targaintdeliver

Logistics & Marketing Segment

Our Logistics and Marketing segment is also referred to as our Downstream Business. Our Downstream Business includes the activities and assets necessary to convert mixed NGLs into NGL products and also includes other assets and value-added services described below. The Logistics and Marketing segment includes Grand Prix, as well as our equity interest in the Gulf Coast Express Pipeline (“GCX”), which are both currently under construction. The associated assets, including these pipeline projects, are generally connected to and supplied in part by our Gathering and Processing segment and, except for the pipeline projects and smaller terminals, are located predominantly in Mont Belvieu and Galena Park, Texas, and in Lake Charles, Louisiana.
 
The Logistics and Marketing segment also transports, distributes and markets NGLs via terminals and transportation assets across the U.S. We own or commercially manage terminal facilities in a number of states, including Texas, Oklahoma, Louisiana, Arizona, Nevada, California, Florida, Alabama, Mississippi, Tennessee, Kentucky, New Jersey, Washington and Maryland. The geographic diversity of our assets provides direct access to many NGL customers as well as markets via trucks, barges, ships, rail cars and open-access regulated NGL pipelines owned by third parties, and by Grand Prix once it is completed.
 
In May 2017, we announced plans to construct a new common carrier natural gas liquids ("NGL") pipeline from the Permian Basin. Targa's NGL pipeline ("Grand Prix") will transport volumes from the Permian Basin, and also from Targa's North Texas system, to Targa's fractionation and storage complex in the NGL market hub at Mont Belvieu, Texas. Grand Prix will be supported by Targa's volumes and other third party customer commitments, and is expected to be in service in the second quarter of 2019.  The capacity of the pipeline from the Permian Basin will be approximately 300 thousand barrels per day, expandable to 550 thousand barrels per day.
 
Additional description of the Logistics and Marketing segment assets and business activities associated with Fractionation, NGL Storage and Terminaling, Petroleum Logistics, NGL Distribution and Marketing, Wholesale Domestic Marketing, Refinery Services, Commercial Transportation and Natural Gas Marketing follows below.
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Fractionation & Treating
After being extracted in the field, mixed NGLs, sometimes referred to as “Y-grade” or “raw NGL mix,” are typically transported to a centralized facility for fractionation where the mixed NGLs are separated into discrete NGL products: ethane, ethane-propane mix, propane, normal butane, iso-butane and natural gasoline.
 
Our NGL fractionation business is under fee-based arrangements. These fees are subject to adjustment for changes in certain fractionation expenses, including energy costs. The operating results of our NGL fractionation business are dependent upon the volume of mixed NGLs fractionated, the level of fractionation fees charged and product gains/losses from fractionation.
 
We believe that sufficient volumes of mixed NGLs will be available for fractionation in commercially viable quantities for the foreseeable future due to historical increases in NGL production from shale plays and other shale-technology-driven resource plays in areas of the U.S. that include North Texas, South Texas, the Permian Basin, Oklahoma and the Rockies and certain other basins accessed by pipelines to Mont Belvieu, as well as from conventional production of NGLs in areas such as the Permian Basin, Mid-Continent, East Texas, South Louisiana and shelf and deep-water Gulf of Mexico. Hydrocarbon dew point specifications implemented by individual natural gas pipelines and the Policy Statement on Provisions Governing Natural Gas Quality and Interchangeability in Interstate Natural Gas Pipeline Company Tariffs enacted in 2006 by the Federal Energy Regulatory Commission (“FERC”) should result in volumes of mixed NGLs being available for fractionation because natural gas requires processing or conditioning to meet pipeline quality specifications. These requirements establish a base volume of mixed NGLs during periods when it might be otherwise uneconomical to process certain sources of natural gas. Furthermore, significant volumes of mixed NGLs are contractually committed to our NGL fractionation facilities.
 

Although competition for NGL fractionation services is primarily based on the fractionation fee, the ability of an NGL fractionator to obtain mixed NGLs and distribute NGL products is also an important competitive factor. This ability is a function of the existence of storage infrastructure and supply and market connectivity necessary to conduct such operations. We believe that the location, scope and capability of our logistics assets, including our transportation and distribution systems, give us access to both substantial sources of mixed NGLs and a large number of end-use markets. 

