Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
While the debate surrounding natural gas exports stays heated, few are noticing as another form of natural gas heads out of the country. Quietly the U.S. has become the propane export king. In fact, in the week since I wrote an article looking at where all of our propane was going, two more propane export projects were announced. For investors, this really is an important development.
Enterprise's export expansion continues
Not more than a week after announcing that it was planning to expand an existing LPG export facility, Enterprise Products Partners (NYSE: EPD ) has decided it has enough demand to build a second export facility. Between the expansion project and this new facility, Enterprise will have the capacity to export up to 16 million barrels per month of low-ethane propane and butane by late 2015.
With natural gas drillers like Chesapeake Energy (NYSE: CHK ) targeting liquids rich shale plays, it's adding a big boost to the production of liquids such as propane. If it wasn't for exports the liquids rich wells that Chesapeake and its peers are targeting in places like the Utica and Marcellus wouldn't be nearly as profitable. In fact, producers can get as much as a $2 per Mcf uplift in price by targeting super rich natural gas over dry natural gas. At the current price that's a 54% boost in revenue, which makes for very compelling economics.
Bluegrass brings more gas to the Gulf
While Enterprise is the biggest propane exporter, it's starting to see an increase in competition. Williams (NYSE: WMB ) and Boardwalk Pipeline Partners (NYSE: BWP ) recently announced a joint venture agreement to build the proposed Moss Lake LPG terminal in Louisiana. The most recent agreement is really an extension of the Bluegrass pipeline agreement, which will bring Marcellus and Utica natural gas liquids like propane to the Gulf Coast.
Given the current projections, this increase in both takeaway capacity and export capacity will be critical to the well economics in the future. That's because NGL production from the Marcellus and Utica expect to grow by 510% from 2012 to 2017. Without the Bluegrass Pipeline that would leave about one million barrels of NGLs without access to the market per day by 2020. So while it would seem that Williams and Boardwalk are competing with Enterprise, given the sheer volumes of NGLs expected to be produced, it leaves plenty of room for both projects.
We don't typically give propane much consideration, unless of course the gas grill ran dry right in the middle of that end of summer BBQ. However, for natural gas drillers having an outlet for propane is critically important for well economics. That's why seeing this flurry of activity to increase exports is a net positive, with both Enterprise's second export terminal and the Williams/Boardwalk venture being critically important projects to the future of America's natural gas industry.
How to Profit from America's Energy Boom
Companies like Chesapeake are fueling the record oil and natural gas production that is revolutionizing the United States' energy position. That's creating more ways for investors to profit than many realize. To help you profit from this boom, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.