October 13, 2015
Phillips 66 Plans Bayway, Billings Refinery Upgrades; NGL Projects on Track

Phillips 66 said on Monday that it is planning upgrading work at its Bayway and Billings refineries, and the company is continuing its NGL export plans.

Phillips 66 will also continue to work on its Bakken crude pipeline projects, and it will look to expand its retail presence in Europe.

These projects are supported by the company's $3.6 billion 2016 capital budget, which excludes Phillips 66 Partners' capital program.

Excluding Phillips 66 Partners' capital spending, Phillips 66 plans to invest $2 billion in its Midstream business lines.

In natural gas liquids (NGL), the company continues construction of the 4.4- million-bbl-per-month Freeport LPG Export Terminal on the U.S. Gulf Coast, with completion expected in the second half of 2016.

In addition, the budget includes spending associated with expansion of the Sweeny NGL midstream hub.

In transportation, the company is investing in the new DAPL and ETCOP pipeline projects to move crude oil from the Bakken production area of North Dakota to market centers throughout the United States.

Storage capacity is being added at the Beaumont Terminal in Nederland, Texas, and the company is investing in the Bayou Bridge pipeline project to move crude oil from Texas to Louisiana markets.

Phillips 66 plans $1.2 billion of capital expenditures in refining, with approximately 70% to be invested in reliability, safety and environmental projects, including compliance with the new Tier 3 gasoline specifications.

Discretionary refining capital of about $400 million will improve product yields and lower feedstock costs. These investments include a modernization of the FCC at Bayway, and an upgrade of the vacuum tower at Billings.

A company spokesman confirmed that production capacities at Bayway and Billings refineries would remain the same despite the respective upgrading projects. The upgrading projects will improve the products yields.

In marketing and specialties, the company plans to invest about $135 million of growth and sustaining capital. This furthers Phillips 66's plans to expand and enhance its fuel marketing business, including new retail sites in Europe.

Capital spending plans for 2016 for Phillips 66 Partners and for self-funded joint ventures DCP Midstream, Chevron Phillips Chemical Company, and WRB Refining will be announced later this year.

Meanwhile, the board of directors of Phillips 66 also approved a $2 billion increase to the company's share repurchase program, bringing total authorizations to $9 billion.

October 8, 2015
Sawtooth Looks to Add One More NGL Storage Cavern in 2016

Sawtooth NGL Caverns LLC is looking to open another new underground NGL storage cavern in the first half of 2016. That will boost the firm's Delta, Utah, facility total storage capacity to just over 5 million bbl.

The new well would be devoted to field grade butane, Jay Furman, senior vice president, commercial development with NGL Energy Partners told OPIS. Sawtooth is owned by NGL Energy Partners.

Sawtooth opened a third NGL storage well over the summer and a fourth well is expected to be open by the end of October, bringing total storage capacity to 4 million bbl. Of the current four wells, Sawtooth has one available for propane, one devoted to normal butane and two committed to refinery grade butane. One of those wells has been fully contracted by a single customer. Furman declined to disclose the name of the customer.

The decision to open a well dedicated to field-grade butane, a mix of normal butane and isobutane, was largely driven by customer interest. While one observer speculated that some of that product could originate from the Bakken Shale, Furman said the interest has been broad and not exclusive to that region.

Sawtooth also expects to open a second brine pond sometime before the end of 2015. Combining the new pond with the current pond gives Sawtooth a total brine storage capacity in excess of 40 million bbl. That is well in excess of current underground NGL storage capacity. Furman said Sawtooth decided against drilling a brine disposal well and will keep excess brine in surface ponds.

Looking ahead to the possibility of further expansion, Furman said Sawtooth can expand its current wells and has permits to drill additional underground storage wells. He declined to say how many additional wells are permitted.

A permit with the Utah Department of Environmental Quality shows Sawtooth has the space to add more brine storage. Furman said current brine storage capacity is more than adequate.

With Sawtooth focusing on butane storage, a reasonable question is whether butane treating and splitting facilities might be located at the site. Furman said Sawtooth is open to the possibility and is examining many projects.

In addition to the new caverns that opened this year, Sawtooth added 10 new rail tank car unloading and loading spots, for a total of 20 spots. The firm purchased a Trackmobile which will allow the firm to handle its own local switching needs and allow for multiple car moves a day. The company doubled its truck loading/unloading capacity and now has four racks.

The Sawtooth facility is located about 130 miles southwest of Salt Lake City. The only way to bring NGLs in or out is via truck or railroad. Union Pacific provides rail service to Sawtooth.

September 29, 2015
Kinder Morgan Strengthens Econs for $3.3 Bil Northeast Gas Pipeline Project

Kinder Morgan Inc. said on Tuesday that its subsidiary, Tennessee Gas Pipeline Company (TGP), has executed agreements with producers, local distribution companies (LDCs) and a New York end-use market participant totaling 627,000 dekatherms per day (Dth/d) for the Supply Path component of the proposed Northeast Energy Direct Project (NED).

