Testing. Okay. Good morning, everyone. We're going to go ahead and get started. Wanted to welcome you to the Enterprise Analyst Day, and thank you for coming. Got quite a presentation put together for you today, pretty exciting, and I look forward to going through it. A few housekeeping items. The presentation today will be webcast live, so there's going to be some listeners in addition to the participants here. Just keep that in mind. Also, since this is April, we normally have this in March. This is April, so we're blacked out. There will be no comments regarding the quarter results or anything like that, which this is not tailored for that anyway. We have our customary forward-looking statement here, and don't worry, I'm not going to read it. It's there for your reading pleasure. It'll cover our comments today and our presentation.
You should have a tent card on your table that gives the Wi-Fi password. It's Hilton 2019, and that's the Enterprise Products Network. You also have a medallion. It's a little box on there, a little black box medallion. That commemorates our 20th year anniversary of listing. 2018 was 20 years from 1998, our IPO, and 50 years as a company. Back in 1968, Dan started the company with pretty meager beginnings. We're really proud of that. 20 year and 50 year is a pretty big year for us. I think that's all I have. With that, I'm going to hand off to Randa Duncan.
Okay. I think I'm double mic'd here. Good morning, everyone. Jim Teague asked me to convey his regrets that he's not here with us today. He spent the weekend getting ready for this meeting and acting as a chauffeur for his two tween stepkids, enthusiastically cheering at both middle school baseball and softball tournaments, and somehow, in the course of that, managed to crack three ribs. Last year, we celebrated our 50th anniversary of our founding and the 20th anniversary of our IPO. These are obviously major achievements. I believe we're one of the oldest midstream companies and the only one that's still under the same ownership. Because we're Enterprise, longevity and staying power isn't enough. We had a record-breaking year on a number of fronts. Record revenue, record coverage, record volume, and we outperformed every major index and all the market sectors on the S&P.
I think that's pretty cool. If you're familiar with us, you've heard us talk about the Enterprise family or the Enterprise team. We work that way, and we've organized today's presentation that way. You're going to hear a number of panels made up of people from different groups who work together every day. I want to thank all of you who were able to join us on the tours of Mont Belvieu, of Ninety4Twenty, and at the reception at HMNS last night. Wiess Energy Hall is a true testament to the generosity and innovation of the energy industry here in Houston and in the state of Texas. Now I'll turn the meeting over to Ivan to start the way we start all Enterprise meetings, with a safety moment. Thank you.
Thank you, Randa. As Randa said, we start every meeting at Enterprise with a safety moment. Today's safety moment is on leading in safety. Our words will always be interpreted by our actions when it comes to supporting safety. Examples like what we pay attention to, how we allocate our resources, the behaviors we reinforce in others, all of those things will be observed and used to interpret our words. We can say safety is a priority, but we need to use our actions to reinforce that. One quick example is exactly what Randa said, these safety moments.
We allocate time at the beginning of every meeting we have to have a brief discussion about safety, and that includes our main meetings, like the supply meeting and the Tuesday management meeting, but as well as our weekly meeting that we have with Randa and Randy and Jim every Friday at 7:30 A.M. to just talk about safety. Remember, when leading, your actions will always be used to interpret what you're saying. That's it.
Okay.
Yeah, here we go. Good morning.
All right. We're going to start with the Enterprise model, for those of you that maybe aren't as familiar with us as all of the people I work with sitting in the front row. The Enterprise model was created in an attempt to capture and define what makes us Enterprise. This model is posted all over the company, and we focus on a different aspect every week. Because I'm sure you don't want to be here for several months as we cycle through it, I'll give you the CliffsNotes version. My great-grandmother, Miss Nettie, drummed into Dan's head to do the best you can every day and God will take care of the rest. It must have worked because he did it, and he made sure that all of us got the same lesson. The first and foremost thing in our model is our values.
The key element in these values is caring. We care for our fellow employees by being safe. We care for our unit holders and our investors by being honest and fiscally responsible. We care for our customers by being reliable. The next element is how we work. We're creative, we work together, and we make sure we've got it right down to the last detail. The third is how we lead. We listen, we learn, we're flexible and creative. In being all of these things, we make things happen. Finally, underpinning the entire model is humility. We know that all of the things we do happen because we contribute in our own way. We give credit where credit is due and celebrate both the individual's and the group's accomplishments. We let our actions speak louder than our words. That's enough words from me. Thank you.
Okay. When we were here a year ago at our analyst meeting, Jim kicked it off by getting on the cell phone with his broker and buying Enterprise stock. We thought it would be good to come back in and sort of take a look at how did Jim do on his transaction. When we came in and compared this to the Alerian MLP Index, the FANG stocks that we hear so much about, the S&P 500, and all the different sectors in the S&P 500, Enterprise had the best total return since our analyst meeting last year. Probably the only thing that's keeping Jim from coming in and repeating that feat this year, other than three cracked ribs, is we're in a blackout right now, as Randy mentioned. Coming back in and looking at our financial performance, we came in and looked at several years.
I think we're really as proud of the 2014, 2015, and 2016 years as we are of the record performance that we had last year. A lot of that was working through that cycle and the hustle that we had in coming in and managing our operating costs. Graham and his team did a remarkable job in managing the expense side of the ledger during the downturn. It's also the work that was done during that cycle, which is probably the worst energy cycle that I've seen in my career, was the work with our commercial teams and engineering teams and ops teams to come in and basically negotiate new contracts, underwrite new projects. It's the investments that we made during that downturn that really set 2018 up to be the record year that it is.
To underscore what Randa said, it was really all about teamwork and executing through the cycle, setting up 2018. We're setting up well for 2019. Briefly, hitting 2018 performance, again, it was a record year for us, a 30% increase in cash flow whether you measure it in distributable cash flow or cash flow from operations. A 50% increase in free cash flow up to $2 billion, which that set us up to really hit our goal of becoming equity self-funding a year early. We were able to do that. The only equity that we raised last year was through our distribution reinvestment plan. It also set us up well from a capitalization standpoint.
We were able to come in and lower our leverage down to 3.5 times debt to EBITDA, which again, gave us some financial flexibility as we enter in 2019, and we ended the year with about $6 billion worth of liquidity.
On the 2018 projects and milestones, one of the ones we're most proud of is for the second straight year, we won the GPA Midstream Association Safety Award. As we pointed out when I was telling you about the model, safety is a big part of our culture, and we encourage every one of our 7,000-plus employees to be safe at work, at home, and in all points in between. As you'll hear from our panels, we had quite the year. The launch of the Houston CME contract, completion of two new gas plants, one new frac, several new pipelines, and if that weren't enough, expansions of existing facilities and pipelines. In the case of M2E-1, a brand-new pipeline. Our operations groups made sure that all of our assets hummed along at record volumes to support our commercial group's efforts.
Jim had this list divided up into four categories, but those categories only relate to the type of opportunity. The hard work to achieve all of these milestones belongs to every group at Enterprise, whether they're commercial, operations, finance, accounting, or engineering.
When we come in and take a look at from a macro perspective, we continue to see excellent fundamentals in the business. I think, again, you're going to hear this in more detail from the panels as they come up and present. Shale plays have been a game changer for the U.S. in terms of energy independence, and also frankly, just lowering energy costs for consumers globally. There are large and growing markets in Asia and Africa. Tony and his team are going to hit that here in a little bit. If you would, soon we'll be entering into the second decade of the renaissance of the U.S. petrochemical industry. Some of that is we've already been talking to customers about, if you would, another wave of crackers that would be built in the United States on the Gulf Coast in the mid-2020s.
Also the next generation of crackers globally are really planning to utilize, whether that's in Europe or whether that's in Asia, they're coming in and planning on using U.S. ethane and U.S. propane as one of their key feedstocks. We're positioned uniquely for this. If you would, we've got a front-row seat. Whether we come in and if it's through our premier supply position and storage position in NGLs and crude oil, or if our export marine business, where last year from an NGL standpoint, we probably had 50%-60% market share on NGL exports last year. When it comes to crude oil, we probably had about 30%-40% market share last year in the U.S.
You'll see, when you see the presentations, the maps of our system and the integration so we can supply customers both domestically and internationally, I think is one of the best. We're connected to all the ethylene crackers in the United States, as well as 90% of the refining capacity east of the Rockies. We supply petrochemical and refining customers worldwide. Our crude, NGL, and refined product storage, combined with our multifaceted distribution system, allow us to ensure that our customers rarely miss a beat. We've managed this through several storms and other types of disasters. During the recent Houston Ship Channel closure, we helped ensure that no pipelines were slowed down. Any refinery that was connected to our system got their crude.
We shifted delivery points where we were able and are fast catching up where we weren't, so that our producers and our customers don't suffer.
This is a picture of our crude oil tank farm outside of Houston in Sealy, where we already have a lot of tanks built there and more tanks to come. The key thing here is American oil equal American jobs. Getting a little bit more granular, the momentum that Enterprise has will continue into 2019. First, if we come in and think about the projects that we put into service in 2018 that will benefit from a full year of EBITDA in 2019. To highlight a few of these, our Midland to ECHO Crude Oil Pipeline. The first one was put in service second quarter of last year. We'll get a full-year benefit this year. Plus, we have a small expansion of that pipeline that we'll benefit from in 2019. An item to note, the Old Ocean and North Texas Natural Gas Pipelines.
This was a venture that we were with Energy Transfer on to increase capacity to move natural gas from Waha back to the Gulf Coast. Currently, depending on the day, we're benefiting from about 250 million-350 million cubic feet a day, where we can come in and pick up the differentials on that movement. Our Orla I, Orla II plants. Again, we'll benefit from that for a full year, as well as our Loving County Crude Oil Supply Lateral. Frac IX, Aegis, PDH. We've got more operating experience under our belt on PDH, so looking forward to a full year with PDH. There are several other projects, some of that had already started operations in 2019, where we converted our Seminole Pipeline from NGL service into crude oil service. We call that Midland to ECHO 2.
We completed that in February, and it's been in limited service for a couple of months. It actually went into full operations here beginning April 1. As I mentioned earlier, we do have a small expansion coming in on Midland to ECHO 1 that should be complete, frankly, in the next few days. The Orla III Plant, another natural gas processing plant out in the Permian, will come on later in the second quarter. We've got two NGL pipeline expansions, Front Range and Texas Express, that'll go into service in the third quarter. We're restarting another 55,000 barrels a day of fractionation outside of Mont Belvieu, so some of this is in South Texas, some of it is over in Louisiana. This should help relieve some of the capacity constraints for NGL fractionation capacity in Mont Belvieu.
Latter towards the end of the year, and frankly, right at year-end, our isobutane dehydrogenation plant, our IBDH facility, and our ethylene export dock should come into service as well. From where we sit right now, our current expectation is 2019 is going to be another record year. In addition to that, we have other major projects that are currently under development, and our teams are coming in and are in active negotiations. This includes Brad Motal and his team working on two more natural gas processing plants out in the Permian, Mentone 2 and 3. We also have in discussions as far as, depending on the basin, additional pipeline infrastructure, whether it's crude oil, NGL or petchem as well. Crude oil. We're working on developing another NGL fractionator at Mont Belvieu.
We have additional projects as far as expanding our Aegis Ethane Pipeline that serves the petchem industry on the Gulf Coast. Another PDH facility, as well as our VLCC Offshore Port. In total, when you come in and you look at these major projects, these that are on this page, the ones that aren't on this page, probably we have projects under development in the $5 billion-$10 billion range. We come in and I guess we're living in interesting times with the midstream sector at a crossroads. From a macro perspective, I think, especially going through the last commodity cycle, energy investors have been burned to a degree as far as relative returns to other sectors in the S&P 500. We've seen that weighting of energy in the S&P 500 go from some 15%-5%.
I think many investors, and companies too for that matter, are asking, do investors care about the energy sector that much now? In the MLP sector, we're at a place where all the restructuring phase that we're going through is near complete. It's been painful with the distribution cuts, and with a lot of LPs coming in and getting tax bills from conversions into their GP C-corps. Again, we're transitioning out of that and into a mode where, again, we're going to talk about later today, is business fundamentals are really strong right now. We see good opportunities not only for continued volume growth, but also to come back in and underwrite new projects at good returns on capital. To a degree, investors are still in a little bit of show-me mode, which is totally understandable.
We think one of the keys to come in and operate in this season, if you would, of where the capital markets are, is really financial flexibility. That's coming in, whether it be the equity self-funding or being able to come in and have a strong balance sheet. Where we are right now, the capital markets are just not that deep, and equity can get expensive very quickly. We think, again, at least the season that we're in right now the more self-reliant we can be in raising our capital, the better we'll be at coming in and increasing cash flow per unit going forward. Then it's interesting on how to return capital to investors. Again, that's when you come in and you get into the high-class part of this, of how to return capital.
While we've gotten, if you would, a lot of feedback from investors, I don't think we've necessarily got consensus, but we certainly have gotten bookends. Whether it's distribution growth, we've heard some say, "We'd like to see 10% distribution growth." Others were like, "We really don't want to see any distribution growth. Just keep reinvesting your capital back in your business." On the buybacks, we've heard, "We love buybacks." We've heard, "We hate buybacks." We've heard, "We'd like programmatic buybacks." We've heard, "We'd like for it to be opportunistic buybacks." On leverage, we've heard, "We'd like for you to leverage up and return more capital to investors." We've also heard that we'd like to see you de-lever more.
Again, we've got bookends to work from, I think the way we're looking to come in and manage through this is really to come in and take a moderate and a balanced approach, very deliberate as we come in and work through where we are today. We also, if you would, these are probably the top 4 questions that we get in many of our meetings. We thought we'd just address at least part of it from the get-go. Will the Permian get overbuilt? Our view here is most likely it will for a period of time anyway. If everything that's announced gets built, we could see a period for three or four years where the Permian could have excess crude oil takeaway capacity, ultimately we come in and we think that gets filled up.
