Reports related to this article:
Project(s): View 14 related projects in PECWeb
Plant(s): View 12 related plants in PECWeb
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--A year ago, amid surging condensate production from the Eagle Ford Shale in Texas, building condensate splitters on the Texas Gulf Coast was seen as the best way to turn that ultra-light crude into a salable product. Half a dozen condensate splitter projects were announced, at an aggregate cost of about $1 billion. These units had processing capacity exceeding 350,000 barrels per day (BBL/d).
View Project Report - 300164617 300059341 300109208 300162619 300158297300160482
The splitters were thought to be needed because most Gulf Coast refineries were unable to process large volumes of condensate. Years earlier, they had been configured to process mainly heavier crudes. U.S. law prohibited export of domestic crude oil, and the government classified condensate as a form of crude oil.
As Eagle Ford condensate stockpiles rose, the conventional wisdom said that building condensate splitters, at a cost of $100 million to $400 million each, was the most cost-effective way to turn condensate into a salable product. Building a condensate splitter would cost far less than a grassroot refinery.
But then, this summer, conventional wisdom came under scrutiny after the U.S. government allowed two companies to export a tanker of lightly processed Eagle Ford condensate. For more on that issue, see August 8, 2014, article - Would Scrapping Crude-Oil Export Ban Lower Gasoline Prices?.
That lightly processed condensate was not run through a splitter; rather, it was processed at a condensate stabilizer. Building condensate stabilizers cost $10 million to $40 million each, depending on the processing capacity. Not only are stabilizers far less expensive to build than splitters, they can be built far faster.
Industrial Info is tracking eight condensate stabilizers under development across North America. These projects have an aggregate total investment value (TIV) of about $200 million. Four are to be built along the Texas Gulf Coast, while two are to be built in Ohio, and two more are planned for Alberta, Canada.
View Project Report - 300179812 300184316 300184172 300180818 300180831 300180811 300180828 300180057
At the time of the first tanker shipment of processed condensate, a number of companies were seeking permission from the U.S. Department of Commerce to export that product. But after that shipment, thinking shifted: If Pioneer Natural Resources Company (NYSE:PXD) (Irving, Texas) and Enterprise Products Partners LP (NYSE:EPD) (Houston, Texas) could export condensate that was processed in a stabilizer, rather than a splitter, the U.S. government was, in effect, providing exporters with a roadmap and a precedent. Splitters were out. Stabilizers were in.
At least one company, reportedly BHP Billiton Limited (NYSE:BHP) (Melbourne, Australia), is said to be moving ahead with export plans without seeking permission from the U.S. government, apparently relying on the precedential nature of this summer's export of lightly processed condensate.
While none of the announced splitter projects have been placed on hold or cancelled, the rush to announce new splitter projects has cooled. Currently, condensate projects are being developed by:
"I think it's fair to say, it's unlikely to see anything new develop in the short term," Mears said last month. "I don't think that necessarily eliminates the potential interest in the long term."
In an earnings call this summer, Kinder Morgan Chief Executive Richard Kinder told investors, "As far as future splitters are concerned... the people who utilize those splitters (will) probably think carefully about whether they want to proceed."
Kinder said that his company's plans to build a 100,000-BBL/d splitter on the Houston Ship Channel are still on track. Phase I of that project is scheduled to be brought online by the end of 2014, while Phase II is scheduled to be operational in 2015.
Separately, consultants and investment bankers have said this summer's export of lightly processed condensate by Pioneer and Enterprise likely would have a chilling effect on some announced splitter projects.
"The challenge here is how to bring U.S. energy policy into the 21st century without causing undue damage to either oil and gas companies or U.S. national security," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "There's a consensus the crude oil export ban, now 39 years old, is an anachronism. Surging crude-oil production from the Eagle Ford Shale is forcing companies to jump through a lot of complicated hoops when they seek private rulings from the Commerce Department about proposed exports of processed condensates.
