With new long-haul natural gas pipelines facing substantial opposition, Energy Transfer LP is focusing on optimizing existing assets and seeing growth opportunities mostly in its natural gas liquids segment, according to a company senior executive.
New gas cross-haul pipelines will eventually be needed again, but "right now there's a lot of capacity running west to east and right now, we're staying full," Energy Transfer's senior vice president-business development, Adam Arthur, said at the virtual LDC Gas Forums 2020 conference.
"We're very happy with that, but when we start thinking about how can we allocate capital, how can we do projects in this environment, what's the best way to execute on these projects, given the difficulties, we really think asset optimization is key," Arthur said.
Elaborating on that notion, Arthur pointed to the company's 90,000 miles of varied pipeline assets across the U.S.
"We're plumbed up across all basins, we run all directions, we've got all product mixes, but the question to our commercial teams is ... are those pipelines in the right product service, are they flowing in the right direction," the executive said. For example, the company could be looking for opportunities to combine pipelines or introduce new product on lines that are 50% to 60% utilized, Arthur said.
Such opportunities "have a much, much lower hurdle given the difficulty in completing projects in the current environment," he said.
In its third-quarter earnings call Nov. 4, Energy Transfer again said it was reducing its spending plans for growth projects. It expects to invest less than $3.3 billion this year, more than $100 million below previous estimates. Next year, Arthur said, Energy Transfer anticipates a bigger step down to $1.3 billion.
As one example of an asset optimization project underway, Arthur described plans to repurpose one of the Mariner pipelines.
"Now that the Mariner 2 and 2X pipelines are coming on, it makes a lot of sense to convert the Mariner 1 back to refined product service," Arthur said.
Asked what would need to change for new gas projects to be required, Arthur offered that more drilling would need to resume.
"Most of these projects are push-related and without an increase in production, there's lots of pipeline capacity," the executive said.
In April, the U.S. saw a steep decline in gas production amid historic volatility in the gas and oil markets. As West Texas Intermediate crude prices traded into negative territory, producers curtailed output and slashed drilling and completions budgets. By May, U.S. gas production tumbled below 85 Bcf/d, down from a record-high monthly average at 95 Bcf/d in late 2019, S&P Global Platts Analytics data showed. Production has remained sharply lower in the months since, averaging about 87 Bcf/d in October, with no clear sign of a rapid recovery coming in the months ahead.
While there is not much need for new projects out of the Haynesville Shale, there is a need for those projects to be "optimized and give customers and producers and these LNG facilities access to the right markets at the tail end of those pipes," Arthur said.
As for areas where growth projects are likely to be completed, Arthur said "it's NGL exports." He mentioned Energy Transfer's deal with China-based Zhejiang Satellite Petrochemical Co. Ltd., which is developing the first 100% ethane-to-ethylene cracker in China, with exports from Energy Transfer's terminal in Nederland, Texas.
Maya Weber and J. Robinson are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.