If you would, I think Brent and Tony both will come in and hit this a little bit later on. PDH 2, really? Yes, really. I think here when we come in and look at PDH, we see it as an excellent fee-based business from a credit standpoint with strong customers, with a needed product. It's also a business that, if you would, very well integrates in with our value chain. There's one other point. Oh, yeah. It has high barriers of entry. You really can't say that. There are some parts of the business that you're not seeing us participate in as much because of low barriers of entry and some of these returns getting competed away. We can get good returns on capital in the PDH business.
We also think we can come in and deliver a PDH, construct it and deliver it successfully, and Graham will hit on that a little bit later on. With that, Brandon and I are going to come in and turn it over to the next panel, which will be the fundamentals panel, which will be Tony Chovanec, Natalie Reagan, and Richard Tubio. Thank you.
Richard, do you want to come over here? Tony wants.
Yeah.
Okay. Thank you. I want to start off by introducing my other two panelists today. I'm Tony Chovanec. I'm responsible for what we call fundamentals, among a few other things at Enterprise. When you think about fundamentals, think supply and demand. When we started the group eight years ago, we thought about supply and demand domestically. Now we think about supply and demand globally every day. To my right is Natalie Reagan. Natalie is in charge of our supply appraisal team. It's a small group of geologists and petroleum engineers. Some are both. All of the oil and gas forecasts that you receive from Enterprise, they're responsible for. The other thing they do is they do a significant amount of business development work for us. When we're thinking about buying or building something, they're deeply involved. Then to her right is Richard Tubio.
Richard Tubio works on the fundamentals side of the equation with me. We'll have him talking about demand today. Richard is, by education, originally a rocket scientist, so an aeronautical engineer, and that makes him, in my opinion, a very big thinker. He's got a graduate degree from UCLA. This is the second time in my career that I've had the opportunity to work with Richard. You'll see when he talks that he's a global thinker. He has a little bit of an accent, so he's well traveled. I want to start out with this slide, the top of the slide says, "Executing on fundamentals, not a reactive approach." If you follow Enterprise, and you do, or you wouldn't be here today, you understand we're not a reactive kind of company.
We believe that there are always what I call on this slide, the big doubts. If you can't find opportunity in the big doubts, then you're going to be a follower, not a leader. I'm going to go through what some of the big doubts have been through the cycle as we know it today, the shale cycle, then what our reaction has been. First of all, I think back to the 2011, 2012 timeframe, when we all had the question: Are the shales real, and do they really have staying power? I have to tell you, there were a lot of consultants making a living countering what was happening in the shales and saying they don't have staying power. We began to forecast production at that point through Natalie's group.
I will tell you that from the fundamentals standpoint, from the supply appraisal standpoint, we forecasted, and we defended those forecasts extensively. Our commercial teams went out on the road and did the same thing. I say here on the slide, we began intensive domestic and global market development with the petchems and export markets. We burned up the streets of Houston talking to people and their consultants, and Brent and his team did the same thing in the air, crisscrossing the globe to make sure people knew how we felt. The next big question I call 2013, 2015. Remember in 2013, we announced that we were going to add considerable LPG export capacity. We announced again that we were going to add some more as customers started signing up for it.
People would always ask, "Well, where are all these LPGs going to go? Is there a market for them?" As we viewed it, that was just the first question. In 2015, we doubled our LPG export capacity, we did other things during that timeframe. We bought Oiltanking. We reversed and looped Seaway. We started the extension of the Aegis Pipeline. We began an export project, I say here we led the industry in condensate export initiatives. The next one in 2016, and it kind of goes into '15 also, we had a very low price environment, people said, "Will oil prices be low forever? Can the U.S. shale make it through this?" Every newspaper you'd pick up in Houston every day talked about the Saudis' desire to kill shale in the U.S. Richard was really my true north at that time.
Richard would say, obviously, we're listening to our customers. They don't feel that way. He would say, "Think about it, Tony. The world can't afford $30 crude. They simply cannot afford it." I would tell him before he would leave at night, "Tell me that one more time, Richard, so that I can sleep on it." We looked at the big doubt, and we said there's opportunity there. We loaded the first crude oil cargo after it became legal to do it and began a massive Permian build-out processing initiative. Multiple large-diameter pipelines, NGLs, and then crude oil pipeline that we've already discussed, and added to natural gas takeaway. My two favorite projects here is as oil prices were falling, in the first quarter of 2015, Brent announced we were going to build Midland-to-Seaway.
It was really jaw-dropping. Probably my next one in this time period that's a favorite is when we announced Cheniere. What you heard from Cheniere all the time is, "Y'all just have to do that pipeline as a joint venture. You must do that pipeline as a joint venture." We would look at the appraisal forecast from Natalie's team, and we would do our balances and go, "I don't see. It's going to have to be a really good joint venture for us to joint venture it." At the same time, Brad started building processing plants in the Permian Basin for customers. There you have your doubt, and you have to have a view, and your customers have a view, and you go forward. Next one probably is my favorite.
In this analyst meeting in March of 2017, we presented a slide that showed that the U.S. was going to be a massive crude oil exporter, and that there was no way around it. It drew a lot of questions. It was somewhat controversial, and I guess rightfully so, because as people pointed out in that meeting, the port arms for export of U.S. crude oil were closed. To us, it was simple. The crude oil was going to be exported. Since then, we've loaded the first VLCC on the U.S. Gulf Coast, expanding significantly what we do on the Houston Ship Channel, including a large purchase. We have become the largest crude oil exporter in the United States. It all happened on the U.S. Gulf Coast. We've begun VLCC project development. We'll talk about more today.
We're very proud of the fact that working with CME, that we're developing a NYMEX contract for crude oil. There are some big doubts, and we're going to address two of them today. The first one is, does the Permian Basin have staying power? I think when you leave here today, that you will understand why Enterprise believes that the Permian Basin has decades of staying power. The next one is my favorite to read about, and that is the U.S. producing the wrong kind of crude? I have heard it all. I've heard the light blight. It's unfortunate that the U.S. is producing light crude. I had one consultant who I will not name, a banker actually, fairly famous one, came in and said, "I feel sorry for you guys.
The position that you all have taken in the U.S. crude markets, I really do. I feel sorry for you all. I love you all's NGL position, but it's too bad that you all have done what you've done in crude. I'll move from this slide, but this is how we see it. If you're going to be the industry leader, you have got to find opportunity in the big doubts, and the big doubts are not a bad thing. This is my sixth year to show this slide, and I'd say I've worn it out. When I first showed it, I said, "This is what's going to happen." Right? Now as we look at it and we see that big dark red line in Asia, and we see the U.S. tailing off, it's not what's going to happen. It is what is happening.
This is our existence today. This is our future. I don't believe I showed this slide before. I'll just take your eye to the left, to that 100% red diamond. What that is energy intensity per capita in the U.S. We're grading ourselves at 100%. There's nothing that looks like the U.S. There's our population. For simplicity, let's call it 350 million people. The next column there is India. They have over three times the population that we do. Their energy intensity per capita is 10% of ours. The next column there is China. They have four times the population we do, and their energy intensity, as calculated in 2017, is 32%. Then we put other major Asian countries at 800 million people, an energy intensity of 15%.
If this group of people would move up to 50% of the energy intensity that the U.S. has, which they won't, I promise you, there is not enough oil and gas. There's not enough renewables to meet those needs. This is where you're seeing the growth. They know what you have. We're past the information age. They want the standard of living that all of us in this room have. The word here that should stick out is plastics. I use that term generically. There is, up here, if you'd read the press, a war on plastics. I guess if you'd read it, you would believe that plastics has lost. I'll start with the gray box there. GDP over the last 10 years, 3% globally. Crude oil growth during that same time is a percent and a half.
If you look at ethylene derivatives, it's beat GDP. I call it 10%. Look at what propylene has done. We're going to talk a lot about propylene today. As we do, I want you to think about that gray box. This slide is a wow, okay. When you look at plastics compared to the other things that we use every day in our homes, in our cars, there's nothing like what plastics has done. Again, using the word plastics kind of generically, there isn't anything to trade for it. It has, relative to all of its replacements, has a very low carbon footprint. It's friendly to the things that we're doing on the renewable side.
We do have, in parts of the world, we have a problem with the recycling of one-time use plastics, the initiative is to figure out how to make them not one-time use. That's the ethylene-derived products. When you think about propylene, that's not the case at all. The U.S. is not one of these bad actors in this regard, and I'm going to tell you, my own house is not one of these bad actors. The important thing, if you look at the IEA out of Paris, France, the IEA says that our crude oil growth, one third of it between now and 2030, is going to be used in the petrochemicals industry. They say by 2050, it's going to be a half. Okay. We're using about 10 million barrels a day.
That'll be 20 by 2030, and they look at their low case scenario, that's only half a million barrels less in their low case scenario by 2030. There isn't a replacement for plastics. I'm going to go to the next one. Summarily, this is our supply forecast that we publish every year. Last year, we only published to 2022 mid-year. We published it to 2025 because there's so many questions. As we see it, we've got battery running low. Okay. As we see it, 5 million barrels incrementally from now to 2025, another 3 million barrels of liquids if we recover them all, and then 26 Bcf of natural gas. To put it in perspective for you, in the Permian Basin, generically, for every million barrels of incremental oil that we produce, we produce about a half a million barrels of NGLs.
That should help you with those ratios. What we don't say in here is what we think 2019 is going to do, and I'll just tell you for oil, we have about 1.35 million barrels of growth for the entire U.S. That compares to what the EIA said yesterday for 2018 was 1.6 million barrels. We have the growth slowing, and I'll leave it at oil for right now. I'm not going to spend too much time on these next slides. I think the title says it all. I wanted you to have them for reference, but almost all the growth in oil and condensates is from the Permian and the Eagle Ford. When we look at NGLs, 80% of it is from the Permian and the Eagle Ford, and then of course, the Appalachia makes a contribution also.
Then for dry natural gas, we talked about the large contribution from the Permian. This is quoted in dry numbers because we don't want to double count the molecules. When I look at our Permian natural gas number, I would say generally, and I see other forecasters, our number's a little on the low side. The big barbells are in Appalachia for growth, in the Permian. We also don't forget as to what's happening in what we call other Gulf Coast and think the Haynesville area and some in the Eagle Ford also for natural gas. How do I go back? This next slide is one that Natalie is going to present, and I'll just say that Natalie tells a story I'm going to try to get her to. She's a petroleum engineer from Texas A&M, and she also has an MBA out of UT Permian Basin.
I'll let you talk about your history with the Permian Basin, because it's a good one.
Let me just start by talking about the map.
Okay.
I don't think we need to go into my history personally working in the Permian Basin. This map was prepared by our team, and we divided the Permian Basin into what we consider the core, which is in blue, the core being the most prolific and economic area of the basin, and non-core in yellow, which is the area that has yet to be proved to be highly prolific. We see geologic potential in the non-core. The pink is the units with horizontal drilling. Picture you're flying over West Texas, you're looking down, you see 12 million acres in the core, nine million acres in the non-core. We use this area to calculate the remaining undrilled horizontal well locations.
Just in the core, we calculate over 200,000 remaining well locations, and it's over 300,000 if you include the non-core, because I'll show my methodology on the next slide. The thing to note, over the years, we observed that areas that are non-core tend to move to the core. Operators try new ideas and improve technology. An example of this would be Alpine High. A few years ago, that would have not been considered core. Apache has drilled quite a few wells, been very successful. Now we're considered part of the core. Moving to this slide. Really, the Permian is very large, but what's important is that there are many productive zones. This picture illustrates the stacked cake. Picture a layer cake of reservoirs.
We have used an average of five zones, 30 wells per unit in our calculations, a unit being a one mile by two mile area. As I mentioned, this leads to our calculation of over 200,000 remaining well locations. When you think about today's drilling rate, that puts us in the range of 35-50 years of drilling, maybe even more. What's interesting to me is that this basin has had such a big renaissance in the past 10 years. The USGS recently released their new resource assessment just of the Delaware Basin with the mean undiscovered resource of 46 billion barrels. Their previous assessment
That's just in the Delaware.
just in the Delaware side of the basin. If you look at their previous assessment, 1.3 billion barrels in the entire Permian. To put that in perspective, we produce more than that in a single year.
Currently, right?
Currently. A true renaissance in this basin. Tony mentioned our forecast showing growth of 1.35 million barrels a day in 2019, 750,000 of that would be from the Permian. Last year, I think the Permian grew about 900,000. Does the basin have staying power? Yes, I would say the Permian has plenty of staying power.
When we look at all those dots and we read about parent and child, how do I think about those dots and those layers?
Okay. Picture, when you read what's written about this, journalists, you would think that the Permian Basin's in decline. Here's the way to look at it.
Bit self-defeating, right?
There's no point even drilling anymore.
Okay. Take a zone. Say we drill one well. We would leave a lot of oil in the reservoir. We go back in, we drill infill wells, say the infill wells do not produce as much as the original parent well, we are still coming out way ahead in terms of the unit. What people miss is that producers are not trying to maximize the recovery per well. They're trying to maximize their net present value of their unit, and they're studying their data. It's just a matter of optimizing their spacing to maximize their net present value. To a certain extent, some interference is even desirable because this shows that we're draining the entire reservoir.
Anything else? That's a great summary of how we think about it.
Right. It's just a massive resource any way you look at it.
