Despite the increased fractionation capacity being built at Mont Belvieu to compensate for the additional NGLs flowing to the hub, there doesn’t appear to be a strong need for additional storage capacity, according to Wells Fargo Securities. The investment firm stated there is currently 200 million barrels of NGL storage at the hub, but according to EIA data NGL inventory in PADD III was only 74.7 million barrels in August, which implies a 37% utilization rate.
It is expected that fractionation capacity at the hub will increase by 65% in the next to two to three years. The investment firm noted in its Feb. 2012 NGL Snapshot that the current storage capacity of 200 million barrels at the hub will be able to handle these increased volumes in the region for the foreseeable future. However, the report added that there could be a need for additional above-ground brine-pit capacity.
While Wells Fargo doesn’t anticipate the need for additional NGL storage capacity, it does foresee producers utilizing more brine to help counterbalance the withdrawal and injection of NGLs into and out of storage as fractionation capacity is added. The firm estimates that storage operators carry one barrel of brine for each barrel of hydrocarbon removed from storage in most cases. However, the report states that the ratio is slightly greater than 1:1 at Mont Belvieu.
“The reasons for maintain a higher NGL-to-brine ration are based on cost and operational considerations. The cost of producing and storing enough brine for a 1:1 ratio would be prohibitive and an inefficient use of capital. Further, because of the seasonality of demand associated with certain purity NGL components (e.g., propane and butane), a 1:1 ratio of brine to storage capacity is not necessary,” according to the report. Because propane is most used in the winter and can see withdrawal levels that are quite high, which require storage operators to backfill storage caverns with brine.
Wells Fargo calculates that Mont Belvieu NGL storage operators currently have 200 million barrels of NGL storage and 50 million barrels of brine-pit capacity. Enterprise Products Partners having the largest share of both NGL storage capacity at 100 million barrels and brine-pit capacity at 25 million barrels.
“NGL storage at Mont Belvieu is used primarily for load-balancing purposes to support fractionation facilities and/or downstream petrochemical plants. With fractionation capacity at Mont Belvieu expected to increase by an estimated 65% over the next 2-3 years, we estimate that NGL logistics companies could construct up to 33 million barrels of additional brine-pit to support the build-out of new NGL fractionation facilities. As an estimated cost of $5-8 per barrel, this implies roughly $150-250 million of expansion opportunities…[W]e view brine storage capacity as the key bottleneck that could require incremental investments,” the report said.
Contact the author, Frank Nieto, at fnieto@hartenergy.com.
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