200 miles from North Dakota to Oklahoma. Currently, the design gives it an initial capacity of about 340,000 barrels per day (bbl/d) of crude oil, and makes it expandable to more than 700,000 bbl/d. The pipeline would have the capability to transport up to six grades of crude oil and products, including Rockies condensate and processed condensate. However, as crude prices hover around $80/bbl, shippers are balking at the long-term contracts necessary for Enterprise to move forward with the project.

After first announcing the Bakken-to-Cushing Pipeline, Enterprise announced a binding open season scheduled to run from Sept. 4 until Oct. 17. However, that open season was extended to Nov. 14 due to insufficient commitments from shippers, and still has not reached the threshold at which Enterprise would proceed with the project, Teague said.

The company’s confidence in the success of the binding open season is tied to the price of oil.

“If we had $100 [/bbl], I’d have been a lot more confident than I am at $80,” Teague said in response to an analyst’s question. “I mean, we have a high-quality producer that’s made a sizeable commitment. We have a threshold that, if we reach that threshold, we’ll build and at this point, we haven’t reached the threshold.”

Enterprise isn’t ready to call it quits on the project yet, though.

Teague expressed hopes that, with the recent narrowing of differentials between domestic benchmark West Texas Intermediate and international benchmark Brent, crude-by-rail transport will seem less attractive to producers compared to the typically much lower per-barrel cost to transport crude by pipeline.

“If this thing is successful, that’s going to be a major part of its success,” he said. “People are recognizing that rail’s going to be difficult.”

Whether the company proceeds with the project depends, Ordemann said, “on if the producers are willing to believe that and step up. We’re in conversations with a very large number of them right now and frankly, got the indication they needed some more time so we extended the open season here through Nov. 14.

“We’ll see what we can pull together by then,” he said. “We’ll certainly continue the dialogue.”