Yeah, I think that in 2014 when we talked about supply, we had that picture of the Grand Canyon. Do you all remember that? We said that we were in the early beginnings because of all the stack pays that were going to emerge, there's no better example of it than the Permian Basin in the U.S. We're going to move to demand. Thank you, Natalie. We're going to move to demand next. Won't spend too much time on this slide. Everything is up and to the right, whether it be motor gas, whether it be ethane, crude oil, LPG exports. What we find is going to be exported, end of story. Just an update of this slide, this is ethane supplies exceed what demand is.
We've layered in the new crackers that have been announced, exports, when we put our line on there in supply, that does not include Appalachia, only what comes down in ATEX Pipeline. Just U.S. Gulf Coast ethane is significantly oversupplied after we look at everything we plan on using in that regard. There's a lot of white space on that page. We publish this slide every year also. The gray is export capacity as we see it at an 85% operating rate, the white space is the gap between how we see LPG supplies in the entire U.S., so this includes exports in the Northeast, how we see our ability to export it. If we're going to produce it, largely it's going to be exported. We said this last year, dock capacity expansions will be required.
We're in the process of adding as we speak. We think about what's happened to the LPG global markets, going back to 2010, let's call it an 8-year timeframe that we have here. If you look across the spectrum and say, who has met the needs of growing LPG demand in the world? Only the U.S. has. You look at the Saudis or any of the other countries that are exporters of LPGs, if they have increased their exports, it's been, I will call it minimal. This is a trend that we expect to continue. This is that slide on crude oil exports. Our number is not large anymore, projecting that it's going to go to 8 million barrels by 2025. I'd say it's in the normal range at this point.
The one thing that I have on this slide is if we do get there, or I'm going to say when we get there, if the Saudis don't increase their exports, their 2018 number was right around 7 million barrels a day. The U.S. will exceed the Saudis in what we export in our crude oil. That's the trend that we're on. Next, we're going to get into the topic of where does all the light material go as we put more of it on the water, I will summarize it this way. The light material's going to go where it's going today. It's going into the petrochemical community. It's a great fit for petchems. It's a fabulous fit for where you have refineries and petchems integrated, Richard's going to talk about that.
That's how most of the world builds their refining and petchem complexes. They're integrated. That's not what we've done in the United States, but that's how most of the rest of the world does it. Refined product demand, this low sulfur light crude is easily placed in these low complexity refiners, and Richard's going to break down the barrel for us here in a minute. We see upside in gasoline demand. I would say our projections for gasoline demand have leaned stronger than the industry's, so we think that's a trend that continues. Any consultant that writes about this writes that the U.S. crude is a great fit for IMO 2020. I'll open this up. This is looking at two crude oil assays. One's for Brent and the other's for not WTI, but WTL.
I'll kick it off with Richard and let you break down the barrel for us.
Okay. I'm going to try to frame the situation because I feel like there's a lot of hand-waving and people talking in the abstract. Before I get started, just right now having breakfast, I was asked about this. Are we producing the wrong type of oil? Is it all condensate?
It's a good question, right?
Here, this is the distillation cut for the assays of the West Texas Light oil, 48 API from Delaware Basin, actually. It shows you have 41% light end, naphtha and lighter. The remaining is 60% middle distillate and heavier, and they are all low sulfur. This is what the market needs, low sulfur middle distillates. If you compare it to a typical Brent barrel of oil at 38 API, the difference in light end between the WTL and the Brent is 12%. Natalie and her group expect 5 million barrel growth in light oil over the next five years from the Permian area, assuming it's all WTL in this analysis. At 12% differential, you have an incremental 600,000 barrels a day over the next five years, more light end to be put in the market. The question is: Is this going to tank the market?
I don't think so, especially given the preference for the petchem feed that comes from it.
Natalie, what's the difference in, excuse me, crude quality between the Midland Basin generically and the Delaware Basin? Is that a fair question?
Yes. I was just looking at new production in 2018, and it was averaging 40 degrees out of the Midland Basin and averaging 45 in the Delaware.
I don't think you see, when you take a deeper dive and read the articles, you don't see a pushback on U.S. light material. The only pushback that I read, and I think it's a valid one, and that is when we have contaminated that barrel somehow and not keeping it neat and clean into the markets that want it. You've given us a barrel breakdown. Now let's compare that to the needs in the market.
Correct. Let's see where the disposition of these light barrels could go. Again, if we start with 5 million barrels a day growth over 5 years, that's 1 million barrels a day on a yearly basis. We saw that 60% of those are middle distillate and heavier, so no problem there or low sulfur. The remaining 40% is this, call it naphtha. It's about 400,000 barrels a day. We think half of it will go in the pet chem demand, naphtha into the steam crackers, and the other half could go into the gasoline pool. This pet chem demand here exactly matches the IEA prediction of 200,000 barrels a day incremental growth in the pet chem industry.
If you were to put this amount of naphtha in a typical steam cracker, that would satisfy 40% of your ethylene growth and about half of your propylene growth every year. You still need, if you want to produce propylene and ethylene from ethane, from PDHs, from CTOs, MTOs, and the FCCs.
You need it all, right?
You need all the above, basically. Just going back to the graph you showed, the strength and the growth in the pet chem is going to absorb a lot of the material. On the gasoline side, we'll see in the next graph, IEA is expecting 200,000 barrels a day growth in gasoline over the next five, six years. We think we probably could be surprised on the upper side, upside of that demand. If you flip to the next one. Just a couple of points to make here on the gasoline demand, and we're showing gasoline and diesel demand in China and India. You can see the growth over the past five, six years has all been in the gasoline sector. Especially in China as industry or the economy rebalances from investment and construction to personal consumption, the demand for gasoline has been dwarfing the demand for diesel.
Another point to make here is that in Europe, for example, over the past three years, the sales of diesel cars have been down while gasoline car sales have been up.
Significantly, correct?
Correct. This is due to two things, two points. One is gasoline prices have been better than diesel prices, and the thing started with the scandals of the emission and the cheating scandal on the mileage with Volkswagen and other cars. That put people off from buying diesel cars. At the bottom of the page is what the IEA says about this issue, and it exactly mimics what we are saying here, agrees with us.
This is our last slide.
Okay.
Really pretty easy.
I mean, it's a schematic of a typical schematic of an integrated refinery and petchem plant. We keep talking about this growth and the strength in the petchem industry and the chemical. Again, simplification of an integrated setup here. The trend lately has been to build these integrated petchem plants. For example, India is bringing online three of these refineries. There is one in Malaysia called RAPID. RAPID stands for Refinery and Petrochemical Integrated Development, just to make the point here. The point to make here is that this setup is meant to maximize the production of chemicals and plastics while reducing the output of naphtha and gasoline.
If you think about it, this setup reduces the output of light ends. We have a little bit more light ends coming from the shale in the U.S., they balance each other out if you want. If you contrast this to what happened in how we build refineries in the U.S., refineries were here built to be a gasoline machine, correct? Everything centered around-
Demand was so big.
Demand was so big. The petchem industry was supposed to be in decline. Everybody focused on gasoline demand and satisfying gasoline. As we shift, demand is going to be strong in the petchem. That's the trend that's going to be with us. To the extent, for example, Saudi Arabia announced they want to start building what they call a oil to chemicals. Just take the whole barrel of oil, more or less, and make chemicals and plastics out of it, and skip the refined products.
I think those are our fundamental remarks. I think we're going to do Q&A for the first group of us, correct?
Before we do that, did we keep you on the edge of your seat as far as the last two burning questions went? Before we give you a chance to ask Q&A fundamentals on how many VLCCs get built, I don't know if we have as strong a view on how many get built, but we think ours is a natural when it comes to supply aggregation, ability to segregate, maintaining quality, and the transparency from the CME contract. If you would, Corey and Brent will cover this in more detail later. We don't know about anybody else's, but we feel pretty good about ours. The last question, MLP or C corp. I think that is the number one question we get these days. In fact, a couple people last night, "Is today the big announcement day, right?" It's not.
I think from our standpoint, the MLP form still fits us. It's not limiting our ability to come in and finance and fund the growth of our business. Staying an MLP, we still have the flexibility of being an MLP, or we can always come in and go the C corp route if we think we ultimately need to go there or if the capital markets are not going to be there for MLPs. It's easy for us to go the other way. Right now, we're going to maintain our flexibility, and again, the MLP is working for us. With that, I think we'll open it up for questions for the petchem group.
Hey, good morning.
For the fundamentals.
Yeah.
Whoa. We've got about 10 minutes here. We can take questions. Fire away.
Hey, Randy?
Hey. Good morning. Tony, you mentioned that you thought that we'd have a surplus of ethane. You also mentioned that you thought naphtha would be sort of in balance. Why would naphtha win out over ethane?
Say that again. I'm sorry.
Why would naphtha win out over ethane?
The rest of the world consumes naphtha as a general rule in their petchems, and they're set up for the kind of derivatives that you get from naphtha. What we see for ethane exports is people want to diversify. They don't want to be completely beholden to oil. They have been for their entire lives, and they look and see that the U.S. has plentiful ethane, they are very willing to spend what it takes to be able to diversify the U.S. ethane. People ask all the time, "Hey, can we do the numbers to show how it wins out?" Right? It doesn't win out. We don't build those ships, and we don't build the infrastructure on the other side to receive it. I see consultants take a shot at it. I'm not going to.
If we did, it would be a fool's game for us because our customers would look and say, "Oh, that number's way too low," or, "It's way too high. We have nothing to gain." What we know is that they want market-based U.S. ethane, they're willing to come over here and get it. The last thing we know is we have a lot of it. I'll speak for myself. I see it developing into a bigger market than what I gave it credit for three years ago. I hope that answers your question.
Over here.
Shneur Gershuni with UBS.
Good morning.
Good morning. Two questions, really. One is, how do we address the looming issue with, if you're switching from naphtha to ethane crackers, that we don't get the same co-products, like butylene, for example. Does that set up the stage for an on-purpose butylene facility?
That's a great question. You want to give me your second one, too?
The second one is logistics of moving chemical products, the next part of the MLP chain. As we send everything to crackers in the U.S., don't we need export capability as well, too?
Let's take the first one. What you see is, just like in the U.S., as we went to ethane, and essentially, we increased our ability to make ethylene by 60% over a five-year period, and we did it all with ethane. Means no co-products. You're short co-products, very short propylene, for example, and you see companies like Enterprise step in and say, "We're going to do it on purpose." That is what it's going to take. It's going to take NGLs. If we're going to meet the need of petrochemicals around the world, it's going to take NGLs, it's going to take Naphtha, and it's going to take on purpose. It's going to take all of the above. You look at that per capita kind of energy intensity. There is significant upside in all of these numbers.
Any consultant, any think tank, any group of economists that write about this and do this analysis are all in the same place. It is going to take all of the above. Your second question?
It was just about infrastructure for logistics to move the chemicals out of the U.S. Is that sort of the next theme that we need to be thinking about?
Infrastructure outside of the U.S.?
No, sorry. We're building all these ethylene crackers and so forth. I assume that the U.S. can't consume everything it's producing. Is that sort of the next thing we need to think about from a logistics perspective? That we need to move ethylene pellets out of the U.S.
I'm sorry. Your mic is very blurry. Hold it closer. Infrastructure to move pellets out of the U.S.?
Yes.
Is that the question?
Yes.
The petrochemical companies, if you read the studies from the ACC, for example, depending on which one you read, some say 60% of the product is going to leave the U.S. Others say as much as 100% in some form or fashion. I think that's a big number. The petrochemical companies are very efficient companies, and they're focused on their value chain. They understand, just like we do, that the material is going to have to be shipped.
Can I add one thing here about ethane and the Naphtha, is that when you build a petchem facility, correctly, you get the capital investment and you get the cost of operation or feed. Today, at the prices we have, and if you look at the supply of ethane is expected to be very competitive compared to other feeds. Between cheaper construction costs and cheaper feed, ethane is going to win in many other places.
Is this better?
Yes.
Perfect. This is Jean Ann Salisbury from Bernstein. I guess I'm stuck in 2013 from your chart earlier, but my question is, how do you have conviction that the world can absorb all the LPG that the U.S. is going to produce without a massive-
Oh, great question. Thank you for asking it, Richard.
Sorry.
No, that's okay. She wants to know how do we have confidence that the world's going to be able to drink all this LPG. They drank the first tranche. How are they going to drink the second tranche? That's a really good question.
Tony showed the graph showing the export from United States, correct? If you look at it back in 2013, I think 2014, we used to sit down and ask the question: Can the market absorb all this material that Natalie's group is saying is going to happen? I can say that I worked in the LNG business for a little bit, I learned very five important words, the big sucking sound from the East. You see it today. All this stuff is really going to Asia, whether it's LPG, crude, LNG.
How much LPG do we use globally?
LPG today consumption is between 9.5 million-10 million barrel a day. If you look at the demand of LPG in just China and India has been growing at about 8% over the past 6, 7 years. China, 16%-17% growth over the past 6, 7 years. Once we provided them with the cheap, clean fuel, these countries said, "Just bring it on." China itself today, but just China, has 12 PDHs. They are constructing 9, and they are talking about planning for 12 or 13 PDHs. Just China. There are other PDHs in the world, including here being planned and other countries. I hope I have answered it. It just provide us with clean, affordable, clean energy, clean LPGs, and this demand is going to materialize.
If we look at demand today, global demand, and we increase it by 2%, you drink it all, don't you?
Correct.
Good.
If you do the math, about 1.8% annual growth. Even if China and India grow at 6% combined, you cannot keep up with them.
It's a great question.
Thank you. Good morning. You noted that the Delaware barrel has a higher degree of gravity, and I'm just wondering on the export side, are you seeing a preference for Delaware barrels over Midland barrels? Thank you.
He's talking about price of the Delaware barrel over the Midland barrel. Is that the question?
With just demand on the export side, the more buyers you're looking for
I'm not in the crude market. Brent, you want to take it? Here's the microphone. Let's talk about the real market rather than me talking theory.
