DCP's Sand Hills Pipeline Moving Eagle Ford NGLs to Mont Belvieu

October 26, 2012 R.T. Dukes

DCP Sand Hills Pipeline Map - Eagle Ford Segment

DCP's Sand Hills Pipeline has started servicing the Eagle Ford Shale. The company is opening the 720 mile pipeline that runs from the Permian Basin to Mont Belvieu (East of Houston) in segments. The next segment connects directly to Mont Belvieu and will be open by the end of 2012. Construction tying in the Permian Basin will be finished mid-2013.

“When finished, Sand Hills Pipeline will be a major link between the liquids-rich Eagle Ford and Permian producing regions and growing Gulf Coast markets,” said Tom O'Connor, chairman and chief executive officer of DCP Midstream. “With Sand Hills, we can offer an integrated NGL takeaway solution to producers, who will enjoy reliable one-stop service. Sand Hills adds to our well positioned assets in the Permian and Eagle Ford producing regions.”

When finished, the Sand Hills Pipeline will be 720 miles of 20-inch pipe with capacity of 200,000 barrels per day of NGLs and will have the ability to expand to 350,000 b/dif needed. DCP is projecting it will spend $1 billion on the pipeline and offers three strategic reasons for constructing the pipeline:

Provides critical capacity and NGL transport from South Texas and the Permian Basin
Capitalizes on increased Eagle Ford growth
Improves reliability of the overall NGL network

Live Oak Railroad Near Three Rivers Coming

October 23, 2012 R.T. Dukes

The Live Oak Railroad will be breaking ground in November with plans to open in the first half of 2013. The new rail facility will include 28,000 ft of track located just south of Three Rivers. The facility has a great location almost halfway between San Antonio and Corpus Christi. If you have noticed, there has been a dramatic rise in rail traffic in South Texas related to the Eagle Ford boom.

Three other major railroad sites have grown significantly in recent times:

The Live Oak Railroad is being built by a partnership between Howard Energy Partners and local real estate developers. The primary purpose of the facility is to move liquid hydrocarbons - condensate, NGLs, and oil.

Why Move Oil by Rail?

It might surprise you that crude will move by rail. Approximately 1.8 million barrels per day of pipelines have been built or are under construction. That should be adequate capacity for quite some time, but that is only part of the story. WTI oil prices have been significantly discounted to Louisiana Light Sweet (LLS) in recent history (Read more at Eagle Ford Oil Prices Trade at a Premium to WTI).

There are several projects underway to move crude from WTI's trading point, Cushing, OK, to the Gulf Coast near Houston. Those projects will relieve congestion in Oklahoma, but will make supply more abundant in the Texas refinery complex.

All that to say, there is adequate pipeline capacity to get into the Gulf Coast Refinery Complex, BUT there is a lot of other oil on its way there too. If Eagle Ford operators can get their production across the state line into Louisiana, it might mean several more dollars per barrel. That's potentially millions of dollars of savings per day across the Eagle Ford. The Live Oak Railroad and others will be the primary trading points for oil if prices prove more lucrative in other areas of the country.

Valerus San Antonio Office Opening for Eagle Ford Work

October 18, 2012 R.T. Dukes

Valerus is opening an office in San Antonio to help support operations in the Eagle Ford Shale. The new office will provide sales support for the company's Three Rivers facility.

Valerus provides oil & gas handling and processing services across the world. In South Texas, the company is helping meet growing demand in the midstream sector, including production, compression, and process and treating facilities. The company will offers operations and maintenance services.

Daniel B. Cannon, senior VP of North America operations for Valerus, stated,

“We are delighted to officially open our sales office in San Antonio and to expand our operations in the Eagle Ford and South Texas. We are excited about the opportunities and value we are bringing to the area and to Valerus employees and customers, and are hiring additional personnel to support our growing operations.”

The new Valerus Office is located near the airport at 1777 NE Loop 410, San Antonio, TX 78217.

San Antonio Central Railroad Open at East Kelly Railport

October 17, 2012 R.T. Dukes

The San Antonio Central Railroad was opened at the East Kelly Railport by the Port of San Antonio and Watco Companies on October 16, 2012.

This means jobs here in San Antonio ....... An incredible boom, transformation we are seeing in South Texas," said U.S. Representative Henry Cuellar.

He mentions 4,000 rigs, but I'm certain he meant wells. We have more than 4,000 Eagle Ford wells producing now and that number is expected to grow to well over 20,000.

Marathon Petroleum Buys BP's Texas City Refinery

October 10, 2012 R.T. Dukes

Marathon Petroleum has agreed to buy BP's Texas City Refinery and related marketing and logistics assets for as much as $2.5 billion. The refinery has a 451,000 b/d capacity and is positioned well to benefit from growing production in plays like the Eagle Ford.

The deal includes several related assets:

Texas City refinery, three intrastate NGL pipelines originating at the refinery, an allocation of BP's Colonial Pipeline Company shipper history, four terminals, retail marketing contract assignments for approximately 1,200 branded sites and a 1,040 megawatt cogeneration (cogen) facility. The base purchase price is $598 million, plus inventories estimated at $1.2 billion. The agreement also contains an earnout provision under which MPC could pay up to an additional $700 million over six years, subject to certain conditions. The transaction is expected to be accretive to earnings in the first year of operation. The acquisition is expected to be funded with cash on hand, and is anticipated to close early in 2013, subject to customary closing conditions and regulatory approvals.