Demand for export capacity growth still exists despite the development of yet another terminal, writes Amy Strahan
US midstream companies MPLX and Oneok this month announced that they are to develop a new 400,000 b/d (12.6mn t/yr) LPG export terminal in Texas City on the US Gulf coast. The facility is due to be operational by 2028 and signifies the belief that yet more capacity will be needed to distribute growing volumes of US LPG around the world even after other midstream companies bring on line expansions at existing terminals in the interim.
The planned terminal is likely to be fed by MPLX's Bangl pipeline, which carries unprocessed natural gas liquids (NGLs) from the Permian basin to the Galveston Bay refinery in Sweeny, Texas, and is due to be expanded to 300,000 b/d from 250,000 b/d by late 2026. MPLX, a subsidiary of upstream firm Marathon Oil, is also due to build two new 150,000 b/d NGL fractionators adjacent to Marathon's Galveston Bay refinery for completion in 2028 and 2029, to provide processed LPG and ethane. An extension of the Bangl line would provide access to the new fractionators, Marathon says.
As part of the project, Oneok and MPLX are also building a 24-inch (61cm) diameter pipeline that will send LPG from the latter firm's Mont Belvieu storage facility to the export terminal. Oneok will own 80pc of the line and MPLX 20pc.
The project is being developed near the mouth of Galveston Bay on to the Gulf of Mexico, about 50km downstream of the Houston Ship Channel, where midstream firms Enterprise Products and Targa Resources own the 763,000 b/d and 450,000 b/d Baytown and Galena Park terminals in Houston, respectively. And it is about 60km northeast of Phillips 66's 260,000 b/d Freeport facility. The terminal project, named Texas City Logistics, comes at the same time as Enterprise works to add 300,000 b/d of capacity at its Houston facility by late 2026, while peer Energy Transfer is adding 250,000 b/d of LPG capacity at its 480,000 b/d Nederland terminal, which is about 125km northeast of Houston, by the end of this year.
Tight capacity at US Gulf coast LPG export terminals as a result of weather-related delays and maintenance drove cargo premiums to forward Mont Belvieu prices to record highs of more than 30¢/USG ($156.50/t) in September, prompting talks of investment in further capacity expansions. But the project has drawn a muted response from market participants who say it may come too late to help. It will bring the US' total LPG export capacity to more than 3mn b/d by 2028, while the additional 300,000 b/d of fractionation capacity adds to the 755,000 b/d being developed by the other midstream firms in Mont Belvieu by 2026.
The project complements Oneok's "disciplined capital allocation strategy" given the firm's "high expectations" for LPG supply growth and demand for export capacity, chief executive Pierce Norton says. Oneok, which does not own any LPG export capacity, has talked about its ambition to access the international market since 2019. The firm will spend $1bn on the project, while MPLX will invest $2.5bn.
The US continues to ramp up NGL production alongside natural gas. Domestic propane output rose by 5.7pc on the year to a record monthly high of 2.24mn b/d in November, while normal butane production climbed by 9.4pc to a new high of 707,000 b/d, according to the EIA. The government agency expects propane output to stand at 2.26mn b/d in 2026 and butane output at 1.19mn b/d.
A decade late?
But the new terminal might not reap the benefits of higher fob cargo prices as it will come after the Houston and Nederland facility expansions, market participants say. Enterprise called the project "challenging", adding that LPG export values will be eroded by new capacity in the next few years. The project is "a decade late", one trader says. But the terminal will be underpinned by Marathon's existing international customer base, other participants say.