I think on the light barrel, we're seeing more and more of it month by month. If you look at our pipeline system, I'd say, and Natalie can correct me when we go up here, but three or four months ago, we weren't moving any West Texas Light barrels. They were all getting blended up there in Midland. I think next month we're going to do 200,000 barrels of West Texas Light. Right now, the Koreans have been very active buyers of that barrel. I think ultimately they have more appetite for them. I think Japan has an appetite for them. I think ultimately China's going to step in and buy those barrels as well. We're going to see how this all plays out, but so far there hasn't been a lack of bids.
Okay. I think that'll conclude our first round of Q&A. Jeremy on your question on petrochemical export infrastructure. While pellets are not in our focus area, frankly, because now you're beginning to move more petrochemical products, and that's non-qualifying earnings for a public and traded partnership. I will say where we are focused is coming in and getting our ethylene dock running by the end of the year. Also we're looking at opportunities to expand our propylene export capability. That's where we'll cover that off. Next we'll go to our supply panel, and that's going to be moderated by Brad Motal, also Jay Bany, Tug Hanley, John Thompson, and Corey McGinnis is on that panel.
Thank you.
All right. Good morning. For those of you that don't know me, I'm Brad Motal. I'll be moderating today's supply panel. Sitting to my left are members of our commercial team. I'll start with Jay Bayney, who's Vice President of Crude Oil Pipelines and Terminals. Sitting next to him is Tug Hanley, who's Vice President of NGL Pipelines and a piece of the terminal business as well. Immediately to his left is Corey McGinnis. Corey is Senior Director of the Eastern Gas Gathering Assets here at Enterprise. Finally down there on the end is John Thompson, who's Director of Gas Supply and Processing, specifically for the Permian Basin. Alas, because a lot of what I was going to frame as context for this discussion, Randa hit right out of the gate.
I got to thinking about what makes this successful when it comes to supply. I wrote a long list of things trying to figure out how to frame this context. I pretty much narrowed it down to a few things. I think when we talk today about our successes on the supply side, I think you'll see that some of these things and these concepts are really key in what drives us for our success across all of the commodities. Our success has been driven by being creative, attentive, and forward-thinking. Again, I think Randa started out talking about those. Then we often talk about an integrated platform. I think most people in here, when they think integrated platform, would think physical assets. I believe our people are an integrated asset for growth. From operations and engineering to commercial and distribution, everyone works together.
We leverage each other's strengths. We leverage relationships across commodities. There are some people that have better relationships with various organizations than others. We cultivate relationships across those commodities. No one has their own objectives up here. We have Enterprise's objectives. We rationalize what we do to gather and aggregate supply on a daily basis. We've seen success from challenging our conventional thinking. We ask ourselves why. Why do we do things a certain way? What if we did things a different way? Would that lead to further opportunity? I'll have to pick on Tug a little bit. He walked in my office one day and stared at a map of the natural gas system and said, "Hey, do you really need that pipeline?" The answer was yes. It's that kind of thinking that leads us to look towards opportunity.
Should we rationalize using a piece of pipe in a different service? It's that kind of thinking that's taken the Permian gas processing business, frankly, from nothing earlier this decade, to by 2023, we estimate somewhere around 350,000 barrels a day. It's that kind of thinking that, again, daily rationalizes the use of individual pieces of pipe. I know, especially on the gas side, I've seen us take lean gas, turn it to rich gas, then turn it back to lean gas in the span of a few months, capitalizing on opportunities. It's that same mentality that takes an NGL pipeline and turns it into a crude oil pipeline. Today's discussion across the panel, it's going to be real Permian-centric. That's the thing that everyone wants to talk about.
What I want you to take away from it is even though we focus there, this mentality stretches across the whole organization, from Wyoming to Mississippi, all of our assets in between as we gather and work to aggregate supply. I'm going to look at Jay. I know everybody wants to talk about crude oil and Permian specifically. Why don't we talk about crude oil first and talk about being successful on the supply side out in the Permian Basin, Jay?
Absolutely. Well, thanks, Brad. Flipping the slide there. There you go. Thanks.
Yes, thanks.
Yeah, it's been an exciting 2018, start of 2019 for Enterprise Permian Crude. What I'd like to start off with is just giving an update on our Loving County. This is the orange line on the slide here. An update on that project. Brad mentioned or showed a few keys to successes and just how that relates to our crude assets and how Enterprise is differentiated through those keys to success. You may recall the Loving County pipeline effectively looped our New Mexico assets four times really the capacity we brought on from the existing capacity working through Hobbs to Midland. It originated in Red Hills. We laid 40 miles of 16-inch pipeline down to the Loving County station. From that point in, it was a little over 100 miles of 20-inch.
Initial design capacity on this pipeline was 190,000 barrels a day, it started service last year, July timeframe. One of the keys to success on that previous slide, and I think it's important here, we've noted the forward thinking already on the Midland to ECHO 1 pipeline. I think it's just as true on this one. When we made a financial investment decision for this pipeline in 2016, there wasn't the buzz of the Delaware that we see today. Crude pricing wasn't the same as we see today. To be honest, we had a single commitment on this pipeline for roughly 30% of the capacity. What we did internally, though, is we were listening to our customers. We believed in the rock, and I think through Tony's group, we got comfortable with the production forecast and made a financial investment decision on it.
Fast-forward to today, that 190,000 barrels a day of capacity is fully subscribed. We've launched an expansion of this pipeline up to 350,000 barrels a day. You can see the lateral there. We're building a new line into Wink where a portion of that supply will originate. Yeah, we're out there active in commercial negotiations to fill that capacity and then some. Another key to success, really just a case study for this is that integrated platform. I've mentioned the commitments we've got on this pipeline. Every one of those commitments either has a downstream pipeline to the Gulf Coast commitment and dock services, or they're currently in negotiation for those services. What we see are the majors and large independents that want a solution, basically from wellhead to the water. Another one that we see, just keys to success that this project highlights is market choice.
I mentioned the 20-inch ends in our Midland terminal here. As you're aware, this is the price point for West Texas. Shippers on our pipelines in our systems have access. You can see it in this Midland connectivity. They have access, one, it's the price point, so there's liquidity in trade, but also access to every major terminal in Midland, and now access to our two outbound pipelines. We've talked about the Midland to ECHO 1, the similar conversion, which is the other highlighted, which we're creatively calling Midland to ECHO 2. Finally, this is one that wasn't on your slide, Brad, but it's important to crude, and that's quality. This pipeline offered segregations. One of the first ones to offer segregations from the Midland Basin.
We've mirrored that in our Midland terminal where we're able to segregate not just the standard West Texas Intermediate, but also West Texas Light and condensate. From there, that really created an add-on value to work with Brad's team and the gas group. You can see another extension out to the Orla plants there for condensate.
Thanks, Jay. John, down on the end, equally impressive as the crude oil growth in the Permian has been our expansion of our gathering and processing business out on the Permian. Why don't you to talk a little bit about what makes our system so robust and what's led to our success out in the gathering and processing business?
Yeah. Thank you, Brad. The cross-functional nature of Enterprise commercial organization really allows us to leverage the Enterprise platform. Just a quick example is Jay and I both operate in the same basin, but we're chasing different hydrocarbons. Our teams are out in front of customers every day listening to their feedback, comments, intelligence, and we come back to the office, we gather that intelligence, and we go out and provide solutions. I think one of those solutions is condensate. We keep hearing everybody, "Please help us with my condensate." One of the things that we can tell everybody here is that we're in early development of evaluating condensate solutions for people in the basin, and hopefully you'll hear more about that in the future.
This communication is essential for Enterprise to source new business development opportunities, not only for new business development, but with our existing portfolio of customers. Essentially, we want to be the first mover when opportunities present themselves, I think that the Permian processing asset is a classic example of where we seized an opportunity. Just to give everybody a quick example or a quick history on this asset, this asset was historically operated as a lean gathering asset. In the 2014, 2015 timeframe, we saw this system begin to fill up with rich gas. Not only our system, but nearby systems. At that time, we identified the opportunity to expand our footprint in the Delaware Basin. Brad and Corey, who are up here on the stage with me, had a lot to do with that, and their vision kind of created what we see today.
What we did was we constructed two new cryo plants that anchored the system, one in New Mexico and also one in Texas. That was really a strategic decision. You'll hear this a lot today, we leveraged the Enterprise platform because we had nearby existing NGL pipelines in the area, and we were able to leverage those assets to point this rich gas and these liquids towards Mont Belvieu. The last piece was the vision of the super system. What is a super system? It's illustrated on this chart with these black arrows.
Essentially, the vision was for the entire system to be a super system, and it's made up of three main components, or we look at it as three legs of the stool. The first thing is new build, large diameter, bi-directional steel pipelines that allow our operators to shift gas between different facilities, as I mentioned. It also enables us to handle increased gas on our system, as Natalie in the supply group talked about earlier. We're seeing increased well density. The graph that she showed, I think, Natalie, it said 30 wells. I've had producers come to me recently within the last couple of weeks on 1,280 ESUs with 48 wells. The future potential there is just unbelievable. The second leg of the stool is our NGL export redundancy at each plant.
We have two options at each plant, Tug's gonna fill you in on that a little bit later. The last piece is our residue optionality. Each of our plants have two residue export options. That way, if one goes down at the plant, the plant will keep running. Also at the Orla facility, we have a 36-inch dedicated residue pipeline to the Waha area. It gives our customers all the flexibility and optionality that the Waha area provides. The new Mentone facility that we've been talking about today will also have its own independent 36-inch pipeline. At the end of the day, our super system here in the Permian, combined with the Enterprise integrated platform, allows us to provide commercial solutions to large integrated customers from the wellhead to the dock and beyond.
One of the things I think, Sunit, that we can point out here is the fact that you wouldn't think that East Texas Haynesville would have much to do with the Permian. What we've seen is the same producers in one area of the Permian as there are in East Texas. I know that you and Corey actually work together trying to come up with combined solutions that basically aggregate residue gas out of the Permian as well as gas that's produced in the Haynesville. That's a benefit to you, Corey. Beyond working those combo deals, can you elaborate a little bit on our efforts in East Texas and the rebirth of the Haynesville?
Sure. When you think of the Permian Basin and the Haynesville, you don't immediately think of combo deals and collaboration among groups. They're 500 miles apart on opposite ends of the state. Pretty big state, by the way. We have an asset that often flies under the radar within our portfolio here at Enterprise, that's called our Enterprise Texas Pipeline. This is an intrastate natural gas system that has two pipelines that originate at Waha. One that goes into North Texas, a 36-inch that terminates in Carthage, another one that goes south into the Eagle Ford into our South Texas markets. If you follow pricing at Waha at all, you'll know that transportation out of the basin today is at a premium. This pipeline allows the Permian and the Haynesville groups to collaborate.
It also allows the Permian and the South Texas Eagle Ford to collaborate, as we have a pipeline between them, and there are certain producers that have acreage positions that span multiple basins. John did a good job mentioning what our integrated value and super system is in the Permian. I'd like to provide a quick example of how we collaborate across our value chain. If you go to the wellhead in the Permian Basin, we have pipelines that traverse the Permian Basin. We can gather that gas and collect a fee. We transport it to our processing plants. We'll use Orla as an example, where we collect a processing fee. At the processing facility, we separate the gas into NGLs and pipeline quality gas. The NGLs move on to Cheniere into Tug's Group where we collect a transportation fee.
They move into our fractionation group. From there, you will hear from Zach Strait, where we collect a frac fee, then into storage fee. You kind of sense a theme here across our value chain. On the natural gas side of the business, we utilize Enterprise Texas Pipeline to take the gas from the tailgate of the plant and move it across the state of Texas to Carthage. Carthage is not a consumer of natural gas. It is an interconnecting hub of pipelines. In order to get our customers better net backs and premium pricing, we need to move this product to an end user. In true Enterprise fashion, we are looking to extend the value chain, and we are developing a project that we call the Lumberjack Pipeline. Lumberjack because we go through Nacogdoches, even at Stephen F. Austin State University. Lumberjack will move gas from Carthage down to Beaumont.
Really the missing piece of our interstate system. If you look at it on the map here, once we commercialize Lumberjack, we will effectively have a loop of interstate pipelines around the state of Texas, moving supply basins, the Permian, the Haynesville, and the Eagle Ford to growing demand centers, which include Corpus Christi, Houston, and Beaumont. Currently scoped, Lumberjack is a 36-inch pipeline which will move 1.3 BCF a day of growing Permian supply, which is constrained, and also organic Haynesville supply, which is looking to get to the growing markets on the Texas Gulf Coast, which include LNG, pet chem, and industrial demand. Moving more to the Haynesville gathering and processing assets, and specifically the Haynesville is often overshadowed by the tremendous growth story, which is the Permian Basin, but it has had a quiet comeback story of its own, which has been pretty significant.
In the last two years alone, it has added over four BCF a day of natural gas. In fact, in 2019, it will eclipse the 2012 record of the Haynesville back in the heyday. A ton of growth is going on in the Haynesville, which we are positioned well to capture. We talked about being forward-thinking in the opening, Brad mentioned it, and I think what could be included in this discussion was our 2017 acquisition of the Azure system. Back in 2017, really before the Haynesville started taking off again, we acquired distressed assets out of bankruptcy for only $189 million, which included over 800 miles of pipeline and two gas plants. That system back then was moving 200 million cubic feet per day. Fast-forward to today, we are moving over a half a BCF and the system is full.
You are going to hear us today talk a lot about our systems being full, and this is paving the way in the Haynesville for a lot of expansion opportunities. The Azure acquisition was strategic for two reasons. One, you can see it on our map here. It is in green in between the two red gathering systems, which we call the Haynesville Gathering System. We have an East Texas Gathering System and a Louisiana Gathering System. The Azure fit right down the fairway and connects the two systems into an integrated system where we can move gas across. Secondly, it provided processing capability. Prior to 2017, we had a gathering system. We had an NGL pipeline, which transported NGLs from Mont Belvieu. We actually had to lease out processing space.
