Kinder Morgan - KKR Announce Midstream Deal for Camino Real and Altamont Assets

Kinder Morgan is acquiring KKR's 50% interest in a joint-venture with El Paso that controls gathering and processing assets in Utah and the Eagle Ford Shale for $300 million. The deal is a precursor to the $20+ billion Kinder Morgan - El Paso acquisition that will close in May. At closing of both deals, Kinder will own 100% of the two systems. Both systems were in place to help gather and process El Paso's upstream oil and gas production in the areas. The Camino Real System in South Texas has capacity of 150 mmcf/d and 110,000 b/d. The Altamont system is larger and includes over 1,000 miles of pipelines, a processing plant, and a natural gas fractionator.

With over 1,100 miles of pipeline infrastructure, the Altamont system includes over 450 well connections with producers, and it operates a processing plant with the design capacity of 60 million cubic feet per day (MMcf/d) and a 5,600 barrel per day (Bpd) natural gas liquids fractionator. The Camino Real Gathering System has 150 MMcf/d of gas gathering capacity and 110,000 Bpd of oil gathering capacity.

Read the entire news release at kindermorgan.com

Eagle Ford Crude is Driving Rail Traffic Across South Texas

Gardendale Pipe Yard

South Texas rail traffic is on the rise. Some of the traffic is directly related to growth in the Eagle Ford and some is related to economic growth across the board.

The Port of San Antonio's East Kelly Railport is set for an expansion this year. Watco is expanding to occupy 20 acres of the 350 acre railport and will nearly double the amount of track it has in place from 20,000 ft to more than 35,000 ft. The development is in response to growth from serving a little more than 2,600 railcars in 2010 to more than 4,500 in 2011.

San Antonio isn't alone either. The Gardendale railroad was almost abandoned a few short years ago, but now the interchange has five switching engines running.

Gardendale Rail Map

Frack sand silos rise above the yard and black tank cars hauling Eagle Ford crude stand ready for transport. Adjacent to the interchange, you'll see several loads of pipe waiting to be put to work. There's no doubt who is driving growth in Gardendale. It's all oil & gas.

There's enough activity that Ironhorse Resources, operator of the Gardendale Railroad, has added around 80,000 ft of track and has expansion plans that will cover more than 350 acres. The facility is built to handle 15,000 railcars per year, but that number will stretch well above 20,000 as expansions are completed.

You can read in regards to Ironhorse's facility at gardendalerail.com

Largest Refineries in the U.S. Benefit From Eagle Ford Crude

In about a month's time, Motiva Enterprises' Port Arthur refinery will become the largest in the U.S., with 600,000 barrels per day of crude refining capacity.  The facility will surpass ExxonMobil's Baytown refinery that has a capacity of approximately 560,000 barrels per day. Both will benefit from growing U.S. crude supplies. Motiva is a joint venture owned by Shell and Saudi Aramco. The expansion of the Port Arthur refinery was planned over five years ago without the knowledge of growing production in the Eagle Ford Shale and Permian Basin. That's a bonus that will be welcomed with open arms. Local supply generally leads to better margins for refineries.

While parts of the refining industry have made little to negative returns over the past few years, new facilities like Motiva's will be the benchmark for the future. The economies of scale and modern technology will give it an even greater advantage over other U.S. refineries that are near the end of their useful lives.

If you'd like to learn more, you can read an entire article on the subject at minyanville.com

Enterprise Plant in Yoakum Coming Online May 1

The first phase of Enterprise Products' Eagle Ford midstream plant in Yoakum is coming online in the next few weeks and will have initial capacity to process 300 mmcfd.  The 100 acre plant has seen as many as 500 workers on site during various stages of construction The plant will strip out 6-9 gallons of NGLs for every mcf of gas that is processed. The plant is feed by a 36-inch pipeline and will have ultimate capacity to processes as much as 900 mmcfd when all stages of construction are complete in 2013.

Chevron Phillips - Baytown Petchem Facility to be World's Largest

Chevron Phillips announced the company is going forward with a major petro-chemical facility at the Cedar Bayou Chemical Complex in Baytown, TX. The new plant will be the world's largest on purpose 1-hexene plant and will be capable of producing 250,000,000 metric tons (551,000,000 lbs) per year. The announcement follows a release less than two weeks ago that the company will expand NGL fractionation, at the Sweeny Plant in Old Ocean, TX, to 116,000 b/d. An increase in capacity of 22,000 b/d or almost 20%.

Both developments are the direct result of growing feedstock supplies from liquids plays that produce significant volumes of NGLs. We discussed the reasoning behind new fractionation and petchem facilities in more detail in a previous article titled Eagle Ford NGLs Adding to U.S. Supply Growth.

1-hexene isn't in my normal vocabulary, but the company provided the following description.

The new 1-hexene unit at the Cedar Bayou facility will enjoy significant advantages in infrastructure, feedstock availability, and operational expertise. 1-hexene is a critical component used in the manufacture of polyethylene, a plastic resin commonly converted into film, pipe, detergent bottles, and food and beverage containers.

Construction on the petchem plant will begin soon, with a targeted completion date of early 2014.  The fractionator expansion will be complete early in 2013.

Read the entire press release at cpchem.com