Given its favorable geology that supports high-quality salt dome structures, the U.S. Gulf Coast has been the heart of liquid hydrocarbon cavern storage in the U.S., with multiple NGL/Olefin cavern sites scattered across Texas and Louisiana. Based on the latest public records, the U.S. Gulf Coast has an aggregate salt cavern storage capacity of ~806 Million Bbls, 77% of which is in Texas. Within the state of Texas, the town of Mont Belvieu (60 miles east of Houston, TX) holds the largest concentration of salt cavern structures: 68% (or ~422 Million Bls) of all Texas Cavern storage capacity is located in Mont Belvieu (technical name of the salt dome – Barbers Hill) with estimated working capacity estimated at 285 million Bbls. While there is plenty of cavern capacity, availability of brine/brine pond capacity at Mont Belvieu has always been a limiting factor on volume of product that could be stored at Mont Belvieu. The data reported by cavern operators supports the fact that effective or usable Mont Belvieu storage capacity has been limited by the availability of brine at Mont Belvieu since at least 2016, when we started collecting and analyzing the data.

 It is no coincidence that inventory levels at Mont Belvieu have been limited to ~100 Million barrels until mid-2019, when new brine pond capacity was added at Mont Belvieu. However, the impact of COVID-19 has revealed new facets of Mont Belvieu storage capacity and its limitations. COVID-19 led to demand destruction in the U.S. and triggered a race to identify new market outlets and storage capacity for liquid hydrocarbons.

At Mont Belvieu, the aggregate inventory cycle was more severe during 2020, mainly due to the scale of pandemic demand destruction as several NGL, olefins and refined products hit record inventory levels. Purity ethane inventories (not including ethane in EP mix and in Y-grade) increased drastically – from ~14 Million in April 2020 to ~34 Million by Oct 2020, primarily driven by impacts of COVID19 and hurricane-induced cracker closures in the U.S. Gulf Coast.

Adding to the imbalance, ethane extraction rose in the U.S. (esp. from the Permian basin) as midstream companies tried to keep their NGL pipelines and fractionation assets full. Was this ethane owned and stored by the operator, an exporter, or by domestic consumers?  Or perhaps the build was used to create enough brine to push out diesel, Y-Grade and other products? In any event, the US reached a new record of ethane inventory levels in October 2020. 

Similar inventory build ups can be seen in Diesel and natural gasoline (C5+). In fact, cavern operators in Texas changed products and converted 9 caverns to natural gasoline service to accommodate the influx of C5+. It appears that C5+ is finding its way into condensate blends and crude oil as demand has shot up late in 2020, bringing inventory down.  Unlike other NGLs, butane stocks at Mont Belvieu rose, but below levels seen in June 2019, as stronger export demand restrained inventory levels. U.S. butane found an unexpected market in India/Indonesia where butane is used as the cooking fuel (LPG). In 2020, storage operators/midstream Cos were determined to keep butane inventory under control by offering export incentives. Butane exports averaged 334 MBPD in 2020, smashing the previous year’s record of 262 MBPD.

The inventory buildup has all sorts of implications for brine pond storage, brine disposal, operators’ ability to source brine, and resultant product deliverability issues. For example, operators are getting rid of brine to make space for more product storage. This raises a storage deliverability question: how quickly can product be pulled out under a brine scarcity scenario? Based on anecdotal evidence and discussion with market participants, it appears that there is a shortage of brine that may impact how product is withdrawn at Mont Belvieu. While inventories will be worked off eventually, the events of 2020 have brought to light liquid hydrocarbon storage capabilities and limitations at Mont Belvieu. We outline these implications, as well as key market and commercial trends, in our latest update of the U.S. Gulf Coast cavern storage report. If you are interested in learning more about the 2021 Liquid Hydrocarbon Benchmarking Report, give us a shout: (info@enkonenergy.com)