With historical development and operations of conventional oil and gas resources in the South Texas region, a significant midstream infrastructure facilities base already exists for oil, gas and natural gas liquids (NGLs).

While this infrastructure has provided some valuable initial support for early Eagle Ford area development activities, it became evident very quickly that these available resources didn't match up to growing near-term and ultimately long-term Eagle Ford production needs. In fact, area infrastructure quickly bottlenecked and began to impede increasing production goals.

Producers, operators and midstream infrastructure operators began the necessary dialogues to plan and implement future oil and gas gathering and transportation systems, processing systems and other necessary facilities. Many of these systems are beginning to reach final stages of construction and implementation, with the majority of recent infrastructure capacity constraints for crude oil, liquids, gas liquids and gas anticipated to be eliminated by mid-2013.

Interim truck and rail service

In many cases, truck and rail services have provided essential interim movement of crude oil and condensate production until the new midstream facilities are operative. With overall Eagle Ford production potential resulting in a wide variety of multi-faceted solutions, the entire South Texas gas pipeline, NGL pipeline and crude oil pipeline networks are being transformed into a new mode of future midstream operations.

As a result of significant discoveries in the oil and condensate-rich portions of the play, existing regional crude oil pipeline infrastructure needed major modification and expansion. Also significant was the need for liquids products to be gathered and transported to reach definitive crude oil markets, particularly refinery markets in the greater Houston and Corpus Christi, Texas, areas. As such, a number of differing new pipeline and terminal projects are under way to meet these requirements. Several of these projects are beginning to provide initial levels of service.

Enterprise Products crude line

Enterprise Products Partners LP is one of the largest midstream infrastructure players in South Texas. To date, its primary involvement was in the natural gas gathering, processing and NGLs business. Phase 1 of Enterprise's 350,000-barrel (bbl.) per day Enterprise Crude Oil Pipeline has begun initial service. Phase 1 consists of 143 miles of 24-inch pipeline from Wilson County to existing crude facilities near Sealy, Texas, and has connected to an expansion of Enterprise's Rancho Pipeline into a newly-developed storage and distribution terminal in southeast Houston, dubbed the ECHO terminal. The overall project includes a pump station expansion in Katy on the existing Rancho Pipeline and, for flexibility, an additional 2.2 million bbl. of crude storage capacity in Sealy.

Full pipeline delivery capability should be achieved by late-2012 as the ECHO terminal storage tank construction and related connections to other terminal exit pipelines' facilities are finalized. See the update on the system's Phase 2 on page 36.

Koch Pipeline Co. LP

Koch Pipeline Co. LP—historically the largest crude oil pipeline operator in South Texas—has continued to grow its area crude oil gathering capability. In addition to added upstream gathering efforts, Koch also is adding capacity on its Pettus-to-Corpus Christi/Ingleside crude system to move an additional 120,000 bbl. per day of Eagle Ford crude oil by late 2012. Koch has entered into other commercial arrangements to expand its gathering capabilities via a joint tariff arrangement with Harvest's Arrowhead Pipeline to transport 50,000 bbl. per day of crude and condensate. Near-term service under that arrangement includes a lease of 30,000 bbl. per day of capacity on a recently re-activated NuStar crude oil pipeline to Corpus Christi.

On the Corpus Christi end, Koch is building a new pipeline from Corpus Christi to its affiliate Flint Hills Resources' Ingleside waterborne terminal. Service was expected to begin in the third quarter. The completion of the Ingleside pipeline is timed with Flint Hills' proposed upgrades to its Ingleside marine terminal that will provide the capacity to ship via barge up to 200,000 bbl. per day of liquids to other Gulf Coast markets, while maintaining its historical ability to receive imported volumes there as well.

Flint Hills' 300,000 bbl. per day Corpus Christi refinery is expected to continue to increase the amount of Eagle Ford crude processed there.

