Quietly, America Takes 1 More Step to Becoming an Energy Export Superpower

Enterprise Products Partners announces it’s building an ethane export terminal, again beating peers like Boardwalk Pipeline Partners as the first to the market.

Apr 27, 2014 at 10:35AM
Lpg Export

Source: Flickr/Steven Straiton.

America is fast becoming the world's energy superpower. Thanks to shale production, it leads the world in natural gas production. By next year, the U.S. should pass both Russia and Saudi Arabia in oil production. On top of that, America is also a top producer of natural gas liquids like propane and ethane.

Producing the most energy is just one step as America is looking to become a leader in exporting its energy riches across the world. While limited natural gas exports have been approved and oil exports remain banned, it has quietly become the world's top exporter of propane thanks to Enterprise Products Partners (NYSE:EPD). That title isn't likely to be ceded anytime soon as competitors like Boardwalk Pipeline Partners (NYSE:BWP) and Williams (NYSE:WMB) are teaming up to compete with Enterprise Products Partners to export America's propane riches. That's just the start as other companies are following close behind as the propane export market heats up.

The next step in energy exports
With so many of its competitors now finally catching on to the profits available in propane exports, Enterprise Products Partners is now choosing to focus on ethane. The company hinted at its Analyst Day earlier this year that it was looking into making ethane its next top export. Now, Enterprise Product Partners has officially announced that it will indeed build an ethane export facility on the Texas Gulf Coast to help address the current market oversupply.

Enterprise Products Partners is planning to build a 240,000-barrels-per-day facility, which would be the largest ethane export facility in the world. Its plan is to have it operational by the third quarter of 2016. The company already has strong interest in the project and could have the facility's capacity fully contracted out.

The Enterprise Products Partners' export facility is a timely addition to its portfolio. Currently, U.S. ethane supply exceeds demand by about 300,000 barrels per day. However, that imbalance is expected to widen by 700,000 barrels per day by 2020. That's even with new ethylene capacity being built in the U.S. to use ethane as a feedstock.

Why this matters
The reason for this oversupply is very simple. The production of natural gas liquids like ethane and propane are expected to surge in the decade ahead as the following slide from a recent Boardwalk Pipeline Partners' investor presentation shows.

Boardwalk Pipeline Partners Ngl

Source: Boardwalk Pipeline Partners investor presentation (link opens a PDF).

This surging NGL production especially in the Marcellus and Utica Shale plays, as that slide noted, is especially important to exports. To address this, Boardwalk Pipeline Partners, along with its partner Williams, is planning to build an NGL pipeline -- the Bluegrass Pipeline -- from these two shale plays to the Gulf Coast. The main reason is to serve the Gulf Coast petrochemical market with NGL feedstock. However, Boardwalk Pipeline Partners and Williams are also proposing to build the Moss Lake LPG terminal to export NGLs like propane and butane.

Enterprise Products Partners is well aware of this trend in NGL production growth. It is already well ahead of both Boardwalk Pipeline Partners and Williams as it completed its key NGL pipeline from these shale plays to the Gulf Coast -- the ATEX Express Pipeline -- earlier this year. That pipeline will now enable Enterprise Product Partners to start a new trend as it will provide more than enough fuel to supply the company as it builds the world's largest ethane export facility.

Investor takeaway
While America debates oil and natural gas exports, Enterprise Products Partners has quietly became the country's top propane exporter. Now, it's looking to do the same with ethane. Given the massive supply glut that's expected and its first-mover advantage, Enterprise Products Partners should make its investors a lot of money as it exports our excess natural gas liquids.

The IRS is quietly fueling energy exports
Record oil and natural gas production is revolutionizing the United States' energy position. What you probably don't know is that the IRS is providing a big assist to companies like Enterprise Products Partners and Boardwalk Pipeline Partners to export our excess energy. To learn more about the special tax advantage these companies enjoy as well as how you can profit from it check out our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Matt DiLallo owns shares of Enterprise Products Partners L.P. The Motley Fool recommends Enterprise Products Partners L.P. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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