With the acquisition came 120 million a day gas plant, which allowed us to bundle deals, gathering, processing, transport, and frac, the same system we use out in the Permian, which is successful. With that, we were able to commercialize a new 200 million a day gas plant, which we call Bulldog. It'll be ready by the end of this year. Similar to our Permian story where we went from zero to 350,000 barrels of NGLs upcoming. In the Haynesville, we've gone from zero to 320 million cubic feet, and we'll supply 20,000 barrels a day to our Mont Belvieu NGL value chain. Additionally, that was sort of the rich Haynesville side. On the lean Haynesville side, we have a few projects upcoming this year. Significant expansions to our gathering system on the lean side. Stay tuned.
We have a lot of growth and a lot of projects upcoming on the natural gas side of the business. I think our value proposition when we talk about combo deals, Brad and John, we offer a significant valuable story to Permian gas, which is constrained to move across the state and ultimately down to the Gulf Coast. Organically, there's enough Haynesville production to commercialize these projects. I think there's a long runway for projects in the Haynesville.
Thanks, Corey. Hey, John, real quick, let's jump back to the Permian. If Jim was here, I would have already been harassed for mentioning two and three. Either Randa or Randy wanted to mention it earlier, but he likes to give me a daily grief about that. What are we doing to continue the growth of our Permian G&P business, John?
Thanks, Brad. This chart shows really the exponential growth of the Permian processing asset since 2015. At that time, we had approximately 150 million a day of processing capacity. Today, we're at a BCF, and by Q1 of 2020, we expect to be at 1.6 BCF. The crown jewel of this asset is the Orla processing complex. Just to give everybody a little bit of background on that, we're expecting train 3 to be online Q2 of this year. That's early. Tip of the hat to Graham Bacon and his crew. Great job there. I'd like to highlight a couple things about Orla. You'd be hard-pressed to find a facility like this anywhere in the U.S. Not just the Permian Basin. This is a first-class facility. It's got multiple redundant compression at both the front end and the back end of the plant.
It's got 36,000 barrels of condensate stabilization capacity. Which is why we're talking about starting a new business line in condensate stabilization. This facility is really a world-class facility. The third thing I want to talk about is the guys that operate this asset. They're unmatched, they're unparalleled. They'll do anything. They're commercially minded. In terms of safety and reliability, execution of projects, and just day-to-day operations, these guys are doing a great job for us, and they make me look really good. Mentone 2. 13 miles east of Orla. Not Mentone 2, Mentone 1. 13 miles east of Orla, in November, we broke ground on Mentone 1. We expect that to be done in Q1 of 2020. The gray-shaded area in this chart shows the identified commercial opportunities that we're currently in negotiations to commercialize both Mentone 2 and 3.
We see strong demand for these two facilities, and we're actively talking to premier credit-worthy producers to underpin and anchor these two expansions at Mentone. In addition, I can tell you that we're looking for new locations to expand beyond Mentone. On the top left-hand side of this chart, you see a graph showing our Y-grade production in the basin. Currently in 2019, we're at about 150,000 barrels a day. By the time Mentone 2 and 3 are commercialized, we expect to be producing approximately 325,000 barrels a day of Y-grade just from this asset alone.
I think one of the things I want to point out so that everyone really understands the scale of these 900 million a day facilities that we're constructing at Orla and at Mentone, one Orla complex or one Mentone complex is the equivalent of 150,000 barrels a day of NGL make, or the equivalent of one fractionator at Mont Belvieu.
That's a lot of raw make, John. Tug, the growth that we see in the Permian is undeniable. Tony's group talked about it. John's talked about it. What's Enterprise doing from an NGL pipeline perspective to be poised to handle this kind of growth?
That story is impressive. What's also a good story to tell, though, is Dan, Graham, and Kevin's ability to bring these products online. We originally had Shin Oak. I'm not online? Hello? Hey, Tug.
I think it worked.
It's all right. There you go. Hello? All right, there we go. What I was saying was, which is equally as impressive as the growth story has been Kevin and Graham's ability to bring these products online. Originally had forecasted Shin Oak to come online in the second quarter, these guys were able to bring the Shin Oak mainline online in February. A little bit about that is, in the past when we've seen these products come online, a long-haul pipeline, there's always a time period of when the production behind the gas plant and the plant has to ramp up, and that has to coincide with the timing of the pipeline. We've seen that timeline anywhere from two to three months, and it could be sometimes longer depending on where and which basin it's in.
Shin Oak was very interesting because the timing on bringing the liquids online in Shin Oak, there wasn't any commissioning. It was effectively full day one, which is always great. The initial capacity is 250,000 barrels a day. We've already achieved rates over 250,000 barrels a day. We're eager and excited to see additional pump stations come online between now and the third quarter to get back up to its capacity of over 550,000 barrels a day. There's a lot of barrels to move these guys keep bringing online. Since Shin Oak's come online, we've done what we've always done at Enterprise, is we've integrated it into our existing system. It's since then been connected to four of our existing pipelines in the basin. Does a couple of things for us. The flow assurance reliability we can offer our producer customers is bar none. There's nothing else like it.
We can get a barrel west, east, north, south. We can get a barrel anywhere it needs to on our system. In addition to that, all the existing basins that our legacy system touches effectively can get on to Shin Oak. We now have five pipelines across Texas with the ability to move over 1 million barrels a day out of the Permian Basin alone. If you recall last year, what we said is we have six pipelines across Texas in NGL service, now only have five. That's because we were able to work with Jay and his group and get Seminole Pipeline put in the crude oil service. What we've done is we've looked at takeaway capacity as one. We don't look at NGL or crude specifically. We looked at across the board, what does the market need?
Jay and his team were able to put Seminole together, and it's now moving crude.
Excellent. Yeah, I'll talk about it, but to Tug's point, this was a real team effort. I think Randy got up and talked earlier about the Enterprise model and teamwork, and that's not just a piece of paper that we carry around the office. I think this project demonstrates it's a real thing. The heavy lifting on this one was in Tug's group trying to find homes for the NGLs without impacting customers' business. The other piece of this was on Graham and Kevin's team. They'll be up here a little bit later. Just speed to market. Once those two things were done, and the easy part was going out, given the demand for incremental space out there and getting competitive rates and long-term commitments, which we did, and that pipe is full today. It's in service and moving product.
In addition to that one, we've talked a little bit about the Midland to ECHO 1 expansion up to 575, and Randy hit on the fact that we've got another debottleneck really working through increasing DRA and getting up to the 620. That's really an opportunistic volume or capacity that we can use when the market allows for. Thanks, Jay. Tug, we'll jump back to NGLs. We spent a lot of time talking about Permian, but obviously we have NGL pipes that touch a multitude of basins. Can you talk a little bit about what our expansion projects look like in other basins?
No. We focus a lot on our equity production, talking about Shin Oak and the Permian, but we're also looking at a lot of third-party volumes as well. Notably Front Range and Texas Express. We have expansions underway on those assets as well, roughly 100,000 barrels a day on each pipe. It's really nice to say the word full when you're in the pipeline business. Front Range is currently flowing at its design capacity right now, and we're excited to see that expansion come online in the third quarter as well to get incremental volumes going on that. They're all backed by long-term contracts. In addition, ATEX is another area of our focus. We have the expanded capacity here of 145,000 barrels a day on this slide. We've actually seen really great rates on ATEX.
Most recently, we've seen throughput in excess of 170,000 barrels a day out of Marcellus for ethane alone. There's a lot of interest right now from the community in the Northeast on getting additional takeaway solutions in place, and we're evaluating expansions on ATEX and discussions with our producers on that area as well. Whether it's the ethane barrel in the Northeast, a Y-grade barrel in the DJ or the Permian, the common theme is all these are coming down to the Gulf Coast. If you can get these barrels to the Gulf Coast and you can get them into our system, you can offer the producer the solution to store the barrel, sell the barrel to a domestic end user, or export the barrel to the growing international market. At the end of the day, the entire menu is there and available to the producer community.
I'm assuming you're seeing the same thing.
Exactly the same thing. We talked a little bit about the Permian, the same thing in the other basins, Midcontinent, and Eagle Ford. As you know, we went out for an open season on Seaway, given the demand for incremental takeaway capacity there. That was a successful open season. Long-term commitments for the full in excess of 100,000 barrels a day. That pipeline is full day one. In addition to that, we saw some expansions in our Eagle Ford asset last year, 40,000 barrels of incremental production coming online this year. We expect that to double early next year. We see good things happening with Eagle Ford. Just as acreage changes hands there, we expect some good things, as I mentioned before. All of this back to some of the key successes, and this is across the pipelines and across the basins.
You see the three stars are there in the picture. We've got our Cushing. We've talked about the price point in Midland, and Brent will talk a little bit more about the HCL. These projects are successful because, one, they have access of supply at Cushing Terminal. They have access to supply at Midland. Just a metric of success that we see out in Midland. A little over five years ago, we were receiving and delivering roughly 500,000 barrels a day. Today, that's in excess of 1 million barrels at Midland. You see the insert there is just market choice. All of the shippers on any one of those pipelines have access to in excess of 4 million barrels a day of refining capacity.
You guys see the Enterprise ship docks and the footprint that it creates there. Same thing, a metric of success for Echo. There was. What was it? Same time frame, a little over five years ago, 200,000 barrels a day coming through Echo. There's days today that we move in excess of 2 million barrels through that facility.
That's impressive growth, Jay. That's going to wrap it up for us. I hope you take away that we work as a team. We're constantly working and evolving our approach, trying to fit our producers' needs. As Jay and Tug both talked about, getting to the coast is the key. I think Enterprise has got two of the premier supply aggregation points in Echo and Mont Belvieu, we can connect demand customers with this aggregated supply. With that, we see continued success in the future. Thank you.
Thank you, Brad. We're going to take about a 10-minute break now, we'll see you back in here about 9:50, okay?
Thanks.
Good.
Tristeza não tem fim. Felicidade sim. Tristeza não tem fim. Felicidade sim. A felicidade é como a gota de óbalo numa pétala de flor. Brilha tranquila, depois devagarinha e cai como uma lágrima de amor. A felicidade do pobre parece a grande ilusão do céu natal. A gente trabalha o ano inteiro por um momento de sonho, pra fazer fantasia de rei, de pirata, de artilheira. E tudo se acaba na quarta-feira. Tristeza não tem fim. Felicidade sim. Tristeza não tem fim. Felicidade sim. A felicidade é como a pluma que o vento vai levando pelo ar. Voa tão leve, mas tem a vida breve, precisa que haja vento sem parar. A minha felicidade está sonhando nos olhos da minha namorada. E como essa noite passando, passando por um momento de sonho, vai imagem por favor, pra aquela cor de elétrica como o dia, oferecendo beijos de amor.
Tristeza não tem fim. Felicidade sim. Tristeza não tem fim. Felicidade sim. Tristeza não tem fim. Felicidade sim. Tristeza não tem fim. Felicidade sim. Se for viu, só que amor nunca viu, por isso sim. Se passou, nem parou, mas olhou só pra mim. Se voltar, vou voltar, vou pedir, vou falar, vou dizer que o amor foi feitinho pra dar. Olha, é como o verão. Queime seu coraçãoE vai ver, tem que ter, nunca tem quem ama. Hoje sim, diz que sim, já cansei de esperar. Nem parei, nem dormi, só pensando em me dar. Pé. Mas você não vem. Vem. Desde então falo só de hotel, mas você vem. Eu digo só que amor nunca foi por aqui. Nem passou, nem parou, foi só olhar só pra mim. Se voltar, vou agarrar, vou beijar e vou falar. Vou dizer que o amor foi feitinho pra dar.
Olha, é como ver a lua. Que enche o coração. Para de repente para ver a menina que vem. Ela vem, sempre tem, um brilho no olhar. E vai ver, tem que ter, nunca tem quem ama. Hoje sim, diz que sim, já cansei de esperar. Nem parei, nem dormi, só pensando em me dar. Pé. Mas você não vem. Vem. Desde então falo só de hotel, mas você vem. Desde então falo só de hotel, mas você vem.
If you would go ahead and take your seats, and we'll get started with our next panel. Thank you.
You want me to introduce them again?
No, you do it. Let me introduce our next panel. We could go ahead and get started. We were being kind to Brad Motal this morning, because we are riding Brad and John pretty hard on Mentone 2 and Mentone 3. For the record. Our next panel is what we call our demand panel. It'll be moderated by Brent Secrest. Joining Brent on the panel is Natalie Gayden, Corey Johnson, and Zach Strait. They'll come in and hit the demand side. Brent will tell us everything we need to know about, especially about crude supply and demand. With that, Brent.
Thank you, Randy. I'm going to warn you all, this might be a little bit confusing. Corey's got responsibility for crude oil marketing. Zach's got unregulated NGLs, but they each had the other's job not too long ago. They're going to start talking for one another just because that's what they usually do at the office. Don't be confused. Natalie's overall the distribution we have. Before we get started, I wanted to share a story with you. This is about demand. About a month and a half ago, I was meeting with a large Chinese company, and they had a delegation here. We were talking about ethane at the time. We went through some slides on about how much Enterprise exports and what % of the market share we are.
He asked the question, one gentleman asked the question, he said: "How much ethane do you produce? How much ethane does Enterprise produce?" I thought about it. I said: "Well, we got 1.5 million barrels a day of fractionation, roughly, depending on the ethane content of the Y-grade stream. I'd call it around 600 to 750,000 barrels a day." He said, "That's how much ethane you produce out of the ground?" I said, "I'm sorry, I misunderstood your question." I said, "That's how much fractionation capacity we have. We actually don't produce any ethane out of the ground." He said, "I don't understand how Enterprise is able to export so many barrels." If you think about who he typically probably buys from, you got to think the kingdom of Saudi Arabia.