KMCC pipeline

Kinder Morgan Energy Partners (KMP) has implemented a 300,000 bbl. per day crude and condensate pipeline from the Eagle Ford area directly to Houston Ship Channel markets. The Kinder Morgan Crude Condensate pipeline (KMCC) has been recently placed into service. The KMCC system consists of 65 miles of new-build pipeline to PetroHawk Energy's (a subsidiary of BHP Billiton) Black Hawk field near Cuero, and Kinder Morgan (KM) has converted 113 miles of existing KMP intrastate gas pipeline from previous natural gas service to liquids service. This new system terminates at the Houston Ship Channel where initial deliveries have begun to various terminals and facilities.

Separately, KMP has also announced two additional projects related to KMCC.

The first is a project that would build a new condensate processing facility adjacent to KM's Galena Park terminal, providing the ability to split received condensate into various other marketable components. Initial capacity of that facility is 50,000 bbl. per day with expansion potential to 100,000 bbl. per day. Projected in-service date is first-quarter 2014.

Second, KMP plans to build a 27-mile, 12-inch pipeline lateral to extend the KMCC pipeline to Chevron Phillips Chemical Co.'s fractionator at Sweeny. Phillips 66 is the contracting party for 30,000 bbl. per day of lateral capacity. Associated upstream commitments by KMP include providing additional crude/condensate receipt facilities by constructing a five-bay truck offloading facility and three new storage tanks with approximately 360,000 bbl. of crude/condensate capacity at KMCC's DeWitt Station in DeWitt County, Texas, and its Wharton Pump Station in Wharton County, Texas.

Valero Energy/Harvest Pipeline

Valero Energy and Harvest Pipeline have worked together to implement a new crude oil gathering pipeline from Atascosa and Live Oak counties to connect directly to Valero's existing 100,000 bbl. per day Three Rivers refinery. Initial capacity of the new gathering pipeline is 50,000 bbl. per day with expansion capability up to 70,000 bbl. per day. Valero's refinery had primarily been using a mixture of local and/or foreign crude imported from Corpus Christi. Eagle Ford crude has begun to displace such and will become the principal, long-term crude source.

Several major crude oil and condensate off-loading, storage and transportation terminals are being developed by midstream operators in the upstream region to provide for support of crude and condensate trucking and pipeline operations.

Koch is providing truck uploading facilities and a storage terminal at Helena in Karnes County.

Looming overbuild?

Elsewhere, a number of parties are developing commercial capabilities in the vicinity of Gardendale in La Salle County, while others are implementing new terminal/storage facilities in the Three Rivers-Pettus-Oakville area. Coupled with the various pipeline implementations, an extensive crude oil and condensate network is being put into action. In fact, facilities are so extensive that some have questioned whether overall regional facilities planned might already be approaching overbuild. The accompanying tables provide a more detailed listing of liquids projects in the Gardendale area and Three Rivers-Pettus-Oakville areas, respectively.

Phase 2 of the Enterprise Crude Oil Pipeline project recently changed its proposed concept via an announced joint venture arrangement with Plains All-American Pipeline LP. Under this arrangement, Plains, would expand its recently constructed crude oil pipeline from near Gardendale to the Three Rivers area while a new, connecting pipeline lateral would connect from Three Rivers to the existing Enterprise Crude Oil Phase 1 pipeline terminus. Both Enterprise and Plains had already been independently developing storage and other infrastructure projects at Gardendale. A number of the Gardendale-area facilities of both companies appear to now reside within the joint venture structure, but Plains' recently acquired crude gathering assets in the Gardendale area were excluded from the joint venture arrangement.

Plains announced it has entered into a commitment to construct a new, 130-mile crude oil and condensate pipeline from the western portion of the Eagle Ford play in La Salle County to the Three Rivers area and extending on to Plains' facilities in Corpus Christi. The project is expected to be in service in fourth-quarter 2012 with up to 350,000 bbl. per day of capacity. A marine terminal facility with barge storage capacity in Corpus Christi is also included in the structure.

Anchor-shipper Anadarko Petroleum has completed long-term arrangements with Harvest Pipeline to extend the existing Arrowhead crude pipeline system to Cotulla in La Salle County in the Gardendale area. This new 12-inch pipeline will have initial capacity of 50,000 bbl. per day and ultimate capacity of 90,000 bbl. per day. From there, the gathered crude will route via an Arrowhead/Koch Pipeline joint tariff to Corpus Christi.

