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Wet gas likely to continue boosting economy; federal officials scrutinize Enterprise plant fire

Despite the decline in production of crude oil and theslowdown in natural gas output growth, supplies of natural gas plant liquids arelikely to continue rising through 2040. The increasingly abundant supply willcreate further stimulus for the U.S. economy.

The strong growth in these liquids in recent years hasbeen the result of an increasingly favorable ratio of crude oil prices tonatural gas. Between 2011 and the third quarter of 2014, oil prices wereconsistently high and shale plays that had significant portions of liquids werefavored by drillers over plays that contained mostly dry gas.

The increase in demand for exports of propane andbutane has been helped by relatively wide spreads between U.S. prices ofnatural gas and international prices of crude oil. International consumers alsoseek to diversify their sources of supply.

An EnterpriseProducts Partners LP natural gas processing plant in southernMississippi remains shut down after recent explosions and fire as the company and two federalagencies investigate the cause.

The U.S. Chemical Safety Board and the U.S.Occupational Safety and Health Administration are conducting independentinvestigations into the June 28 incident, Enterprise spokesman Rick Rainey saidin a July 6 email. He declined to speculate on what caused the incident butconfirmed that the Pascagoula facility remained closed.

The three-train plant has about 1.5 Bcf/d of capacityand was averaging roughly 400 MMcf/d of inlet volumes, receiving gas fromthird-party pipelines, including BPplc's Destin Pipeline, according to Enterprise.

Despite some signs that production of crude oil hasbegun to decline amid the lower-price environment, output growth of natural gasand natural gas liquids has merely slowed or paused and shows a U.S. marketthat remains fairly well supplied.

Inventories of NGLs grew 15.83 MMbbl from March toreach 170.23 MMbbl in April, according to data from the U.S. Energy InformationAdministration published June 30. The level of inventories was 13.21 MMbblabove the same month a year earlier and 44.76 MMbbl above the five-year average.

The gain was mostly the result of higher production,which rose 161 Mbbl/d sequentially to reach a new record of 4.30 MMbbl/d. Theprevious record was 4.14 MMbbl/d, set in March.

The price of propane dipped during the trading week asanother week of losses in crude oil and improved inventory data for propaneadded pressure.

Lone Star pipeline-grade propane at Mont Belvieu fell1.50 cents to trade at 48.80 cents per gallon in the week ended July 8, whilenon-LST propane declined 1.10 cents to trade at 48.55 cents per gallon. Pricesat the hub in Conway, Kan., dropped 1.50 cents, and traded at 45.45 cents pergallon.

The frac spread decreased 1.63 cents, to 17.55 centsper gallon, on July 7, compared to 19.18 cents per gallon June 30, according todata from S&P Global Market Intelligence. The average NGL barrel fell 6.2%between the two dates, while natural gas prices declined 5.0%.

FERC staff said it will complete the environmentalreview for a major Tennessee GasPipeline Co. abandonment and replacement pipeline project by Sept.2.

In a June 30 notice, the commission released the staff'splanned schedule for the environmental assessment of the proposed abandonmentof 964 miles of natural gas mainline between Louisiana and Ohio and theinstallation of facilities to make up for lost gas transportation capacity, alltogether known as the "abandonment and capacity restoration" project,or ACR. Cooperating federal agencies would then have until Dec. 1 to completetheir own work on a review of the project.

The abandoned pipeline would be sold to the UticaMarcellus Texas Pipeline LLC, or UMTP. UMTP, another company, intends toconvert the pipeline into a natural gas liquids system that would move productfrom the Utica and Marcellus areas to delivery points in the Texas Gulf Coastregion. (CP15-88)

KingfisherMidstream LLC started full operations at the Kingfisher MidstreamLincoln gathering and processing plant in the STACK play in Oklahoma.

The project is supported by a long-term commitment ofover 100,000 net acres dedicated to Kingfisher Midstream. ARM Midstream, asubsidiary of the producer services company ARM Energy, built the plant with capital from investmentfirm HPS Investment Partners LLC,according to a July 11 news release.

The Kingfisher Midstream Lincoln facilities include a60,000-Mcf/d cryogenic processing plant, over 100 miles of gas gatheringpipeline, over 100 miles of crude gathering, a 50,000-barrel crude storagefacility, condensate stabilization, six crude oil truck loading stations and15,000 horsepower of compression.

SanchezProduction Partners LP acquired Sanchez Energy Corp.'s 50% interest in Carnero GatheringLLC.

The partnership's acquisition of the Carnero stakeincludes an initial payment of about $37 million in cash; the assumption of thecompany's remaining capital commitments to Carnero, about $7.4 million; andfuture payments based on hitting volume, transportation fee and deliverytargets, according to a July 5 news release.

Carnero, 50% owned by , will own about45 miles of high-pressure natural gas gathering pipelines that connect thepartnership's Western Catarina Midstream system to nearby south Texaspipelines. Carnero's gathering system would be connected to a cryogenic naturalgas processing plant under construction in La Salle County, Texas.