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Major pipeline execs confident in liquids markets; downstream expansion could boost ethane prices


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Major pipeline execs confident in liquids markets; downstream expansion could boost ethane prices

Managementteams of major pipeline operators are bullish on crude volumes and the NGLmarket but bearish on oil prices versus the strip as Permian Basin productionkeeps supply high, Credit Suisse analysts said.

and Targa Resources particular are upbeat about their NGL prospects. Credit Suisse termedEnterprise better positioned due to an expected ramp-up in ethane exports andsaid the Midland Basin could account for the bulk of Targa's Permian growth.The Sept. 28 note by John Edwards and colleagues was the product of a Houstonbus tour on which the analysts canvased seven midstream companies.

Asseaborne exports of ethane from the U.S. begin to ramp up, they will combinewith increased consumption from the petrochemical sector to soak up excessethane supplies, especially in the Northeast. Development in the downstreamindustry could tighten supply/demand dynamics and potentially offer long-termsupport to prices.

Shaleproduction of natural gas and natural gas liquids began increasing sharply inlate 2008 as the start of the "shale revolution" began.

Productionof natural gas liquids from gas processing plants reached a low around thattime in September 2008 at 1.51 MMbbl/d and was last reported in June at arecord 3.62 MMbbl/d, according to data from the U.S. Energy InformationAdministration. Similarly, production of the lightest NGL component, ethane,fell to 575 Mbbl/d in September 2008 and rose by a similar proportion to reacha record 1.38 MMbbl/d in June.

S&PGlobal Ratings downgraded Ferrellgas Partners LP following its of a $629 million impairmentcharge in its crude oil logistics segment and a delivery interruption from a majorsupplier.

Therating agency lowered Ferrellgas Partners' corporate credit rating to B fromB+, as well as its senior unsecured debt to CCC+ from B-. The outlook remainsnegative, according to a Sept. 30 news release. Its operating subsidiaryFerrellgas LP'scorporate credit and senior unsecured debt ratings were also lowered to B fromB+ with a negative outlook.

"Withthe dramatic decline in crude oil prices and its impact on volumetric demand,the partnership's midstream businesses have underperformed relative to ourexpectations," S&P Global Ratings said in the release. FerrellgasPartners' recent expansion into the midstream sector affected cash flow despitethe majority contribution of its propane operations, according to the ratingagency.

TheB.C. Oil and Gas Commission granted AltaGas Ltd. a permit to construct, own and operate aproposed North Pine liquids separation facility near Fort St. John, BritishColumbia.

Thefacility would connect to other AltaGas infrastructure in British Columbia,including the Ridley Island propane export terminal, and is expected to serveMontney producers, according to a Sept. 29 news release.

, or IEnova, has completed the acquisition of 's 50% equity interest in theGasoductos de Chihuahua joint venture for about $1.14 billion.

Theassets included in the transaction comprise three natural gas pipelines, anethane pipeline, and a liquid petroleum gas pipeline and associated storageterminal, according to a Sept. 27 news release. The deal brings IEnova's sharein the joint venture to 100%.

Thepropane market fell less than a penny in the week ended Sept. 30 amid a sharpincrease in the level of propane stocks, while a rebound in the oil marketfollowing an OPEC agreement to reduce production added support.

LoneStar pipeline grade propane at Mont Belvieu, Texas, dropped 0.10 cent to tradeat 49.95 cents per gallon in the week ended Sept. 30, while non-LST propanealso lost 0.10 cent to trade at 49.85 cents per gallon. Prices at the hub inConway, Kan., fell 0.15 cent and traded at 44.70 cents per gallon.