Enterprise: The Gorilla in LPG

Focus: STOCKS

Igor Greenwald Image Igor Greenwald Chief Investment Strategist, MLP Profits

Fracked shale is producing windfalls all over North America; here, we look at the last and most lucrative link in the hydrocarbon value chain: processing the liquids extracted from natural gas into liquefied petroleum gas (LPG) for export, notes Igor Greenwald, editor of MLP Profits.

In addition to technology and capital, this is a business that requires vertical integration and continent-spanning pipes, as well as highly specialized port facilities and a global roster of customers.

Today, the natural gas liquids (NGLs) are increasingly funneled to the Gulf Coast, which has the ports, the pipes, and the plants.

Almost as important is the Gulf Coast’s geography, suitable for supplying LPG to Central and South America, Europe and, increasingly in the years ahead, Asia via a Panama Canal that will soon be widened with this trade in mind.

The party’s only getting started according to Enterprise Products Partners (EPD), the leading US NGL fractionator and LPG exporter, which is expecting years of persistent domestic oversupply based on booming production from shale.

Propane currently makes up the bulk of LPG exports, and Enterprise accounted for more than three-quarters of US propane exports last year. And ethane is likely to carve out a much bigger European export market in the coming years.

Enterprise estimates that a typical European petrochemical cracker, with an annual production capacity of 1.5 billion pounds, would save $600 million a year by converting to use ethane as a feedstock instead of naphtha derived from crude oil.

Enterprise is the unchallenged 800-pound gorilla in US LPG exports.