Enterprise Products Partners exports ethane from this facility at the Barbours Cut Container Terminal on the Houston Ship Channel. (Source: Hart Energy)
If most midstream operators focus solely on the supply side of the business, well, most midstream operators aren’t Enterprise Products Partners LP (NYSE: EPD).
“At Enterprise, we spend as much time looking at market choices on the demand side of the equation as we spend looking at the supply side,” Enterprise CEO Jim Teague recently told a packed house of upstream executives at the Houston Producers Forum. “To do our job at Enterprise, we have to do both.”
Enterprise, with a market capitalization of about $60 billion, is connected by pipeline to virtually every ethylene plant in the U.S., Teague said, and is rapidly expanding its reach into global markets. That kind of muscle means something to astute producers.
“‘Jim, most of you take us to the stadium,’” he said, referring to a conversation he had with a senior executive of an upstream company. “‘Enterprise takes us to our seats.’”
The company is able to do that because it aggressively sought out those markets and, significantly, established a presence on the Houston Ship Channel to handle product. In short, it may be dawning on some operators that they literally missed the boat.
What makes it difficult for competitors is that Enterprise already operates 18 docks on the Texas Gulf Coast that handled 146 million barrels (MMbbl) of a variety of hydrocarbons in first-quarter 2017, beating its second-quarter 2016 record by 10 MMbbl.
“Most of the assets in the system itself have high barriers to entry,” he said. “This system connects NGL directly to every plant in the United States. There’s no way that you can duplicate that.”
Maybe not, but it is possible to belittle it by implying that the Houston Ship Channel is congested and nearing its effective capacity. Teague did not hide his irritation with competitors boasting that other Gulf Coast ports were comparable or superior to Houston, deriding those claims as “fake news.”
He showed a slide comparing Houston with the ports of Freeport, Beaumont, Corpus Christi and Texas City in eight categories ranging from traffic limitations and designated barge lanes to maximum draft, air draft and number of pilots. Texas City can handle wider and taller ships, but only has 16 pilots to Houston’s 100. The Ship Channel matched or beat the rest.
The fact that traffic has been flat at the port points to a positive, Teague said. Imports of butanes have declined as exports of other NGL have increased.
And Enterprise is bullish on the outlook for hydrocarbon exports, with Teague dismissing arguments that the U.S. should not export while still importing millions of barrels of crude oil per day. Those barrels are “sticky imports,” he said, that will enter this country anyway.
Breaking it down:
- The U.S. Energy Information Administration’s data show that Canada shipped an average of about 4.3 MMbbl/d of crude to the U.S. in January, which Teague argued is more economical than using Jones Act tankers to move U.S. crude to the coasts;
- Mexico shipped 2.35 MMbbl/d and Venezuela shipped 750 Mbbl/d of heavy crudes that require refining by the complex facilities on the U.S. Gulf Coast; and
- Saudi Arabia ships crude to its Motiva refinery in Port Arthur, Texas, to maintain its North American market share.
As U.S. production of light crude from shale plays grows, Teague said, it will head toward less sophisticated refineries in Latin America, Asia and Europe.