On Jan 10^th, 2025, Phillips 66 (“P66”) announced its acquisition of EPIC Y-Grade, further strengthening its position in the natural gas liquids (NGLs) market, particularly as it related to the prolific Permian basin. This move expands P66’s already impressive portfolio, which includes complete vertical integration of NGL assets such as gas processing, NGL pipelines, fractionation, storage, and export terminals. By acquiring EPIC’s NGL assets, P66 aims to maximize its Permian-to-Gulf Coast value chain, increase the reliability of flows from Permian processing plants to Gulf Coast fractionation, and position itself for significant NGL growth with Corpus Christi area fractionation and potential for large scale export. A “Mini-Mont Belvieu” outside of Mont Belvieu is taking shape. Acquisition of EPIC NGLs appears to be a realistic NGL growth avenue for P66.

Strategic Significance

Through this acquisition, Phillips 66 will take control of key EPIC assets, including:

• The EPIC Y-Grade NGL pipeline, with an existing capacity of 175 MBPD, an expansion underway that will add 50 MBPD, and another potential expansion of +125 MBPD (Note: EPIC trunkline has operating capacity of 300 MBPD. BANGL JV has 125 MBPD undivided joint ownership capacity, and EPIC has the remaining 175 capacity)
• EPIC 1 and Robstown fractionators, with a combined processing capacity of 170 MBPD and ability to add three 110 MBPD fractionation facilities at Corpus Christi.
• A y-grade pipeline connecting the Corpus Christi area fractionators to the Sweeny fractionator.
• Purity product distribution lines along the Gulf Coast (to Clemens and Exxon-Sabic cracker).

These assets will enhance Phillips 66’s midstream opportunities, reliability, and flexibility from production basin through fractionation and LPG (and potentially ethane) exports. With P66’s Freeport LPG export capacity maxed out and inability to break into the “Mont Belvieu Club”, EPIC provided the only viable growth opportunity to maximize their “wellhead to dock” NGL strategy and maintain/grow market share from Marathon/MPLX for “non-Mont Belvieu” NGL hubs.

History of EPIC

EPIC Consolidated Operations LLC was formed in 2017 to build a crude oil and a NGL Y-grade pipeline from the Permian basin to the Corpus Christi area to feed new fractionation complex.  Upon completion of the Y-Grade pipeline, the fractionation capacity at the Corpus Christi terminus was not yet available. EPIC initially used the Y-grade pipeline for crude oil until their dedicated crude pipeline came online. To complete the needed fractionation, EPIC acquired the Robstown fractionator (70 MBPD) and built the EPIC I fractionator (110 MBPD) bringing the Y-grade system into service by 2020.  However, despite the pipeline’s capacity to handle ~310 MBPD of NGLs, it was unable to operate at full capacity due to dearth of fractionation capacity at Corpus Christi.   

To solve the fractionation limitation at Corpus Christi, EPIC built an additional NGL pipeline to Sweeny, providing a dual destination optionality for fractionation: Corpus Christi or Sweeny. EPIC also constructed product lines along the Gulf Coast to transport purity products to local markets or export terminals.

The Evolution of BANGL and Its impact

Meanwhile, the BANGL partnership was formed with the goal of providing a pipeline from the Permian Basin to a Mont Belvieu alternative fractionation and export terminal to be located at Texas City.  However, the COVID-19 downturn caused a shift in plans leading BANGL to a less risky option and purchase of 125 MBPD undivided joint interest (UJI) in the EPIC Y-grade pipeline from Benedum to Gardendale with EPIC retaining ~180 MBPD of this capacity.

Since that time, BANGL has grown their plans to try to shift back to their original goal of fractionation and export at Texas City – clearly aimed at wresting market share away from P66’s NGL business in Sweeny. BANGL is building a pipeline from the EPIC Y-grade pipeline Gardendale location to Sweeny/Texas City. The pipeline will have capacity of 250 MBPD.  To fill this pipeline, BANGL is expanding their 125 MBPD EPIC Y-grade capacity to 250 MBPD via pump stations. In addition, BANGL is evaluating building a pipeline from Orla to Benedum to get their volumes straight into their EPIC UJI capacity without extra transport costs on EPIC.  They would then have their own capacity from Orla to Benedum, then Benedum through the UJI, and into their new pipeline at Gardendale to move directly to Sweeny.

EPIC is also expanding their Y-grade capacity adding another 50 MBPD with eyes on potential expansions after that.

Before acquiring EPIC Y-Grade LP and LLC, Phillips 66 (P66) had established itself as a fully vertically integrated midstream company with assets spanning the production, processing, transport, fractionation, storage, and export of natural gas liquids (NGLs).

P66 operates gas processing facilities in several key U.S. basins, including the DJ Basin in the Rockies, the Anadarko Basin, the Eagle Ford, and the Permian Basin. The company also has a 50% equity stake in the EZ Pipeline in partnership with Chevron Phillips Chemical (CP Chem), which transports NGLs from the Permian Basin to the Sweeny fractionation and Clemens storage facilities. Through its acquisition of DCP Midstream in 2023, Phillips 66 expanded its NGL pipeline network across multiple regions, including the Rockies, Mid-Continent, Permian, Eagle Ford, and Haynesville basins. These pipelines transport NGLs from processing plants to fractionation hubs. P66 also operates key fractionation assets, including facilities at Conway in the Mid-Continent, and at Sweeny and Mont Belvieu. Additionally, the company owns an LPG export terminal at Freeport, Texas, further strengthening its position in the U.S. export market.

P66 Benefits of the EPIC Acquisition

Although Phillips 66 was already fully vertically integrated before acquiring EPIC, the addition of EPIC’s assets brings several strategic advantages that will provide new opportunities to grow NGL volumes, improve operational efficiency, enhance flexibility and create optionality for fractionation and dock expansions.

In recent years, two of P66’s key NGL pipelines, the EZ Pipeline (100 MBPD) and the Sand Hills pipeline (500 MBPD), have been operating at or near full capacity. This has created a challenge in transporting additional production and processing volumes.

With the EPIC acquisition, the +50 MBPD expansion this quarter, a potential 2^nd expansion of +125 MBPD, and the capacity likely to be available from diverted volumes from the BANGL pipeline at Gardendale, this will create additional capacity for P66 volumes. The EPIC pipeline will also connect to the Sand Hills pipeline, providing Phillips 66 with the flexibility to move volumes between pipelines and optimize operational capacity across its system. This acquisition enhances the reliability of Phillips 66’s system and provides P66’s access to fractionation and export terminals outside of the Mont Belvieu and Sweeny areas.

Conclusion

The Phillips 66 acquisition of EPIC Y-Grade provides immediate benefits by enhancing the company’s ability to move NGLs from the Permian Basin on multiple pipelines for fractionation at multiple Gulf Coast locations. This acquisition delivers flexibility and reliability for transporting Permian volumes, ensuring they are fractionated and ready for market, storage, or export at Corpus Christi or Sweeny. With an expanded and more integrated network, Phillips 66 is well positioned to capitalize on future growth opportunities in the NGL sector. The added capacity, flexibility, and access to new geographic Corpus Christi gulf coast assets will allow P66 to continue to grow these assets in line with market growth in this sector.

-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.