Southern Hills to enhance DCP's 'super system'

DCP Midstream ranks as the top NGL producer in the U.S. and is a top gatherer, processor and operator of NGL pipelines. The company has developed “super systems” in key areas of the U.S., including the Midcontinent, Denver-Julesburg and Permian basins and the Eagle Ford play. The company produces 400,000 bbl. of NGLs per day, Greg Smith, president, Midcontinent and Permian, DCP Midstream, told Hart Energy’s DUG Midcontinent Conference in Tulsa, Oklahoma.

“Strong crude prices and new technology have created challenges for the producing community as well as the midstream industry,” said Smith. “Notably, lack of NGL takeaway capacity and lack of tight gas processing capacity have limited producers’ ability to drill in many areas at their desired levels.”

That’s where DCP sees its sweet spot. The Midcontinent is a key producing region for DCP, and it currently accounts for more than 100,000 bbl. per day of its NGL production. The midstream firm has been investing heavily in the region, where it currently owns 30,000 miles of pipelines and 13 plants that process 2 Bcf of gas per day.

For the past few years, DCP has worked hard to improve connections between its processing plants. The company can now route gas around the Midcontinent and ensure that production does not get shut in at the wellhead. It is steadily expanding its gathering systems in the South Cana, Granite Wash and Mississippi Lime plays.

In the South Cana play, DCP has added more than 100 miles of gathering capacity; in the Granite Wash it has added 200 miles in Wheeler, Hemphill, Roberts counties, Texas, and Roger Mills County, Oklahoma. In the Mississippi Lime play, DCP is currently building out its gathering systems on both the eastern and western sides of the play.

“We continue to see rigs move into the play, and we are excited to be part of this developing Mississippi Lime play,” he told the Tulsa conference audience.

But the company’s showpiece is its Southern Hills NGL Pipeline, a conversion of a refined products line to an NGL line. The 800-mile line will connect the Midcontinent area to the Mont Belvieu market. Its capacity will be 175,000 bbl. of Y-grade (mixed NGL) per day, and it will transport both third-party and DCP barrels. The billion- dollar project, set to begin service shortly, offers crucial market access to Midcontinent producers.

Set against DCP’s growth plans are some headwinds, however. Smith noted that short-term outlooks for both ethane and propane prices are not particularly rosy at this point. “Both commodities have supplies that are greater than demand,” he said.

Propane has benefited from colder weather this spring, and from an increase in propane export facilities, but ethane remains a struggle.

“We continue to see ethane rejection in many parts of the U.S. in response to low ethane prices and anticipate that will continue in the near future,” he said. “In the long-term, demand for propane and ethane will increase due to new petrochemical facilities being constructed and being brought on line in the Gulf Coast, as well as additional propane and ethane export facilities being brought into service.”

DCP is a private company that is held equally by Phillips 66 and Spectra Energy. The company also owns an master limited partnership, DCP Midstream Partners, which is traded on the New York Stock Exchange. Together, the companies own 63 gas processing plants, 12 fractionators and 64,000 miles of pipe in 18 states.