Where are the fractionation plants in the US and who is doing it?
Enterprise Products Partners (EPD) owns interests in 15 NGL fractionation facilities in Texas and Louisiana. Of the 15, eight of them are in Mont Belvieu, Texas. This list provides greater detail on the company’s fractionation facilities and ownership interests in each. Mont Belvieu is certainly a hot spot for fractionation as both Energy Transfer Partners (ETP) and Targa Resources (TRGP) have facilities in the area, along with Louisiana locations too. NGLs are transported via pipeline to these plants from the Permian and Delaware basins and the Barnett and Eagle Ford shales. While fractionation is concentrated in Texas and Louisiana, it is not limited to these areas. For example, Williams Partners (WPZ) operates a fractionator in Conway, Kansas while Dominion Resources (D) owns a plant in Pine Grove, West Virginia in the Appalachian Basin.
How do the contracts work?
As I mentioned, NGL fractionation contracts are typically fee-based. EPD states that it simply receives a fee on the volume of NGLs fractionated. ETP explains that its fractionation revenue primarily comes from take-or-pay contracts. This means that customers must meet minimum payment obligations even if they don’t use all the fractionation capacity they’ve planned for. TRGP shares that its fractionation is also fee-based and clarifies that fees are subject to change due to expenses incurred in the fractionation process and energy costs.