NuStar Logistics/TexStar Midstream

NuStar Logistics LP and TexStar Midstream Services LP have announced their intent for TexStar Crude Oil Pipeline LP to build and operate a new 110-mile, 12-inch pipeline for gathering up to 100,000 bbl. per day of crude oil and condensate in Frio, La Salle, McMullen and Live Oak counties and routing such to NuStar's crude oil terminal at Oakville, near Three Rivers. TexStar is also proposing to operate truck-loading facilities along the route to receive additional crude.

In Oakville, TexStar has made arrangements for leased capacity on NuStar's recent reversal of an existing 16-inch crude oil pipeline, which will now provide delivery into NuStar's Corpus Christi's North Beach terminal. Ultimate delivery capacity is up to 200,000 bbl. per day. Pending final shipper negotiations, construction and implementation of the TexStar pipeline is in process with expected in-service date by year-end 2012.

Copano Energy/Magellan Midstream

Copano Energy LLC and Magellan Midstream Partners LP have formed a joint venture that would provide delivery of condensate from Karnes, Live Oak, McMullen and La Salle counties to Corpus Christi. The Double Eagle Pipeline LLC would consist of 140 miles of new-build pipeline facilities and would be integrated with an existing, converted 50-mile Copano gas pipeline. Initial capacity of the new liquids system will be 100,000 bbl. per day; limited service capabilities are expected to be offered by year-end 2012 with full service following in early 2013. A truck unloading facility will also be implemented in the Three Rivers area for condensate receipts there.

Magellan will make enhancements to its Corpus Christi storage terminal, including 500,000 bbl. of dedicated condensate storage and a unique delivery pipeline to marine loading facilities.

Gathering, processing facilities

As in the crude oil transportation sector, there are a number of unique regional projects for gathering and processing Eagle Ford natural gas—and handling of related NGL products. In general, project proposals are of two types:

  • First, where the rich natural gas streams are integrated into existing and/or expanded South Texas gas and liquids infrastructure.
  • Second, where gas volumes are routed instead to distant plants and often precipitate infrastructure expansions en route. In general, processing plant output is referred to as Y-grade (mixed NGLs), and the output seeks NGL fractionation facilities where NGL products are thus derived. These NGL products then seek markets in the Gulf Coast refining and petrochemical industries.

The largest fractionation facilities and NGL product market exists at the NGL trading hub at Mont Belvieu, Texas, at the Houston Ship Channel. Significant storage facilities at Mont Belvieu support both operations.

Boardwalk Field Services

Boardwalk Field Services began operating certain Gulf South facilities in South Texas on January 1, 2012. When completed with added facilities, a rich-gas gathering system will consist of 400 miles of pipeline in Karnes and DeWitt counties and will be capable of gathering in excess of 300 million cubic feet (MMcf) per day. To facilitate gas processing, Boardwalk will implement the 150 MMcf per day Flag City gas processing plant near Edna, Texas. Facilities are expected to be available for service by first-quarter 2013.

Copano Energy LLC has previously implemented its 350 MMcf per day DeWitt-Karnes Pipeline consisting of 38 miles of 24-inch pipeline. By second-quarter 2013, that facility will be expanded by adding an additional 65 miles into McMullen County. These facilities connect to Copano's Houston Central Plant located near Sheridan.

Copano is expanding its overall processing capability by 400 MMcf per day to 1.1 billion cubic feet (Bcf) per day by 2013. At Houston Central, Copano has restarted its existing NGL fractionators, providing for output of 22,000 bbl. per day of NGL products and has doubled that capacity to 44,000 bbl. per day. Copano has also entered into a long-term contractual arrangement with Formosa Hydrocarbons at Point Comfort, wherein Formosa would provide to Copano additional processing for up to 175 MMcf per day and additional fractionation capability.