 

Our fractionation assets include ownership interests in three stand-alone fractionation facilities that are located on the Gulf Coast, two of which we operate, one at Mont Belvieu, Texas and the other at Lake Charles, Louisiana. We have an equity investment in the third fractionator, Gulf Coast Fractionators LP (“GCF”), also located at Mont Belvieu. In addition to the three stand-alone facilities in the Logistics Assets segment, we own fractionation assets at Chico and LOU in our Gathering and Processing segment.

 

In June 2016, we commissioned an additional fractionator, CBF Train 5, in Mont Belvieu, Texas. This expansion added 100 MBbl/d of fractionation capacity and is fully integrated with our existing Gulf Coast NGL storage, terminaling and delivery infrastructure, which includes an extensive network of connections to key petrochemical and industrial customers as well as our LPG export terminal at Galena Park on the Houston Ship Channel. In addition, we recently announced another 100 MBbl/d fractionator, which will be connected to most of our other Mont Belvieu and Galena Park facilities. The additional fractionator is expected to begin operations in the first quarter of 2019.
 
We also have a natural gasoline hydrotreater at Mont Belvieu, Texas that removes sulfur from natural gasoline, allowing customers to meet new, more stringent environmental standards. The facility has a capacity of 35 MBbl/d and is supported by long-term fee-based contracts that have certain guaranteed volume commitments or provisions for deficiency payments. 
 
The following table details the Logistics and Marketing segment's fractionation and treating facilities as of December 31, 2017
 
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FOOTNOTES
 
(1) Actual fractionation capacities may vary due to the Y-grade composition of the gas being processed and does not contemplate ethane rejection.
(2) Lake Charles fractionator was idled during 2016 as raw volumes were directed to Cedar Bayou fractionator. Starting in 2017, Lake Charles Fractionator runs in a mode of ethane/propane splitting for a local petrochemical customer and is still configured to handle raw product. 
(3) Gross capacity represents 100% of the volume. Capacity includes 40 MBbl/d of additional butane/gasoline fractionation capacity.
 
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Storage & Terminaling
In general, our NGL storage assets provide warehousing of mixed NGLs, NGL products and petrochemical products in underground wells, which allows for the injection and withdrawal of such products at various times in order to meet supply and demand cycles. Similarly, our terminaling operations provide the inbound/outbound logistics and warehousing of mixed NGLs, NGL products and petrochemical products in above-ground storage tanks. Our NGL underground storage and terminaling facilities serve single markets, such as propane, as well as multiple products and markets. For example, the Mont Belvieu and Galena Park facilities have extensive pipeline connections for mixed NGL supply and delivery of component NGLs. In addition, some of our facilities are connected to marine, rail and truck loading and unloading facilities that provide services and products to our customers. We provide long and short-term storage and terminaling services and throughput capability to third-party customers for a fee.
 
Across the Logistics and Marketing segment, we own or operate a total of 39 storage wells at our facilities with a net storage capacity of approximately 69 MMBbl, the usage of which may be limited by brine handling capacity, which is utilized to displace NGLs from storage.
 
We operate our storage and terminaling facilities to support our key fractionation facilities at Mont Belvieu and Lake Charles for receipt of mixed NGLs and storage of fractionated NGLs to service the petrochemical, refinery, export and heating customers/markets as well as our wholesale domestic terminals that focus on logistics to service the heating market customer base.  Our international export project includes our facilities at both Mont Belvieu and the Galena Park Marine Terminal near Houston, Texas. The facilities have export capacity of approximately 7 MMBbl per month of propane and/or butane with the capability to export international grade low ethane propane. We have the capability to load VLGC vessels alongside small and medium sized export vessels. We continue to experience demand growth for US-based NGLs (both propane and butane) for export into international markets.
 

 

The following table details the Logistics and Marketing segment's NGL storage and terminaling facilities at December 31, 2017
 
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FOOTNOTES
 
(1) Volumes reflect total import and export across the dock/terminal and may also include volumes that have been handled at the Mont Belvieu Terminal.
(2) Exludes six non-owned wells we operate on behalf of Chevron Phillips Chemical Company LLC ("CPC").  An additional well has been drilled and is being prepared for operations. Two additional wells are permitted. 
(3) Five of 12 owned wells leased to Citgo Petroleum Corporation under long-term leases.
 