You got to think Iran, Iraq, where whoever owns the production owns all the midstream assets and owns the docks. I said, "The U.S. is a little bit different." I said, "If I had to give you an analogy," I said, "are you familiar with Amazon?" He said, "I am." I said, "I would look at Enterprise as the hydrocarbon version of Amazon. Amazon doesn't produce anything, but they handle all the production, and they have a world-class distribution system that takes it to buyers, that takes it to consumers." I said, "I would look at Enterprise the exact same way. We have a world-class distribution system, and what we do is hook up producers with buyers." We're going to talk a little bit today about who we sell to on the demand side. We're going to say sometimes you might hear the word shorts.
We try to go establish shorts we have domestically and internationally. With that being said, we're going to start off with crude oil. Corey, I want you to walk us through this because this is a little bit about the supply side, but you can't have a demand panel up here without a supply side look at crude oil in this case.
Brent, I can't hear you.
The supply side, Jay covered it in great detail. Really is an impressive system that we put together out in Midland. Also, Cushing is also a wonderful asset that Enterprise had, bringing barrels across from Midland down to Cushing. Also bringing barrels up from the Eagle Ford, even offshore, and utilizing other companies' assets as well to aggregate these barrels in the Houston market. When you look at the Houston market, it's access to supply. You're looking at over 8 million barrels of potential supply every day. 300,000 barrels of storage access to export docks. Jim likes to call it a sponge, Brent, and I can't think of a better sponge in the entire Gulf Coast area.
That sponge, it all leads to ECHO, you'll hear us talk about how is ECHO different and how is Houston different. Houston is truly a market. It's not a destination. It is a market where you do have choices. Let's talk a little bit about choices, Corey, once you get to Houston.
You talk about this market that we have, again, I go back to that unmatched phrase. Enterprise alone has 45 million barrels of storage as we sit in the Houston area. We have access to 13 refineries with over four and a half million barrels a day of refining capacity. We have access to, I guess, 18 actual docks. Is that right, Natalie?
Those docks are spread out across our Houston ship channel dock. We've got our Texas City dock. We have a Freeport dock, we also have docks at Beaumont as well, giving us diversity of location, which I think Natalie may address as we saw some of these channel problems that we had earlier, where Natalie and her team were able to do some pretty amazing things to get through fog season and the ITC situation. One of the things that really transpires from what you see on this slide here in front of you is the development of a market. A market of not only domestic demand, you also have international demand, you've also got storage. You add all three of those pieces up, that's how you get price transparency. Price transparency that allows people to buy and sell.
Producers meet consumers come to a good, clean price.
When you look at connectivity and you look at all this connectivity downstream puts buyers in the market. The more buyers you have, obviously, typically the more your product is worth. You'll hear Zach talk about NGLs. Having downstream connectivity makes the stuff you're selling worth more. What else makes your crude oil worth more, Natalie? What do you have to live with? How do you guys go about doing this?
You've either heard it said or we're going to say it here, but quality is king and consistency is queen. If that's true, that makes Graham and I the jesters of making sure it happens. We do a lot on the pipelines. There's a lot of detail that goes into scheduling. When you're trying to keep part per million levels segregated, and that's what's important to our customers, it takes large batch sizes. Sometimes it takes moving higher value product into lower value product to make an interface cut pretty tight. We're not new to the quality game. We're good at policing people or injectors whenever they go off spec. We optimize our batch sequencing in crude. We do it in refined products as well. We do it many places.
We've taken what we know from other commodities and other businesses and applied it to crude. It's an initiative that has kind of been an evolution that continues on. It's important to our customers.
Corey, what's quality mean to you?
It gets back to what you spoke of earlier, value. When we look at value and we talk to our consumers, whether it be a domestic refinery or an international buyer who is the refinery or a counterpart who would be taking those barrels to a refinery overseas. They stress quality. One of the things that Tony's group touched on is a lot of these lighter barrels are tending to go to these front-end refineries for a chemical complex. Quality to them is key. When I have Natalie on my side and the work that she's doing, it not only makes us feel more comfortable, but it makes a lot of the consumers of our product in the area more comfortable. It's extremely important.
Natalie's got probably one of the hardest jobs at Enterprise in the sense that folks like myself and these two gentlemen down here make a lot of promises to our customers, and we ask Natalie to figure out how the heck we're going to do it. Her and her team do a great job. We talk about connectivity, we talk about quality, and what did that lead us to a couple of months ago, Corey?
Well, a couple of months ago. Actually, I shouldn't say a couple of months ago. Brent, you've been working on this for a couple of years. One of Brent's passions, and I had the opportunity to step into it right when it got exciting, but Brent's been working on this for a couple of years, was to work with the CME on developing a true contract. The HCL contract, as they're calling it so creatively, the CL is the route for the Cushing contract, they just put an H in front of it for Houston.
They came to us and said, "Your distribution system, your storage, your access to supply is exactly what we're looking for in the Houston market." As you see on the screen here, we've got three different locations that we allow buyers and sellers to meet up where there's appropriate distribution to have price transparency with consistency of quality, access to supply that's unmatched in the area. Again, I keep saying unmatched, but it truly is. Also access to refineries and docks. There is no better place than the Enterprise system to create a market.
Is that any different than the way we view Midland or Cushing?
No. It's a great point. Jay put a slide up earlier. We don't have the slide in our deck, but it showed Midland, Cushing and ECHO. Essentially, Enterprise is the delivery point, the settlement location at each one of those basins. Those are the three most important trading basins in the U.S., essentially, for not only crude movements, but price transparency. It's a good point, Zach.
We'll talk a little later about why this is important for some of the projects we're doing, specifically SPOT. I'll also give Zach credit. As I said earlier, Zach had about a 10-month stint in crude oil.
Yeah.
We'd started this process a couple of years back, Zach made a few trips to New York with me to go pitch this. Zach, we talked a lot about crude oil. We're going to get to you now. Is our approach in terms of the commodities any different in NGLs?
No. Regardless of the commodity, I don't think it's any different, I think we stick to what we know. I think we stick to what we're good at. I think when you think about the strategy on the crude oil side, a lot of that strategy developed because of how successful we've been in NGLs. When I think about NGLs, and this is just an example of some of the connectivity we have on NGLs, connectivity is important to Enterprise, but it's more important to our customers. For flow assurance, one. Two, our customer wants to be able to reach the highest priced market. If they're not able to reach the highest priced market, they don't get the best net back into the field. To me, connectivity is king in NGLs, and I know it's king in crude oil, too.
It's the same story on NGLs, I want to talk about storage, let's go with you first, Natalie. What does salt dome storage mean to you in terms of how you go about scheduling and handling nominations and those sorts of things?
Salt dome storage or storage in general is how we sleep at night. It's a wide spot in the line when things don't go well. Somebody asked me earlier, what's the hardest thing to schedule? Without a shadow of a doubt, most of the time it's a vessel. Our terminal schedulers by far are the hardest working people probably in this company because they are making quick moves of a schedule based on what a vessel's doing or based on what a refiner's doing. You have to have a wide spot in the line to put product that continues to come. Fog events on the channel, events in general, natural disasters like Harvey. Any place in crude and in NGLs that have storage just makes the pipe continue to move.
Zach, you want to comment on that?
I think our customers value it too. We value it from an operational perspective. Our customers value it also from an operational perspective, they also value it in the sense that they want the highest priced market. Sometimes the highest priced market's not today, it's in the future. They want the ability to store product, sell it in the future, and get the best net back in the field again. I think one thing we do want to point out about this slide, and I'll maybe kick it over to Natalie, is this slide is showing sort of independent facilities. These are not independent facilities. We spend a lot of money to integrate these facilities. The way we view this facility is one facility. You schedule it every day.
You see those rings? Those are our rings of reliability. We schedule them as one. Mont Belvieu is one complex to us. To get to one storage place over the other, it's just a redundancy. We have multiple products at each place. We don't store all Y-grade at North Storage, for example, and we don't store all Y-grade at East Storage. We have a mix of everything at every place.
At the end of the day, stuff happens. It always happens. The ability to have these three facilities that act as one can also act independent is really important.
Randy touched on it earlier, the ship channel being closed, it wasn't one pipeline, it wasn't one asset upstream that slowed down. Whether it was crude oil or whether it was NGLs, the story you see, how much storage we have on crude oil, you see how much NGL storage we have with Salt Dome. I'll go back to my Amazon analogy. Those are called very large warehouses, and that allows you to go ahead when stuff like this happens. Now we're in catch-up mode, and we will catch up. We talked about the supply side, talked about the destination side. How do we go about trying to fund supply? We have these little big circles, at the end of the day, there's a lot of sub-circles upstream of that and downstream of that. How do you guys go about doing this, Natalie?
Sometimes maps don't do our systems justice. What I mean by that is if you had to go count all origin points for crude oil and the supply aggregation, we did that. This is the count. There's 108 origins for crude. Mixed NGL, that's the gathering of raw make. There's 113 origin points. You could go back two or three slides, and you could see all of the deliveries for purity NGLs. Petchem, same thing. A pipe is just a pipe without supply, and this is kind of a way to show there's plenty of supply points.
Natalie, when I look at this slide, I see all the arrows, I see all the busyness, what immediately comes to mind for me is optionality. Anytime that you have a problem, anytime you have a situation, look at all the choices you have to solve that problem.
Right.
The choices we can offer if there's-
Absolutely
difference in prices.
Opportunities.
I had a friend of mine who's got his own dock, and he does dry bulk. A couple of years ago, he told me, he said, hundreds of years ago, prosperity flowed to the water and commerce all happened on the water. He said, if you think about it, everything on the commerce side happened on the rivers, the various rivers in this country. He said, it's not a whole lot different in what you do, except now that water is the ocean. Having access to water, the vertically integrated system we always talk about, how does that help you do your business, Corey?
Again, I feel like we're almost being redundant again. You've heard Zach say it a couple times, it's value. It's price. How do you get the highest price for your producer? How do you provide the most reliability from your end user, your consumer, your export? It gets to our access to the water, our access to refineries. That optionality that everybody has is what gets that bid higher for all of our customers on both sides and also provides that optional flexibility. When I look at this slide, and you see 5 million barrels of export capacity and obviously growing, and we'll touch on the growing a little bit later. This gives us the ability to get to the water in order to clear the barrel that Tony talked about earlier. Some people doubted Tony years ago and Tony's team. They were wrong.
He's been right again and again and again. I believe in his forecast. I think it's right. You asked the question earlier, can the world drink all this stuff up? I look at Tony's intensity slide, the energy intensity, and people's drive to live in a society similar to America. That's going to continually put a bid or a higher price for the value of the barrels that cross our docks. Those docks are getting fuller and fuller by the day. Not only from my side perspective, but I'd also say on your side as well, Zach. Yeah. It's no different on the NGL side. It provides the highest price market. Tony said it for years now. The incremental demand is not in the United States. It's elsewhere. I think I have a little bit different perspective because the NGL business is sort of changing.
On the producing side of the business, the producers have been used to doing transportation, storage, export. On the NGL side of the business, they have not. It's been transportation, fractionation, sell it in Mont Belvieu. I think more and more and more as we're talking to people, I can't get fractionation deals done unless I can offer transportation, fractionation, transportation. That transportation's the dock.
I think if you look how this thing is going to evolve, the customers we have on our systems, I would consider them fairly sophisticated. They're actually very sophisticated. They understand markets. They understand why they want to be in Houston. Every one of them has a dock deal for crude oil. Every one of them. They recognize, and they all have their own slide that Tony presented about how much demand is going to be here in the U.S., and that ultimately they want to control their own destiny. Who they want to control their destiny with is one counterparty. That when something happens, you pick up the phone and you call us, and we don't sit there and point the finger at this guy and say, "No, you need to go talk to this guy.
You need to go talk to this girl." It's all with Enterprise. That's what helps us get these deals that basically every deal we offer now, Jay, I think it is from the field to the water. We don't typically go upstream in Midland, but now the producer's saying, "I want you to come get my barrel." We talked about quality, and it's about putting it in one person's hand to be the steward to maintain that quality. That's the one thing that I think Enterprise does very well, is we can take you all the way. I mean, Jim says, take you to the seats, and other people can take you to the ball game or something like that, Randy. It's ultimately taking you. I'm going to. He's going to yell at me for not doing it right.
I always love this meeting because I get my annual review in front of like 250 strangers about what I'm not doing right. Obviously, these docks are incredibly important, and the U.S. producer's stepping in. The U.S. producer recognizes it. They believe Tony's slide that says there is no more demand for HD5 propane in this country. There has to be demand elsewhere beyond the United States if you want to sell it. It's probably not as much so on butane, and it's the same for all these products. Natalie, one of her job descriptions is to make sure that. Her and her team are. I call this the Tetris slide because you guys are trying to fit everything in as tight as you possibly can. What does this slide mean to the crowd, Natalie?
Okay. I just want to say something before you see that. When someone picks up the phone and calls commercial, it's not a good day for distribution because then we get more help than we need and more scheduling advice than we can take.
Thank you for all of your help, Natalie.
You're welcome.
We don't say it enough.
Yeah. This is actually one of our schedules, and Brent makes fun of it, but it is our dock schedule. The white spaces in between is our job to make as small as possible. We want to get ships on the dock and off the dock. If you ever fly over any of our docks, our job is to make sure a ship is on the dock and actually doing something. We want to be loading it or whatever its business is. We do have a berth scheduling software that's got 30 years of algorithms behind it. It's sophisticated. What it does is it basically moves ships to an optimal berth scheduling application. We also have a lot of experience. Sometimes our experience is just as great as the software. We do have multi-product connections to each dock. That's always helpful.