Kinder Morgan Energy Partners LP (KMP) and Copano Energy LLC have entered into a multi-faceted joint venture arrangement that provides for gathering of upstream gas from producers and routing it via new and existing pipeline facilities to Copano's Houston Central and two other area processing plants where Copano has contracted for added capability and flexibility. The joint venture, Eagle Ford Gathering LLC (EFG) will contract for the gas transportation capacity and the various processing plant and fractionation capacities and will be able to offer a full-service, bundled option to its customers. To implement, a portion of the KM Texas Laredo-to-Katy pipeline was converted from dry-gas to rich-gas service. The gas transportation system can provide the ability to transport up to 600 MMcf per day of processable Eagle Ford gas, with 375 MMcf per day routed northward to the Houston Central plant and another 225 MMcf per day routed eastward to the Kinder Morgan Tejas pipeline, a portion of which has also been converted from dry-gas to rich-gas service.

Rich-gas service

Utilizing the Kinder Morgan Tejas system, rich gas can then be routed to Williams Partners' Markham processing plant capacity of 100 MMcf per day, with option for up to 200 MMcf per day or to Formosa Hydrocarbons' processing and fractionation plant, up to 200 MMcf per day. The nearby Formosa Plastics plant is also a nearby consuming market for fractionated NGLs.

DCP Midstream/Targa Resources

DCP Midstream LLC's and Targa Resources Partners' plants in West Texas will utilize the new 700-mile DCP Sandhills NGL Pipeline. On its path to Mont Belvieu, the Sand Hills Pipeline routes through the Eagle Ford area to collect Y-grade volumes that DCP has available there. In fact, initial service on Sand Hills from connected DCP Eagle Ford plants is scheduled for mid-2013 implementation with a target capacity of 120,000 bbl. per day. To manage its West Texas and Eagle Ford Y-grade NGL volumes, DCP has contracted to be the anchor customer, supporting Targa's expansion of its fractionators at Cedar Bayou/Mont Belvieu. Targa will expand by 100,000 bbl. per day and will develop additional product storage capabilities.

In the Eagle Ford area, DCP Midstream is developing an integrated project that will provide gathering, processing, fractionation and marketing services for numerous producers. DCP is in the process of constructing 130 miles of gas gathering pipelines and will integrate these volumes into a new rich-gas header arrangement, a 165-mile portion of Trunkline Gas' existing interstate gas pipeline system, which has been converted to rich gas service and for which DCP Midstream has contracted for the capacity.

DCP has five existing area gas processing plants with capacity and is adding a sixth plant, the Eagle Processing Plant near Edna with capacity of 200 MMcf per day. The Eagle Plant is expected to be in-service by late 2012. Total processing plant capability in the region for DCP via the integrated header arrangement would be approximately 1 Bcf per day.

NGLs would be routed either through existing NGL pipelines in the area already connected to its existing plants or via the proposed Sand Hills NGL pipeline described above.

Enterprise Products gas processing

Enterprise Products Partners LP operates the largest and most-extensive gas gathering and processing operation in South Texas, with seven existing plants and the ability to process up to 1.5 Bcf per day. To facilitate providing additional services for Eagle Ford producers, Enterprise proposed a number of projects which enhanced its existing system capabilities as well as provided for new capabilities, including a proposed new, 900 MMcf per day Eagle Ford processing plant located at Yoakum, Texas. The initial 300 MMcf per day phase of this facility began service in June. Other related projects include implementation of 169 miles of NGL pipeline to provide for routing the NGL's to Mont Belvieu and residue gas handling capabilities from the Yoakum plant.

Finally, to support these numerous upstream NGL enhancements, three new 75,000 bbl. per day fractionators will be added at Mont Belvieu, the first scheduled to start this year and the second and third to follow by 2014.

Energy Transfer Partners LP

Energy Transfer Partners LP is another company that has offered a variety of infrastructure solutions for Eagle Ford producers. In late 2010, Energy Transfer announced it began to provide gathering and processing services for Eagle Ford shippers via the new 50-mile, 350 MMcf per day Dos Hermanos Pipeline originating in Webb County and routing to a connection with ETP's existing Houston Pipeline system.

