ONEOK, MPLX’s ‘Wellhead-to-Water’ Deal Dominates Permian NGL Race

A lot of the energy industry’s attention over the last two years has focused on natural gas coming out of the Permian.

Deservedly so. First, there was so much natural gas that producers had to pay to have it taken away, threatening crude production levels.

Then, the Matterhorn pipeline opened and other gas pipeline projects reached a final investment decision. More Gulf Coast LNG production came online. AI data center demand exploded out of seemingly nowhere.

By the middle of March, natural gas dominated most of the major talks.

During all of the drama, however, a few midstream companies have steadily built interconnected facilities for another segment of the market—NGL.

In early February, ONEOK and MPLX announced a $1.75 billion deal to construct a new 400,000 bbl/d LPG export terminal in Texas City, Texas, and a new 24-inch pipeline from ONEOK’s Mont Belvieu, Texas, storage facility to the new terminal.

The move was a culmination of a years-long effort and made ONEOK and MPLX “full-fledged members of the elite ‘wellhead-to-water club,’” as RBN analyst Housley Carr put it in an examination of the deal.

The two midstream companies joined four others—Enterprise Products Partners, Energy Transfer, Targa Resources and Phillips 66—that can boast ownership of a complete NGL supply and transport chain.

“We are excited to collaborate with MPLX on these strategically located projects, which expand and extend our NGL value chain providing additional optionality and value to our customers,” said Pierce H. Norton II, ONEOK president and CEO, during the company’s first-quarter earnings call following the deal in February. “Given our high expectations for future growth and demand for more energy infrastructure, including export capacity, these projects with MPLX complement our disciplined capital allocation strategy.”

A complete NGL production and transport network stands out in an era when companies in the crude, natural gas and LNG segments still prefer specialization, with few exceptions. The large midstream companies, however, have been able to take advantage by combining assets they already own to make and market products that often slip under the radar.

In an interview with Oil and Gas Investor, Norton said “wellhead to water” is a logical outcome of forces in the NGL market.

“First of all, our prediction is that, if there’s any growth at all in propane demand in this country domestically, it’s going to be small,” Norton said. “All this propane that’s going to come with the movement of additional natural gas, it’s got to go somewhere. You’re going to need to clear your barrels somewhere.”

For ONEOK and MPLX, that means building LPG export facilities in Texas City.

“When you look at the 7 billion or so people in the world who don’t live like we do, one simple solution is just starting with how we cook,” he said. “The easiest way to do that is propane, because you can get the propane over on a ship, unload it, put it in the canisters, and then start driving it around with trucks.

“That’s a lot easier than moving it around with pipelines.”

Liquid growth

NGLs are the components of natural gas separated from the gas that comes out of wells. The natural gas used by utilities is primarily methane. Midstream companies generally own processing plants that can separate out the other chemicals—ethane, butane, propane, isobutane and pentanes plus—all of which can be marketed together or separately.

Ethane is one of the market’s drivers and is used as a petrochemical feedstock in the production of ethylene, a building block for plastics.

Propane is used as an easily portable and storable fuel for heating and cooking.

Butane is part of LPG and is also used as fuel for heating, but also serves as a propellant in aerosol products.

Pentanes plus consists of normal pentane, isopentane, hexanes-plus and plant condensate.

It is used as a diluent for heavy crude oil, such as that produced in the Canadian oil sands.

All of the different uses for chemicals extracted from one source (natural gas production) have created a growing global market. The shale revolution meant the U.S. had plenty of cheap NGL, and the world has had plenty of customers.

In 2022, Allied Market Research valued the global NGL market at about $18 billion and projected it would reach $28.5 billion by 2030, growing at a compound annual growth rate of 5.4%.

In 2024, S&P Global projected an increase of more than $21 billion by 2029, pushing the value closer to $40 billion with a CAGR of 6.7%.

Overall, the market continues to be driven by low-cost supplies, particularly out of the Permian, against rapid urbanization and industrialization and a rising need for space heating across the globe, according to a report from Market Research Future.

Ownership has Its advantages

In the Permian, midstream operators with the required access to capital spent much of 2023 and 2024 in a “knifefight” for NGL barrels, according to an RBN analysis.

