OneOk and MPLX have entered into definitive agreements to form a strategic joint venture to construct a 400 MBPD liquified petroleum (LPG) export terminal in Texas City, TX.  The proposed large-scale LPG export terminal will complete OneOk’s and MPLX’s full vertical integration of its’ NGL midstream value chain. In addition, the parties will join to build a 24-inch pipeline from OneOk’s Mont Belvieu storage facility to the new export terminal, thus completing necessary infrastructure segment to support proposed export capacity. This vertical integration will provide additional optionality to their customers, boost their competitiveness with “Mont Belvieu Export Club” and support their strategic plans for future long-term growth.

The Importance of Vertical Integration for NGLs

As highlighted in our previous article, “OneOk Closer to Full Vertical Integration,” vertically integrated midstream companies have a significant competitive edge over other less integrated companies. This integration allows them to control the entire value chain from “wellhead to ship” which is critical in this competitive market. The key benefits of vertical integration include:

1. Maximized Asset Utilization: Integrated companies can leverage their infrastructure to ensure continuous product flow across multiple assets, optimizing capacity usage and generating revenue at each stage of the process.
2. Strategic Margin Management: Integrated companies have the flexibility to accept a lower rate for one segment of the value chain, compensating for the reduced margin by achieving higher profits in other components of the value chain.
3. Cost Control and Improved Profitability: By overseeing the entire supply chain, integrated companies can better manage costs, leading to enhanced efficiency and greater profitability.

What Does this get MPLX and ONEOK? Where does this leave P66?

1. OneOK puts in place 200,000 BPD of LPG exports providing its producer customers a “Well-Water” pathway and alternatives to MB pricing for LPG
2. Direct connectivity to international markets to obtain pricing uplifts
3. For MPLX – A robust outlet for LPG to be produced from their new fractionation plants that they plan to develop at Texas City/Sweeny area.
4. Both parties aim to grow their G&P footprint to feed this fully integrated value chain.

Where does this leave P66?

Assuming Freeport is dock constrained which limits their ability to expand Freeport, they do not have any choice but to develop an LPG export outlet at a scale to compete with Texas City and Mont Belvieu. P66’s acquisition of EPIC seems very timely!

The LPG Export Terminal and Pipeline Connection

The planned export terminal will have a capacity of 400 MBPD for LPG, primarily consisting of low ethane propane and normal butane.  Both OneOk and MPLX will each hold a 50% ownership stake in the terminal. Each partner will contractually reserve 200 MBPD of capacity for their customers. MPLX will construct and operate the terminal, which is scheduled to be in service 2028. 

In addition, a 24-inch pipeline will be constructed to connect OneOk’s Mont Belvieu, Texas, storage facility to the new export terminal.  OneOk will own an 80% stake in the pipeline joint venture MBTX Pipeline LLC, with MPLX holding the remaining 20%.  OneOk will construct and operate the pipeline.

Conclusion:

The partnership between OneOk and MPLX to develop the LPG export terminal at Texas City marks a significant milestone in the vertical integration of their NGL assets, which include gas processing, NGL pipelines, fractionation, storage and now this export terminal.  This vertical integration will enable OneOk and MPLX to optimize asset utilization, have strategic margin management, enhance profitability and strengthen their ability to support long-term growth strategies.

-Sue Neville

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Enkon Energy Advisors is a boutique consulting firm specializing in oil & gas, and energy transition since 2012. We bring deep expertise in a range of markets including natural gas, NGLs, Oil, LNG, and Energy Transition where we provide commercial and market advisory to investors, energy companies, and project developers with consulting services, subscription reports, and analytics, with the goal of delivering commercially actionable outcomes to our client.