Logistics & Transportation Segment
Our Logistics and Transportation segment is also referred to as our Downstream Business. Our Downstream Business includes the activities and assets necessary to transport and convert mixed NGLs into NGL products and also includes other assets and value-added services described below. The Logistics and Transportation segment includes Grand Prix, as well as our equity interest in GCX. The associated assets, including these pipelines, are generally connected to and supplied in part by our Gathering and Processing segment and, except for the pipelines and smaller terminals, are located predominantly in Mont Belvieu and Galena Park, Texas, and in Lake Charles, Louisiana. Our fractionation, pipeline transportation, storage and terminaling businesses include approximately 2,000 miles of company-owned pipelines to transport mixed NGLs and specification products.
The Logistics and Transportation 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, California, Florida, Alabama, Mississippi, Tennessee, Kentucky and New Jersey. 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.
NGL Transportation & Services
After being extracted in the field from Targa and third party natural gas gathering and processing facilities, mixed NGLs are transported on our Grand Prix NGL pipeline to our fractionation complex in Mont Belvieu where the mixed NGLs are separated into discrete NGL products: ethane, ethane-propane mix, propane, normal butane, isobutane and natural gasoline. These specification products are then supplied to key demand markets along the US gulf coast, including petrochemical facilities, refineries, end-use markets and exported to international LPG markets.
Our NGL Transportation & Services business is underpinned by long term fee-based arrangements, which are subject to adjustment for changes in certain transportation and fractionation expenses, including energy costs. The operating results of our NGL Transportation & Services business are dependent upon the volume of mixed NGLs transported, fractionated, the level of transportation and fractionation fees charged and product gains/losses from fractionation. Significant volumes of mixed NGLs are contractually committed to our NGL pipeline and fractionation facilities.
The NGL Transportation & Services business includes our common carrier NGL pipeline, Grand Prix, which transports NGLs from the Permian Basin, southern Oklahoma and North Texas to our fractionation and storage complex in the NGL market hub at Mont Belvieu, Texas. Grand Prix is supported by our gathering and processing volumes and other third-party customer volume commitments. The capacity of the 24-inch diameter pipeline segment from the Permian Basin is approximately 300 MBbl/d, expandable to 550 MBbl/d. The pipeline segment from the Permian Basin is connected to a 30-inch diameter pipeline segment in North Texas where Permian, North Texas and Oklahoma volumes are connected to Mont Belvieu, and have capacity of approximately 450 MBbl/d, expandable to 950 MBbl/d. The capacity from Oklahoma to North Texas varies based on telescoping pipe size. We are constructing a 110-mile extension of Grand Prix from southern Oklahoma to the STACK region of Central Oklahoma where it will connect with The Williams Companies, Inc. (“Willimas”) Bluestem Pipeline, linking the Conway, Kansas, and Mont Belvieu, Texas, NGL markets. In connection with this project, Williams has committed significant volumes to us that we will transport on Grand Prix and fractionate at our Mont Belvieu facilities. The Central Oklahoma Extension is expected to be completed in the first quarter of 2021.
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 fractionation facility, Gulf Coast Fractionators LP (“GCF”), also located at Mont Belvieu. In addition to the three stand-alone facilities in the NGL Transportation & Services business, we own fractionation assets at Chico, Monument and Gillis in our Gathering and Processing business.
Five of our existing seven fractionation trains at the Mont Belvieu facility are part of our 88%-owned Cedar Bayou Fractionators (CBF), which has 493.0 MBbl/d of gross capacity. Our Trains 6 and 7, which are not affiliated with CBF, are also located at our Mont Belvieu facility and combined have 210 MBbl/d gross capacity. Our new 110 MBbl/d Train 8 at the Mont Belvieu facility, which is expected to begin operations late third quarter 2020 is also not part of CBF. Our fractionation complex 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.
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. Across our Downstream business, we own 34 storage wells at our facilities with a gross storage capacity of approximately 71 MMBbl, and operate 6 non-owned wells, the usage of which may be limited by brine handling capacity, which is utilized to displace NGLs from storage. We provide long and short-term storage and terminaling services and throughput capability to third-party customers for a fee.
We also have a natural gasoline hydrotreater at Mont Belvieu, Texas that removes sulfur from natural gasoline, allowing customers to meet 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.
LPG Exports & Services
Our international export assets include our facilities at both Mont Belvieu and the Galena Park Marine Terminal near Houston, Texas. The facilities have export capacity of approximately 10 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 U.S.-based NGLs (both propane and butane) for export into international markets and have the ability to further enhance our loading capabilities. We are currently expanding our export capabilities at our Galena Park terminal, which will increase our effective LPG export capacity to 11 to 15 MMBbl per month in the third quarter of 2020.
Marketing & Other
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 Transportation segment, including exports. During the year ended December 31, 2019, our distribution and marketing services business sold an average of 651.0 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 Transportation segment.
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.
Our other businesses are as follows:
- Wholesale Domestic Marketing
- Refinery Services
- Commercial Transportation
- Petroleum Logistics