Texas firm to build ethane pipeline from Pa. to Gulf

January 4, 2012 12:00 am

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DALLAS -- Enterprise Products Partners LP, the largest U.S. pipeline partnership by market value, said Tuesday it will build a 1,230-mile line to ship ethane from southwestern Pennsylvania to Gulf Coast petrochemical plants.

The ATEX line will connect the Marcellus and Utica Shale formations in Pennsylvania, West Virginia and Ohio with ethylene plants on the Gulf Coast. Its first leg will run 595 miles from Washington County to Cape Girardeau, Mo. From there, the company will use existing pipeline to connect with its natural gas liquids storage complex at Mont Belvieu, Texas.

Enterprise said it is negotiating right-of-way agreements and expects to begin operating the pipeline in the first quarter of 2014. The company said the project would create about 4,000 jobs during and after construction.

The ATEX Express pipeline will have the capacity to transport as much as 190,000 barrels a day, Houston-based Enterprise said in a statement Tuesday. The company has commitments from shippers to pay 14.5 to 15.5 cents per gallon. If the pipeline reaches its full capacity, it may generate more than $400 million a year in revenue, according to Bloomberg News calculations. The release didn't say how much of the capacity is committed to shippers.

Chemical companies, including Dow Chemical Co. and LyondellBassell Industries NV, are using more ethane and other natural-gas liquids from shale formations as a way to replace crude oil-based feedstocks, such as naphtha. Enterprise estimates that Gulf Coast petrochemical demand for ethane is about 955,000 barrels a day, according to the statement. Ethane is a feedstock for producing ethylene, the main ingredient in plastics.

"The willingness of shippers to commit to a term of at least 15 years reflects the long-term potential of shale development in the Appalachian region," Enterprise chief executive officer Michael A. Creel said in the statement.

"Enterprise has garnered the most shipper interest and, at this point, is the only pipeline solution that goes from the Marcellus Shale down to Texas," T.J. Schultz, an analyst with RBC Capital Markets in Austin, said in a phone interview. Mr. Schultz rates Enterprise's units at "outperform" and owns none.

Enterprise's Mont Belvieu complex is the biggest storage and processing facility for ethane and other gas liquids on the Gulf Coast, said Darren Horowitz, an analyst for Raymond James & Associates Inc. in Houston. He said it is connected to almost every petrochemical facility on the Gulf.

"Producers want a complete solution, and they're willing to pay more for access," said Mr. Horowitz, who rates Enterprise's units a "strong buy" and owns none.

Enterprise rose 29 cents, or less than 1 percent, to close Tuesday at $46.67 in New York.

Associated Press contributed.
First Published 2012-02-09 19:09:17
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