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Phillips 66 to invest $1.5B in Texas NGL expansion project

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Essential Energy Insights - January 2021


Phillips 66 to invest $1.5B in Texas NGL expansion project

Phillips 66 announced June 13 that it would proceed with a $1.5 billion natural gas liquids expansion project at its Sweeny Hub in Old Ocean, Texas.

The project, to begin commercial operations in late 2020, includes the construction of two 150,000 barrel-per-day NGL fractionators, additional NGL storage capacity and associated pipeline infrastructure.

Following completion of the expansion, the facility, which began commercial operations in 2015, will have 400,000 bbl/d of NGL fractionation capacity and access to 15 million barrels of total storage capacity. Phillips 66 currently has 100,000 bbl/d of fractionation capacity at the Sweeney Hub through its midstream subsidiary Phillips 66 Partners LP.

Phillips 66 chairman and CEO Greg Garland said that the Sweeny Hub "is strategically positioned to provide fractionation capacity for rapidly growing Permian Basin NGL production and access to U.S. Gulf Coast petrochemical, fuels and LPG export markets" and that the expansion is "a key part of our Midstream growth strategy that further optimizes our integrated NGL value chain."

The facility is adjacent to the Sand Hills Pipeline and has links through other pipeline infrastructure to Mont Belvieu, Texas, which serves as a key trading hub for the U.S. propane market. The facility currently has access to 200,000 bbl/d of liquefied petroleum gas export capacity and 9 MMbbl/d of gross NGL storage capacity through Phillips 66 Partners' Clemens Caverns storage facility.

The company has secured supply agreements for Y-grade NGL feedstock, including one with DCP Midstream LP, which has an option to acquire up to a 30% ownership interest in the new fractionators.

DCP Midstream said in a June 13 statement that its option becomes exercisable at the in-service date of the fractionators with an approximate capital investment of $400 million.

"This strategic growth option represents another important step as we significantly increase DCP's vertical integration to better meet our customers' needs, while driving fee-based earnings growth," DCP Midstream president, chairman and CEO Wouter van Kempen said. "This project provides critical fractionation services to optimize our Sand Hills and Southern Hills pipeline extensions."

DCP Midstream announced last month that the Southern Hills pipeline will connect the DJ Basin to Mont Belvieu, Sweeny and other Gulf Coast markets via the White Cliffs pipeline.

"The Sweeny Hub ensures adequate fractionation capacity for growing NGL production while providing a noteworthy market alternative to Mont Belvieu," DCP Midstream said.