We can only move some of our bigger vessels during the daylight. During the winter, that's when we start to sweat because there's not as much daylight in the winter, we need to move loaded vessels out during the day. Labor solutions are just basically when we're done with the vessel, we need to get it off the dock and put another one on. Sometimes that might be the scheduling trick. Redirecting vessels to load at other Enterprise destinations, maybe that's Texas City. It just depends. Just optionality is key for us, planning ahead is key. Planning for the unknown is hard, we've managed to make it happen.
People always ask us, do you see any issues with dock infrastructure and the ability to clear barrels? You can't speak for other people, but you can speak for yourself. I want to give credit to Natalie and her team. We don't see any issues with Enterprise. We see some opportunity that we're going to have going forward to help fill up some of the white spots on there. Our job as a midstream company is to make sure that we get people who sign contracts with us to a market, we do what we said that we're going to do, we do it when we say we're going to do it. Corey, talk to us about how you're traveling these days versus how we were traveling four or five years ago.
Well, I would say, Brent, before we get into this, I want to say before we exported our first-
That was the one question we didn't prepare for. I did it to Corey just to see if you'd stand up.
A little trip up.
I love that.
I'll get you back here in a little bit, Brent. Before we exported our first barrel of condensate, our first barrel of crude oil, my travels, Zach's travels, but we were back and forth to Findlay, back and forth to-
San Antonio.
San Antonio. Absolutely. Obviously, Houston has a lot of-
Chicago
friends. Chicago as well. We find ourselves making our way to Europe as we start exporting crude oil, a little bit of Latin America, we keep pushing further and further east. As Brent likes to say, we're chasing the bid. The bid has moved from Houston all the way to Beijing. We've had multiple trips to Beijing, probably more than Brent would like, given the fact that he doesn't fit very well in an airplane seat. Now. He's 6 foot 7 here. I mean, he's seated, so. Didn't go there. That's not fair. These opportunities really have gotten us to really travel the world, meet with a lot of people, get a lot of different perspectives, and move to truly a bulk game.
If you look at this slide, you see 82% of the product going from Houston to Asia is on VLCCs. This is a bulk game. This is a large container ship game, and it's going to continue to be that way. In fact, I would say LPGs have been the exact same way. They just got an earlier start than crude oil.
Yeah, they're the exact same. I won't go into too much detail about it because you all hear about it every single year. The only reason I'm sort of up here today, because I don't run our NGL marketing group, this is more of a marketing panel, is give a shout-out to Justin Klotter, who was supposed to be doing this. He actually had to get on a plane and go to Beijing. That shows you how important it is for Enterprise to be going to the-
Yeah. The more and more of stuff that this country produces, I'm stating the obvious, it's got to go further and further away to find buyers. One or two years ago, we'd go to Central America and Latin America, then we had to go over to Europe. The next year, we had to go to Japan. Year after that, we went to South Korea. Now we spend a heck of a lot of time in India and China. Tony and I are leaving in a week and a half to go to China. We are doing a heck of a lot of trips to China as a company. Before you all ask, we haven't opened up an office there yet.
Jim bought a house in Asia a couple months ago. Hopefully he's going to work from there, we'll call that the new process. I don't know. It sounds like he's going to go into private wealth management after that first slide. He did so good with his stock purchase. All right. Corey, you talk about efficiencies and the need for VLCCs and where the future is going. Why don't you walk us through? We talk about the team effort. James Bany is a big part of this project. The marketing team is a big part of this project, walk us through this, Corey.
This is a lot of fun. I mean, Jay's probably chomping at the bit to jump up here and talk about it because he's really excited about this as well. The collaborative effort, Enterprise has really been trying to find a good solution for the problem that Tony keeps creating for us as he keeps showing all of this increased production. It really is a neat position. What we're looking at doing is basically connecting the Houston Enterprise system that we talk about, not necessarily just ECHO, but ECHO, Houston Ship Channel all over our system. That sponge that we talk about. We're going to run a 36-inch line to a terminal that's going to be right around that Freeport area. We'll stage about 6 million barrels, I believe. Is that correct, Jay? 6 million?
From a 6-million-barrel terminal, we will have twin 36-inch pipelines going approximately 35 miles offshore. It's going to go to a platform offshore in 125 feet of water with two single-point mooring locations, buoys that the VLCCs could come in and dock. Individually, these facilities will load at 85,000 barrels an hour, one at a time. We'll be able to bring in one VLCC, get it docked, lined up, connect, and load it at 85,000 barrels an hour while another VLCC is coming in, and it starts getting hooked up for the next load. The way that this happens is because these buoys are almost a mile apart, about 5,000 feet apart, we're able to do both of these things at the exact same time.
Once the first VLCC is finished loading, all we have to do is switch that manifold over and then immediately move on to the next VLCC. Loading a VLCC 2 million barrels in basically one day, which is just mind-blowing. It's a great project. It has scale, which we love. It has access to 40 grades of crude oil, which the international community loves. It's a lot of fun. I told you, Brent, I was going to get you back here. I've got a surprise question for you here, and it's the one that Randy kind of punted to me. Now I'm going to keep punting it down and send it over to you. How many of these VLCC docks get built?
I always hate speaking for other companies, but let's just talk about the merits of our project, which I think you hit most of them. The ability to aggregate barrels, you have to have that ability to do any kind of dock or any kind of market-type product. When you look at the amount of barrels that Enterprise can aggregate, I don't think anybody can touch us. I'm trying to practice humility and be humble about this, Randy, on your presentation. We have an incredible system. You got to have storage. We see other parts in the U.S., whether it's LPGs in Pennsylvania, or whether it's crude oil going down to Corpus. Things happen. You got to have the ability to store barrels, and you got to store them in a very large number. You have to have a contract.
You have to have the ability to hedge. You got to have a physical financial contract that people can access. When things happen and you don't have storage, you have to have the ability to move barrels into a market where there are buyers. There's always buyers in an open market. You might not like the price, but there's always buyers, and there's always sellers, and that's how markets work. This is a big project. These are projects that Enterprise likes to do. We talk about barrier to entry. Enterprise likes these projects. To have the wherewithal to pull this off, I think Graham and Kevin Ramsey, you'll hear from them here coming up. The team that they assembled, the consultants they hired to do this project, Enterprise does these things the right way. I think we have the wherewithal to pull this off.
At the end of the day, I think customers recognize that. I think the customers that we're talking to want us to do it, almost require us to do it. We'll figure out. They'll pick us, and we'll pick them, and we'll do a contract that works for them and a contract that works for us. We're in the process of negotiating all these contracts. This slide right here, when you talk about crude oil, and there were some questions last night about Waha gas. Waha gas and what's that going to do to production? If you look at the Delaware Basin, but even the Midland Basin to some extent Tony's group ran some numbers that gas, whether it was free or whether it was $3 or $2.50, you're talking about 1%-3% of what these guys are going after.
NGLs is about 8%-10%, Tony, of what they're going after. You look at crude oil, it's somewhere between 85%-90%. The price of crude right now, I haven't looked at it, but I'd probably say it's the highest it's been in five years. We're talking about the Midland Basin, so you got to factor differentials, right? I think these guys have it as good as they've had it in a very long time when it comes to returns. When somebody says, "Paint the scenario how this thing slows down," I don't think Waha gas has a whole lot to do with it. They could give it away. They could pay $10. We were meeting with a very large Permian producer a couple of months ago, and we talked about gas and infrastructure issues.
The head guy said, "I don't care about the rest of this country when it comes to natural gas, but these guys better be prepared to compete with free." He said that. He goes, "They better be ready to compete with free because we're giving it away and we don't care." There's probably some other scenario we could say how this thing slows down. The key for us is how, as Enterprise, how do we go back to our customers and how do we do this in the biggest way, in the most efficient way when it comes to getting crude oil so there are no bottlenecks? That they have open access to lots and lots of buyers. This is our way to make sure that we keep this thing going.
I got one more question that I want to throw at Zach. What does this do for you?
What?
This being the export, the V dock.
Yeah. It's not just the NGL group, though. I'd probably look over at Chris and say, "Chris, what does this do for you?" I think both of us are looking at it going, any ship that comes off the Houston Ship Channel, I truly believe will get backfilled with either LPG or propylene. We also have the ability to do refined products there. By the way, all three of those products like 45 feet draft. Crude oil does not. From a synergistic of you get ships to the water where they want to be, we get ships to the water where they want to be. I think it makes a lot of sense.
You talk about what gets built. If Corpus is successful with their dredge and they go to 55 feet or whatever that they're talking about going, that's not as efficient as this, but it's a lot more efficient than 45 feet. Now you're talking about one reverse lightering. I don't see the economics. These economics are tough, but when you start putting both projects together and creating dock space, it turns into what I think Enterprise does the best, is optimizing. You put it all together and you say, "It's a good project." When you talk about building a VLCC in Corpus, and if they are successful with the dredge, what are you actually saving? It's one reverse lightering. I can't predict whether somebody's going to build it or not. People do things that we scratch our heads all the time.
They've probably scratched their heads at us a few times when we said we're going to do it. They're probably going to scratch their heads when we go out and offer rates on LPG dock that have never been seen before. I'll share, this is the last story. If Jim was here, he'd be going like this to me to get off the stage. We talk about LPG docks. I personally take a lot of responsibility for Tony's slide that showed five years ago, Enterprise probably had like 75% of market share. Now we're a big chunk, but it's a heck of a lot less than it was five years ago. We had probably 50 different counterparties who wanted to sign up for long-term dock deals in the low teens. We decided to pick 20. That's all we had room for, was 20.
We did five-year deals with these guys. The arb was $0.70 a gallon. I remember people ran the numbers. You could actually stack propane trucks on container vessels and ship them over there, and you still made money. That's how wide the arb was open. I don't think it was safe. I don't think Graham was a big fan of it, but theoretically, it made money. These guys were willing to pay these numbers. We said, "Oh, that's great. Let's go ahead and take it." I'm sitting there saying, "Man, these guys can pay more. Let's get more." I don't know how we picked this number, but that's the number we got stuck on. At the end of the day, what we did is we introduced competition. We justified new build economics. We will not make that mistake again.
We are going to gain market share in this business. We can't stop what people do. When it comes to retaining and growing market share, they are going to have to compete like nobody's ever competed before. It's the same lesson on ethane, it's the same lesson on crude oil, is we have a great system, and we will compete. With all that said, we'll round this up. Enterprise has a great platform. I hope you guys can recognize on the supply side, the demand side. We have a ton of opportunity in front of us. I've never felt better about where we're going and what we have in front of us. It's going to mean a lot of travel for a bunch of folks at Enterprise, I tell you what, there is a ton of opportunity out there.
With that, thank you for your time.
While Tony and Chris are getting mic'd up. One, Brent, let me see if I can help you with your review. The baseball usher analogy is many midstream companies can get a producer's product to the stadium, only Enterprise can get them to their seat. Corey, you embarrassing Brent, quote unquote, in front of 250 strangers, I can't help you. Can't help you. With introducing the next panel on petrochemical services, if Tony Chovanec up here earlier, and then Chris D'Anna. Interesting thing about Chris, I think I've been at presentations, bank meetings, and investor meetings with Jim going back to 1999. I think one of the obligatory remarks he always has to make is letting everybody know that he's a Dow Chemical retiree. Chris is a fellow Dow Chemical alumni. With that, we'll kick it off to Chris and Tony.
Green one. Green. Big green. There you go. Not working? There you go. I'd like to start out. Is that all right?
Sure.
I never worked at Dow Chemical. I can be objective, and I think I am. I can't replace Jim Teague in supporting Chris here today, and you all know that, because I didn't work at Dow. Here's what I'll say about petrochemicals. Every time that we start looking at a petrochemical project or I can crawl up on a desk at work and talk about the strong fundamentals for petrochemicals, I have been, I do, and I will do it. I'm just going to give you some simple examples. When I say steel, what do you think? You think a mature industry, and that is correct. That's what you should think. When I say aluminum, what do you think? You should think a maturing industry. Some people would argue when I say oil, you would think a maturing industry.
When I look at demand in Asia, I would argue otherwise. When we say petrochemicals, that is absolutely not the case. When I was a little kid, I hate to tell my age here, but all the planes were silver because they were made of aluminum. Then there was a point where the airlines decided to paint those silver planes to use them for advertisement. Then there was a point when they decided to strip all that paint off of there because it was extra weight, right? Today, your airplanes are made out of carbon fibers that come from propylene. There are issues with the disposal of plastics, no question, but you cannot replace petrochemicals with anything else, end of story, from a fundamental standpoint.
Tony, I would add that it's not just airplanes. If you look at cars and the lightweighting that's going on, we used to have all steel. Now you look at the amount of plastics that's in cars, and it just continues to grow, and it will continue to grow.
Has to from a weight standpoint.
Absolutely.
The fundamentals relative to demand are fabulous, the U.S. has tremendous feedstock capability. That's why you've increased your ability to make ethylene here by 60% over a five-year period. I cannot think of any commodity that has done what ethylene has done, I can't think of any commodity where the fundamentals are better than what they are in propylene, end of story. I can't be any more supportive than that.
All right. Well, we'll get into some of that here in a little bit, one of the things I wanted to do is to back up and really talk about the model that the petchem business uses, because I think it's gotten lost over time. The picture you see at the top there shows the Enterprise value chain. You all have heard us talk about the value chain probably every analyst meeting. What we haven't done a good job of is talking about the petchem business and how the petchem business is really just a midstream service provider. We're just a service provider to a different set of customers. If you look closely around the activities that we do and the services that we provide, you'll see that they're no different than those services that we provide for the NGL side.
