Enterprise Products Partners LP (EPD), the largest U.S. pipeline partnership by market value, will build a 1,230-mile (1,979-kilometer) line to ship ethane from Pennsylvania to U.S. Gulf Coast petrochemical plants.
The ATEX Express pipeline will have the capacity to transport as much as 190,000 barrels a day, Houston-based Enterprise said in a statement today. The company has commitments from shippers to pay 14.5 to 15.5 cents per gallon.
Chemical companies including Dow Chemical Co. (DOW) and LyondellBassell Industries NV are using more ethane and other natural-gas liquids from shale formations as a way to replace crude oil-based feedstocks such as naphtha. Enterprise estimates Gulf Coast petrochemical demand for ethane is about 955,000 barrels a day, according to the statement. Ethane is a feedstock for producing ethylene, the main ingredient in plastics.
“The willingness of shippers to commit to a term of at least 15 years reflects the long-term potential of shale development in the Appalachian region,” Enterprise Chief Executive Officer Michael A. Creel said in the statement.
The ATEX line will connect to the Marcellus and Utica shale formations in Pennsylvania and Ohio.
“Enterprise has garnered the most shipper interest and at this point is the only pipeline solution that goes from the Marcellus Shale down to Texas,” T.J. Schultz, an analyst with RBC Capital Markets in Austin, Texas, said in a phone interview. Schultz rates Enterprise’s units at “outperform” and owns none.
Enterprise’s Mont Belvieu, Texas, complex is the biggest storage and processing facility for ethane and other gas liquids on the Gulf Coast, said Darren Horowitz, an analyst for Raymond James & Associates Inc. in Houston. It’s connected to almost every petrochemical facility on the Gulf, he said.
“Producers want a complete solution and they’re willing to pay more for access,” said Horowitz, who rates Enterprise’s units a “strong buy” and owns none.
If the pipeline reaches its full capacity, it may generate more than $400 million a year in revenue, according to Bloomberg calculations. The release didn’t say how much of the capacity is committed to shippers. The pipeline is expected to begin service in the first quarter of 2014, according to the statement.
Enterprise rose less than 1 percent to close at $46.67 in New York.
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