"Until that law is modified or repealed in a transparent fashion, capital investment in splitters may be stalled. For export purposes, what's legal and what's required? When we get those questions answered, we'll know more about the outlook for constructing condensate splitters along the Texas Gulf Coast."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
View Project Report - 300164617 300059341 300109208 300162619 300158297300160482
The splitters were thought to be needed because most Gulf Coast refineries were unable to process large volumes of condensate. Years earlier, they had been configured to process mainly heavier crudes. U.S. law prohibited export of domestic crude oil, and the government classified condensate as a form of crude oil.
As Eagle Ford condensate stockpiles rose, the conventional wisdom said that building condensate splitters, at a cost of $100 million to $400 million each, was the most cost-effective way to turn condensate into a salable product. Building a condensate splitter would cost far less than a grassroot refinery.
But then, this summer, conventional wisdom came under scrutiny after the U.S. government allowed two companies to export a tanker of lightly processed Eagle Ford condensate. For more on that issue, see August 8, 2014, article - Would Scrapping Crude-Oil Export Ban Lower Gasoline Prices?.
That lightly processed condensate was not run through a splitter; rather, it was processed at a condensate stabilizer. Building condensate stabilizers cost $10 million to $40 million each, depending on the processing capacity. Not only are stabilizers far less expensive to build than splitters, they can be built far faster.
Industrial Info is tracking eight condensate stabilizers under development across North America. These projects have an aggregate total investment value (TIV) of about $200 million. Four are to be built along the Texas Gulf Coast, while two are to be built in Ohio, and two more are planned for Alberta, Canada.
View Project Report - 300179812 300184316 300184172 300180818 300180831 300180811 300180828 300180057
At the time of the first tanker shipment of processed condensate, a number of companies were seeking permission from the U.S. Department of Commerce to export that product. But after that shipment, thinking shifted: If Pioneer Natural Resources Company (NYSE:PXD) (Irving, Texas) and Enterprise Products Partners LP (NYSE:EPD) (Houston, Texas) could export condensate that was processed in a stabilizer, rather than a splitter, the U.S. government was, in effect, providing exporters with a roadmap and a precedent. Splitters were out. Stabilizers were in.
At least one company, reportedly BHP Billiton Limited (NYSE:BHP) (Melbourne, Australia), is said to be moving ahead with export plans without seeking permission from the U.S. government, apparently relying on the precedential nature of this summer's export of lightly processed condensate.
While none of the announced splitter projects have been placed on hold or cancelled, the rush to announce new splitter projects has cooled. Currently, condensate projects are being developed by:
- Kinder Morgan Energy Partners LP (NYSE:KMP) (Houston, Texas)
- Targa Resources Partners LP (NYSE:NGLS) (Houston, Texas)
- Castleton Commodities International LLC (Stamford, Connecticut)
- Magellan Midstream Partners LP (NYSE:MMP) (Tulsa, Oklahoma), and
- Phillips 66 (NYSE:PSX) (Houston, Texas)
"I think it's fair to say, it's unlikely to see anything new develop in the short term," Mears said last month. "I don't think that necessarily eliminates the potential interest in the long term."
In an earnings call this summer, Kinder Morgan Chief Executive Richard Kinder told investors, "As far as future splitters are concerned... the people who utilize those splitters (will) probably think carefully about whether they want to proceed."
Kinder said that his company's plans to build a 100,000-BBL/d splitter on the Houston Ship Channel are still on track. Phase I of that project is scheduled to be brought online by the end of 2014, while Phase II is scheduled to be operational in 2015.
Separately, consultants and investment bankers have said this summer's export of lightly processed condensate by Pioneer and Enterprise likely would have a chilling effect on some announced splitter projects.
"The challenge here is how to bring U.S. energy policy into the 21st century without causing undue damage to either oil and gas companies or U.S. national security," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "There's a consensus the crude oil export ban, now 39 years old, is an anachronism. Surging crude-oil production from the Eagle Ford Shale is forcing companies to jump through a lot of complicated hoops when they seek private rulings from the Commerce Department about proposed exports of processed condensates.
"Until that law is modified or repealed in a transparent fashion, capital investment in splitters may be stalled. For export purposes, what's legal and what's required? When we get those questions answered, we'll know more about the outlook for constructing condensate splitters along the Texas Gulf Coast."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