A second project allowed Energy Transfer to build an 83-mile Chisholm pipeline from Dewitt County to ETP's existing LaGrange processing plant. ETP will implement a new Chisholm plant adjacent to the LaGrange plant with capacity of 120 MMcf per day.

Expanding upon these initial arrangements, Energy Transfer announced it will construct new area facilities, including a major natural gas gathering pipeline, a large regional processing plant and additional facilities. Supported by various producer contracts, the 160-mile, 30-inch Rich Eagle Ford Mainline has an initial capacity of 400 MMcf per day with the ability to expand to 800 MMcf per day. This rich-gas gathering system originates in Dimmitt County and extends to the Chisholm Pipeline for ultimate deliveries to Energy Transfer's existing processing plants and/or to a new Energy Transfer 600 MMcf per day processing plant to be located in Jackson County. This new processing facility will be operative by early 2013.

Permian Basin link

Somewhat similar in scope to the DCP Sand Hills Pipeline, Lone Star NGL LLC—a joint venture between Energy Transfer Partners LP and Regency Energy Partners LP—will build the West Texas Gateway NGL Pipeline, a 530-mile, 240,000 bbl. per day pipeline originating in Winkler County in West Texas and terminating in the Eagle Ford at the ETP Jackson County plant. In-service date is expected to be first-quarter 2013. From there, ETP is building the remaining link, a 130-mile NGL pipeline, eastward to Mont Belvieu. Lone Star will contract for capacity on the new ETP pipeline.

Thus, NGL Y-grade from numerous plants in the Permian Basin, routed eastward, will be combined with Y-grade from the Jackson County plant. Regency will also make Y-grade available from its Eagle Ford area facilities as well. Supporting the overall arrangements, Lone Star will construct two new 100,000 bbl. per day fractionators at Mont Belvieu and additional Y-grade storage facilities. The second fractionator is scheduled to be in-service in 2014.

Regency Energy Partners LP

Regency Energy Partners LP is expanding its gas and condensate gathering capabilities in the Eagle Ford area. As part of the project, Regency has purchased other area midstream assets, which will be integrated with its existing system. The so-called Eagle Ford expansion will include a 400-mile wellhead gathering system in Webb, Dimmit and La Salle Counties, compression and the implementation of four gas and condensate export terminals.

The Eagle Ford expansion will occur in phases over a period to 2014 as required by upstream parties. Implemented condensate terminals will have a stabilization capacity of 26,500 bbl. per day.

Southcross Energy

Southcross Energy will provide natural gas gathering, transportation, processing and fractionation services for Eagle Ford supply developments in McMullen County. Southcross has constructed a 25-mile, 20-inch pipeline along with smaller gathering lines. The pipeline system has a capacity of 120 MMcf per day and extends via South Cross' existing rich gas pipeline system to its processing plant near Gregory, outside Corpus Christi.

Southcross has enhanced the operating efficiency of its Gregory plant in San Patricio County, increasing its capacity to 135 MMcf per day and supporting its fractionation capability of 4,800 bbl. per day. Southcross will further increase its ability to process Eagle Ford gas by implementing a new 200 MMcf per day gas processing plant at Woodsboro in Refugio County. Construction should be complete this year. To support both plants, Southcross will implement the Bonnie View fractionator near the new Woodsboro plant; the fractionator will have an initial capacity of 11,500 bbl. per day and will be expanded to 15,000 bbl. per day.

TEAK Midstream LLC

TEAK Midstream LLC will implement a 200-mile rich gas gathering system to gather gas in Frio, La Salle, Live Oak, Bee, Karnes and DeWitt counties and will construct the 200 MMcf per day Silver Oak gas processing plant. The system will consist of two principal laterals, the Karnes Lateral owned 100% by TEAK and the Bee Express, jointly owned by TEAK and TexStar Midstream Services LLC. Overall capacity of the system is 600 MMcf per day; implementation was proposed by the third quarter.

As can be seen from so many projects under way, the South Texas liquids pipeline grid represents an array of new projects and capabilities. With many of these projects entering their initial phase of service and often followed by additional phases completing into 2013, recent capacity bottlenecks are moderating, and the finish line is indeed in sight.

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