Our fractionation, storage and terminaling business includes approximately 900 miles of company-owned pipelines to transport mixed NGLs and specification products. 
 
 
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Petroleum Logistics

Our Petroleum Logistics business owns and operates storage and terminaling facilities in Texas, Maryland and Washington. These facilities not only serve the refined petroleum products and crude oil markets, but also include LPGs and biofuels.

 

 

The following table details the Petroleum Logistics facilities at December 31, 2017
 

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NGL Distribution & Marketing
We market our own NGL production and also purchase component NGL products from other NGL producers and marketers for resale. Additionally, we also purchase product for resale in our Logistics and Marketing segment, including exports. During the year ended December 31, 2017, our distribution and marketing services business sold an average of 490.0 MBbl/d of NGLs.
 
We generally purchase mixed NGLs at a monthly pricing index less applicable fractionation, transportation and marketing fees and resell these component products to petrochemical manufacturers, refineries and other marketing and retail companies. This is primarily a physical settlement business in which we earn margins from purchasing and selling NGL products from customers under contract. We also earn margins by purchasing and reselling NGL products in the spot and forward physical markets. To effectively serve our distribution and marketing customers, we contract for and use many of the assets included in our Logistics and Marketing segment.
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Wholesale Domestic Marketing
Our wholesale domestic propane marketing operations primarily sell propane and related logistics services to major multi-state retailers, independent retailers and other end-users. Our propane supply primarily originates from both our refinery/gas supply contracts and our other owned or managed logistics and marketing assets. We sell propane at a fixed posted price or at a market index basis at the time of delivery and in some circumstances, we earn margin on a netback basis.
 
The wholesale domestic propane marketing business is significantly impacted by seasonal and weather-driven demand, particularly in the winter, which can impact the price and volume of propane sold in the markets we serve.
 
The following table details the Wholesale Marketing Terminal facilities as of December 31, 2017
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FOOTNOTES
(1) Throughputs include volumes related to exchange agreements and third-party storage agreements.
(2) Volumes reflect total transport and injection volumes.
(3) Throughput volumes reflects 100% of the facility capacity.
(4) Rail-to-truck transload equipment.
(5) Operational in the third quarter of 2017 and located at our Baltimore Petroleum Logistics Facility. 
 

 
 
 
 
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Refinery Services
In our refinery services business, we typically provide NGL balancing services via contractual arrangements with refiners to purchase and/or market propane and to supply butanes. We use our commercial transportation assets (discussed below) and contract for and use the storage, transportation and distribution assets included in our Logistics and Marketing segment to assist refinery customers in managing their NGL product demand and production schedules. This includes both feedstocks consumed in refinery processes and the excess NGLs produced by other refining processes. Under typical netback purchase contracts, we generally retain a portion of the resale price of NGL sales or receive a fixed minimum fee per gallon on products sold. Under netback sales contracts, fees are earned for locating and supplying NGL feedstocks to the refineries based on a percentage of the cost to obtain such supply or a minimum fee per gallon.
 
Key factors impacting the results of our refinery services business include production volumes, prices of propane and butanes, as well as our ability to perform receipt, delivery and transportation services in order to meet refinery demand.
 
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Commercial Transportation
Our NGL transportation and distribution infrastructure includes a wide range of assets supporting both third-party customers and the delivery requirements of our marketing and asset management business. We provide fee-based transportation services to refineries and petrochemical companies throughout the Gulf Coast area. Our assets are also deployed to serve our wholesale distribution terminals, fractionation facilities, underground storage facilities and pipeline injection terminals. These distribution assets provide a variety of ways to transport products to and from our customers.
 
Our transportation assets, as of December 31, 2017, include approximately 640 railcars that we lease and manage, approximately 130 leased and managed transport tractors and 18 company-owned pressurized NGL barges.
 
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Natural Gas Marketing
We also market natural gas available to us from the Gathering and Processing segment, purchase and resell natural gas in selected U.S. markets and manage the scheduling and logistics for these activities.
 
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