Enterprise Products Partners L.P.

SEC Filings

ENTERPRISE PRODUCTS PARTNERS L P filed this Form 10-K on 02/28/2018
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Additionally, several other petrochemical companies have announced large scale expansions and/or conversions at existing facilities that will use ethane as feedstock.  Almost all of these ethylene plants as well as the major expansions are in close proximity to our existing or planned assets, including our recently completed Aegis Ethane Pipeline.

Based on industry publications, U.S. production of ethylene in 2015 and 2016 averaged 155 million pounds per day. In 2017, U.S. ethylene production averaged 160 million pounds per day despite devastating disruption from Hurricane Harvey, which caused the industry operating rate in September to dip below 70%. Ethane is the most widely used feedstock by the U.S. petrochemical industry in the production of ethylene; ethane consumption by domestic petrochemical companies has, at times, been in excess of 1.2 MMBPD.  We believe the U.S. ethylene industry could consume approximately 200 MBPD of additional ethane feedstocks over the next few years through modifications, debottlenecking and expansions at existing facilities.  In addition, we believe that publicly announced new petrochemical plant projects, including those noted in the preceding table, could consume well over 700 MBPD of additional ethane feedstocks when completed.  However, until these new ethylene plants are completed, ethane production capacity continues to exceed demand, resulting in significant volumes of ethane not being extracted from the natural gas stream by producers and natural gas processors in an effort to balance ethane supply with demand.

In response to growing international demand for U.S. ethane, we placed into service our Morgan’s Point Ethane Export Terminal in September 2016.  Abundant U.S. ethane from shale plays offers the global petrochemical industry a low-cost feedstock option and supply diversification from a stable producer.  The Morgan’s Point Ethane Export Terminal, located on the Houston Ship Channel, is the largest of its kind in the world, has an aggregate loading rate (nameplate capacity) of approximately 10,000 barrels per hour of fully refrigerated ethane, and is integrated with our Mont Belvieu NGL fractionation and storage complex.

U.S. exports of LPG continue to increase as a result of ample domestic production, increased export capacity and competitive, transparent pricing when compared to international markets. Overall, U.S. propane waterborne exports increased from approximately 423 MBPD in 2014 to approximately 875 MBPD in 2016 and 989 MBPD in 2017.  Markets in Northwest Europe, Central and South America were traditionally the main destination for U.S. LPG exports. However, starting in 2016 a shift towards Asia was underway such that in 2017 exports to Asia have taken the center stage as countries like China and India experience solid and consistent demand growth. For example, Enterprise’s exports of LPG to Asia accounted for 14% of that region’s total imports in 2016, but in 2017 that figure jumped to 43%.   We believe that various factors have favored this rapid tilt towards Asia: (i) continued economic expansion in emerging Asian markets; (ii) the widening of the Panama Canal, which was completed in 2016; and (iii) favorable domestic policies in countries like India and Indonesia where the governments are subsidizing the switch to LPG for domestic use as a means for reducing pollution and protecting against deforestation. In anticipation of the aforementioned growth in LPG exports, we completed the final phase of the expansion of our LPG export terminal located on the Houston Ship Channel at EHT in December 2015.  This expansion increased our loading rate for LPG at the terminal to approximately 27,500 barrels per hour (nameplate capacity).

We believe that the U.S. has plentiful supplies of natural gas at very competitive prices. Associated natural gas production from crude oil supply basins tends to be the lowest in cost followed by rich gas plays.  However, with enough demand pull, supply basins with dry natural gas, such as the Haynesville/Bossier, Barnett, Fayetteville, Piceance and Jonah/Pinedale, could experience an increase in drilling activity due to their low development costs.  The Haynesville resource basin is an excellent example of a dry gas production area that we believe could experience a substantial increase in drilling activity since it is ideally located to serve future demand from LNG exports and industrial customers on the U.S. Gulf Coast.  We believe that natural gas prices will tend to stay around $3.00 per MMBtu as there is enough supply to satisfy future demand, both domestic and exports (piped gas to Mexico and waterborne LNG).