“A slew of LPG, ethane and ethylene export projects are underway along the Gulf Coast, a direct result of rising U.S. NGL production and generally flat domestic demand,” wrote RBN analyst Kristen Holmquist in November 2024.

“Wellhead to water” describes all facilities, from the processing plants treating natural gas in the Permian to the NGL pipelines to the fractionation plants in Mont Belvieu to the export terminals for purity products, almost all along the Gulf Coast.

Having that kind of control over a product provides midstream operators with some major advantages in efficiency and gives them the ability to collect fees from shippers at each step in the process, Carr said.

Targa Resources spent much of the last two years building up its NGL infrastructure. In 2024, the company added two Permian processing plants and two additional NGL fractionators. Targa also put its Daytona NGL pipeline in service during third-quarter 2024.

The result was a national production record. In January, the U.S. Energy Information Administration reported NGL production averaged about 7.23 MMbbl/d in October 2024. That figure exceeded October 2023 average output by 200,000 bbl/d.

During its fourth-quarter earnings call in February, Targa announced three new NGL projects: the Delaware Express pipeline, a new 150,000 bbl/d NGL fractionator at Mont Belvieu and expansion of LPG export capacity to 19 MMbbl a month at Galena Park, Texas.

“We are also in a position to deliver significant growth in 2026 and beyond with four new Permian G&P plants coming online in 2026, driving significant NGL volume growth through our downstream assets,” Targa CEO Matt Meloy told investors.

Building with purpose

The ONEOK-MPLX deal in February was the result of a yearslong effort.

To that point, ONEOK had several key NGL-related assets, including several gas processing plants in the Rockies and the Midcontinent, NGL pipeline systems including West Texas NGL and ElkCreek, and six fractionators in Mont Belvieu, which made up the majority of 1 MMbbl/d of fractionation capacity. ONEOK also owned 30 MMbbl of salt-cavern storage for its products.

Executives said finding the right assets in the right places was key to finally closing the circle on its system.

“Our strategic rationale is, you could say: location, location, location,” Sheridan Swords, ONEOK executive vice president and chief commercial officer, said during the earnings call.

The location of the export dock site in Texas City was a huge advantage for the joint venture (JV).

“We have access to the open waters,” Swords said. “We’re within open waters at this location, significantly better than the other docks in the area. We’re next to [Marathon Petroleum’s] refinery.

“It is a brownfield construction site, where we have a lot of other infrastructure there. That greatly reduces the cost of this venture. And then, obviously, the location to our NGL system and storage, where we easily can be able to get our products into the dock as we go there.”

Norton referred to ONEOK’s purchase of the Easton Energy midstream NGL system in the Southeast Texas area in 2024. At the time, the deal stood out from other midstream acquisitions, which had been focused on production areas in the Permian.

“The Easton acquisition was really important to us because it connected Mont Belvieu facilities—the fractionation and storage—and it connected that over to East Houston, Galena Park and Pasadena,” Norton said.

MPLX has been an active partner in the JV on its side. The company has continued building gas processing capabilities in the Permian. In 2024, the company put two new plants in service and hit record throughput on its network.

MPLX changed the name of the gathering and processing segment from G&P to Natural Gas and NGL Services.

Most importantly, according to East Daley Analytics’ Julian Renton, MPLX acquired full ownership of the BANGL Pipeline, the company announced in February. In a $715 million deal, MPLX bought the 55% interest in the NGL line from affiliates of WhiteWater Midstream and Diamondback Energy.

“The deal is the next big move in the race to control Permian NGLs, expanding MPLX’s reach to export docks on the Texas coast,” Renton said in an analysis.

David Heppner, senior vice president at MPLX, told investors the growth trends in NGLs require a continued emphasis on facilities.

“The Gulf Coast, as everybody knows, has got a very large petrochemical footprint,” he said. “With our new JV partner ONEOK, as we continue to build out this project and look at incremental opportunities between that partnership, we believe that there is a roadmap for some pretty substantial growth opportunities there. I think the combination … has a lot of growth potential in the NGL platform.”