The agreements will provide a direct supply link from abundant natural gas fields in Pennsylvania to existing and future Northeast and New England markets, and firm transport of incremental supplies for delivery at or near Wright, N.Y., the company said.

From the Wright area, shippers can deliver into the Market Path component of the NED project for transport to Dracut, Mass., or into TGP's existing pipeline system or into the Iroquois Gas Transmission system.

The incremental gas supplies will help meet New York and New England's growing consumer and industrial gas needs, as well as help to bolster electric reliability in the region.

TGP is continuing to negotiate with additional potential shippers on the NED project, including LDCs and others, and expects to announce these commitments and others at a later date.

OPIS notes that the utilities and gas companies in the Northeast have been pushing end-users to convert to natural gas for heating from heating oil in the past several years, leading to a steady attrition of heating oil customers. This project could accelerate the ongoing trend of customer conversion.

It is noted that the Northeast and Mid-Atlantic regions faced gas rationing in the past two winters as the current gas supplies were not able to meet the peak demand when temperatures dropped. This led to interruptible-load customers reverting to heating oil, which in turn, jacked up heating oil demand and prices.

NED's Supply Path component, from northeastern Pennsylvania to Wright, N.Y., is scalable up to 1.2 billion cubic feet per day (Bcf/d), and its Market Path component is scalable up to 1.3 Bcf/d. The NED project, including the Supply Path and Market Path components, has a planned in-service date of November 2018, subject to regulatory approvals.

Additionally, the NED Supply Path component and associated agreements are subject to approval by the Kinder Morgan board of directors.

September 24, 2015
PennTex Commissions Gas Processing, NGL Recovery Plant in N. Louisiana

UOP LLC, a Honeywell company, said on Thursday that a new UOP Russell modular gas processing plant in northern Louisiana has begun processing rich natural gas and recovering valuable natural gas liquids (NGLs).

This is the second turnkey UOP Russell plant commissioned by PennTex Midstream Partners LP, capable of processing 200 million standard cubic feet per day (MMSCFD) of natural gas.

PennTex's first UOP Russell gas plant began operation in May 2015.

"Natural gas is on trend to become the world's second-largest source of energy by 2035, so the ability to process gas reserves profitably is critical to meet that growing demand," said John Gugel, vice president and general manager for Honeywell UOP's gas processing and hydrogen business.

"UOP Russell pre-engineered modular gas processing plants, coupled with a turnkey solution, help companies such as PennTex process gas and recover valuable NGLs faster than with stick-built plants, all with better quality and more attractive economics," he said.

For both PennTex projects, Honeywell UOP supplied and installed modular cryogenic, dehydration, acid gas removal, and inlet/residue compression units, along with the control system, the flare system and site electrical equipment.

Honeywell UOP also provided site utility systems and buildings for office, control room, motor control center and compressors.

Based in Houston, Texas, PennTex Midstream Partners LP is a master limited partnership focused on owning, operating, acquiring and developing midstream energy infrastructure assets in North America. PTXP provides natural gas gathering and processing, and residue gas and natural gas liquids transportation services to producers in the Terryville Complex in northern Louisiana.

September 8, 2015
Phillips 66, Spectra Ink Agreement to Strengthen DCP Joint Venture

Phillips 66 and Spectra Energy said today they intend to contribute certain assets to their DCP Midstream, LLC joint venture in an effort to strengthen DCP's balance sheet and to better position it to weather boom-and-bust commodity price cycles.

Through a nonbinding letter of intent, Spectra will contribute its ownership interest in the Sand Hills and Southern Hills NGL pipelines, based respectively in the Permian and Eagle Ford Basins and in the Midcontinent. Phillips 66 plans to contribute $1.5 billion in cash, to be used to pay down some of DCP's revolving credit facility. The companies expect this transaction will close in the fourth quarter, subject to various regulatory approvals, as well as the green light from Spectra's board of directors.

A statement released by the companies says this transaction, if approved, will help DCP reduce operating costs, sell certain non-core assets and convert some commodity contracts to a fee-based structure.

"The contribution of the one-third interests in Sand Hills and Southern Hills will diversify DCP Midstream by enhancing the balance of fee-based assets while building on the re-contracting work already underway," said Greg Ebel, chairman and CEO of Spectra Energy. "In addition, the infusion of cash to pay down debt will result in DCP Midstream bank credit metrics that will be much stronger, allowing DCP to continue providing excellent service to customers and retain its number one position in gas processing and NGL production. This deal also retains the upside for owners as commodities improve."

Phillips 66 and Spectra plan to remain 50/50 joint-venture owners of DCP.


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