We gather, we transport, we store, we process, we store, export. The exact same activities that we're doing on the NGL side. We have a value chain where we're collecting margin as we go through that side. When you start thinking about that and the volumes that we move, last year, 300,000 barrels through our petchem pipelines. We have 7 million barrels of third-party storage contracts. With that, it's easy to see that we have a large majority of our margin that's fee based. One of the other things, we've talked about this in the past, is how the petchem business extends the value chain. There are certain projects that do that.
If you look at the top there, we have our PDH. If you think about what a PDH is doing, it's creating a new demand source for the producer in the Permian or the producer in the field. That demand wouldn't be there if we didn't have that PDH. It's raising the value of that product all the way through our value chain, adding additional steps to it.
If you think about it, we think about our splitters. They're like fractionators on the NGL side, aren't they?
Absolutely.
If we think about PDH, this is not a stretch for me, it's really like the isom units because you're taking a molecule and you're making it into a higher value molecule.
Absolutely. Yeah. I was talking to somebody last night at the reception, they said that they had been studying PDH to try to understand it, that it was real complicated. I said, "From a business perspective, it's really easy. You take a molecule, you run it through a process, you make something that's worth more." It's no different than we're doing. I think the isoms is a great example of that.
I guess before you flip this slide, we have coined the term petrochemical midstream services. When you think of this business for us, that is exactly what we are. We're not a petrochemical company, but you are the lead in petrochemical midstream services.
We absolutely are. We'll go through some of the assets, what our asset footprint looks like here a little bit later, and some of the value that we provide to our customers. Some of the things that you don't see in there is on the splitter side, we're a merchant buyer of RGP. On the splitter side, we're not backward integrated to the field, but it's its own little value chain where we're doing the same sort of things. Again, transportation, processing, storage, exporting as we're doing within the NGL business. We're collecting revenue throughout that chain. There is integration between the splitters and other parts of our business. For example, our RGP splitters make an ultra-low ethane propane.
We can take that propane that's produced off the splitters, blend it up, and now we have more propane that we can export across our docks. There's those type of things that the splitters do for us. The other thing is when we're buying refinery-grade propylene rail cars from some of the refiners, we unload that rail car and we return it back to the refiner, but a lot of times we'll sell them iso. Isobutane that they can use in their alkylation plants. It's creating opportunity to do more business with our customers.
I'm going to guess that 25% of you in this room have been out to Mont Belvieu. When you look at Mont Belvieu and you take a tour or you do a flyover, there's not a corner where all the petrochemical stuff sits. The units are integrated, same operators. It's core to our business as I see it.
Yeah. When you think about storage, it's the exact same operators that are operating our petchem storage, that are operating our NGL storage. The same is true for our plants. It's all under the same supervision. We talked a little bit about the fee-based nature of petrochemicals. This slide may surprise many of you that two-thirds of our margin is fee based. If you think about the activities, maybe it's not that hard to understand. 100% of our ethylene, obviously we're not a producer, we're making fees on all the ethylene that we're moving through our system and storing. As we continue to develop our system, that'll still remain the same with our exports. It's fee based. On the propylene side, 71% of our volume is fee based.
If you think about that on the splitter business where we're a merchant buyer, it may seem a little counterintuitive, but we buy on the same basis that we sell in a lot of cases. Effectively, we're locking in a spread on that business. We keep about 30% of that on a spread basis, and we like to have a little bit of that flavor in our portfolio. Then on the C4 side, it's about two-thirds fee based. All of our high purity isobutylene that we sell and our mix that we sell is on a feedstock plus basis. Our MTBE is the only thing that's really spread based for that segment. If you think about how we contract it one to two years in advance and on a way that allows us to hedge it.
Really you could say that our MTBE, at least on a one or two year horizon, is mostly fee based as well.
When I look at the word ethylene on that slide, Enterprise's C2s. When I look at propylene, C3s. When I look at butylene and MTBE, C4s. Just going through the words. I'm a B school guy.
If you think about the C4 side, it's really another example of how we're extending our value chain. We take isobutane and feed it to that process. That isobutane comes from our isom plants that are fed from our fractionators, that are fed from our gas plants, that go all the way back to the wellhead in the field. I think we've talked about in the past that the very first plant we ever built in Mont Belvieu was a propylene splitter. Or I think Tony's calling them fractionators, we'll stick with the fractionator theme. That first plant that we built 40 years ago gave us really a foundation to start growing a propylene system. Over the last 40 years, we've grown that system into now what is the largest propylene system in the world.
We see the same opportunities on the ethylene side of the business. Tony showed a graph earlier that showed how much ethane was being consumed by these crackers. What you don't hear about are infrastructure projects that take away ethylene, and that's really created a huge opportunity for us, and we'll get into some of the things that we're doing on that side here in a little bit. What you can see from the graphs on the right is we've been incrementally growing, and our margins have continued to grow. Everything in those pictures is up and to the right.
Because I don't want you to miss Jim too much, where are you headed and when?
Yeah.
Up and to the right is a little vague.
Yeah. Jim would want to hear a number, right?
He would hear a number.
He would hear a number. Yeah. He's probably listening, so he'll hear it now. Our goal, I think we have visibility within the next few years for this business segment to be over $1 billion in gross operating margin.
By 2025?
Easily by 2025.
Okay. Thank you.
We'll talk a little bit more about the propylene side of our business. As I said, we have the largest system in the world. We're the largest merchant seller of propylene in the world. The way that we've been able to grow is our focus on reliability to our suppliers. One of the key things for us when we talk with our suppliers, which are refiners, is the takeaway is key. They do not want to shut down their refinery because they can't get rid of their byproduct. We've built this system with gathering pipelines, with strategically placed storage to make sure that we always take care of them. Whether it's a hurricane, whether there's some other event going on, we have the ability to take that product away. Our system on the PGP side, on the polymer-grade propylene side, is equally impressive.
Today, we have the only U.S.-based export facility, we're able to export and get prices globally and take advantage of any arbitrage that exists.
Really, when you look at it, this is no different than the demand panel that just left, right? The key to what happens on the demand side is that you have great supply aggregation, and obviously you do with RGP, second to none. Upgrade capability, the ability to add services to it, that is to store it, distribute it, and now to export it.
Yeah. When you think about the basic pieces, again, it's just like the NGL business model. We've leveraged that to create this business. Like Tony mentioned, if you think about the operations experience that we have, it's storage, it's building pipelines, it's building fractionators. There's really no difference in what we're doing on the petchem side.
I'll have to tell you on this next slide, if you want to go ahead and switch it. This takes my simple slide that had the line that said plastic on it, makes it pretty lame, doesn't it?
I'm not going to go through and read all the details. These are all the different uses of propylene. Tony gave the example about the airplanes, airplane wings and fuselage. It's created from propylene. When you think about windmills and the turbine blades, those are low weight, high strength composite materials that have propylene in them. You start thinking about being green, you can't do that without propylene. I'll leave it at that with the propylene side. What that means, though, is that there's going to continue to be growth in propylene. You saw Tony's numbers in the plastic chart, what he showed versus GDP. We really like the PDH project. We like the primary Petrochemicals business.
PDH, if you think about it, is really a perfect midstream project for us because one, we have the feedstock position like nobody else with the propane aggregation. We have the asset base on the finished product side to pull this off. When you think about cost-plus type project, what we do is we take propane and we add our cost to operate and our margin on the capital investment, and that's how we turn a PDH project. The added benefit, I talked a little bit about this on the first slide to the value chain, is that now we're creating a demand source all the way back to the field, all the way back to the Permian or the Eagle Ford. By pulling that propane molecule all the way through our value chain.
It's going all the way through our value chain, all the way through. Why don't you take a deeper dive into PDH 2 now?
Perfect. On PDH 2, we're trading term sheets and contracts. We're still in the commercial development. We haven't announced this project, somebody asked me if we were going to announce it today, and we're not. We feel pretty good about it. We're implementing all the lessons that we learned from the first one. One of the key things that we're doing is, on the construction side, we're going to firm bid this so that we have certainty in what the costs are going to be. We're going to use the same technology that we're using today to make MTBE, what we call our BEPF plant, and the plant that we're building, the IBDH plant. Really, the driver for this is our customers.
We hear the need for additional supply, we have a lot of requests, and that's how we feel good about the development piece. On the engineering and construction side, typically, when we do these type of projects, it's commercial, it's negotiating the contract, then we go to Graham and say, "All right, we're ready. Now build it as fast as you can." On this one, we've actually done it more from the design and construction basis leading the way, so that we have really a firm understanding of what the cost is going to be. At this point, it's more Graham pushing us.
Same. We're ready.
Yeah.
We're ready.
When are you going to be done?" He asked me that this morning. "How close are we?
Before we switch from that graph, and I'll go back to something Richard talked about, take you to the lower right. We make propylene from naphtha. In China, they make it from coal, for example. They have 11 of these PDH units and, I don't know, another nine planned. The facts are, to meet that capacity gap on that lower right, it's going to take it all. In the U.S., because we make so much ethylene out of ethane, it's going to take on-purpose. End of story. Because we're not making byproducts here.
Yeah, absolutely. If you look at the basis of the demand for the very first PDH, all these crackers that we had started converting to ethane. That created a huge gap just here domestically. Well, propylene demand continues to grow. There are new derivative plants that are being built and debottlenecked, and so the fundamentals are very strong. That's creating the need for additional on-purpose propylene. Kind of in the same light, IBDH 2. We've talked about this in the past, so I'm not going to spend a whole lot of time, other than to say that our construction is on time. We're on budget. This is the same technology that we use in our BEPF plant today, and it's the same technology that I just talked about that we're going to use for our next PDH plant, should we go forward with that.
The nice thing about this plant is that it's going to create additional feedstock so that we can operate our existing plants at full rates. Today, our MTBE plant and our HPIB plant can't run at full rates because they don't have the feedstock for it. We were able to underpin this, 50% of the capacity, with a long-term contract. Really, at the time, it was a customer that we didn't do a lot of business with. Now they're a huge customer, and we're looking for other ways to grow together. This is a great project. It'll be on at the end of this year. We talked a little earlier about the growth in ethylene and how we're really not seeing a lot of announcements around the infrastructure to support that.
On the ethane side, we have our Aegis pipeline, and there's a lot of connectivity to feed those plants. There's not a lot of infrastructure investment that's happening. We see a lot of opportunity in this area. We have some pipelines that we're building, and these pipelines, we have customers that have signed up for 20-year contracts with us, and we're growing it incrementally. If you look at how our propylene system grew over the years, it took us 40 years to grow a system. In this case, we're starting to grow it incrementally over year periods, where we're constantly getting requests for additional links of the system.
I've said it before, but I've never seen a commodity, especially the size of ethylene, where you've increased your capacity by 60% in a five-year period. That doesn't come without noise. There's no question about that. When this phase of the build-out first started, people thought that all of the derivative plants would be up before the crackers would be up. That's what I read. That's what I thought. What we've found is that's just not the case. I'm assuming that people are beating your door down to ask you when are you going to be able to store and export ethylene.
Yeah, absolutely. I saw Brian here earlier. He led the charge on our export terminal. It took us over 2 years to develop that project, and a lot of it was some noise coming from the ethylene producers at the time, saying, "We're going to export all of our product as pellets. And ethylene exports aren't needed." Now, whenever we meet with those guys, exactly, they're asking, "How much faster can you do this? We need it now." The same thing's true with our storage. We're using the same NGL model on our ethylene storage as we're using on our propylene system as well. We want a system that's well connected, that has a lot of liquidity and transparency. We're building that. It'll be online later this year in a couple of phases, similar to our export terminal.
Our export terminal, the first phase, we'll just be loading directly off our refrigeration system until we get a tank, and then once our tank is in, we'll be able to load it at really high rates. That's when we'll get the full utilization of that facility.
I keep going back to the growth, the growth in ethylene is literally all in Enterprise's backyard. Literally, all in our backyard. Shell's building a cracker up in Appalachia, a cracker up there, and derivative plants to go with it. You look at what has happened over the last three or four years, and you look at the next wave that's coming, literally, it's in our backyard. Mont Belvieu is the largest NGL hub in the world. I would argue relative to propylene, you have the largest hub in the world. I think that the opportunity's even bigger for ethylene, just because if you just look at the concentration.
Certainly on a growth perspective, it is. One more thing on the ethylene. When you put up your graph, Tony, talking about how we're not reactive, how we use fundamentals to develop projects, I can think of, in the petchem business especially, nothing that's more true than on the ethylene system.
From a supply standpoint for Natalie's team, I'm telling you, every ethylene plant that was built and every one that was considered, they wore the front door out on Enterprise Plaza. We had to defend our views on supply. You had to defend your views on ethylene. You certainly had to defend them on export. That's the way it goes. People should have doubts when markets are moving this quick.
Yeah. Finally, we'll end on this slide. We've talked a lot about propylene, and we should, because it's a big part of today's petchem business. Today, we're the world's largest merchant seller of propylene. We have the largest storage facility. We're the hub for the U.S. We are the CME financial contract settlement location for propylene. We used to have a closed system. We opened that system up. Now we have more liquidity. We have more price transparency. It's opened up a lot more opportunities for us. On the export side, we talked a little bit about what we're doing. We're continuing to look to see what we can do to grow that system, to grow our capacity to export more. We're not done on the pipeline side either. We're continuing to incrementally grow there.
Is it Q&A?
Yes, it is. We're actually running a few minutes behind. We'll go ahead and continue with our full Q&A and give you guys plenty of chances to ask questions. Do we have any? Jeremy?
Jeremy Tonet, J.P. Morgan. Seems like a pretty consistent theme through the presentation today. You guys have talked about the barriers to entry that Enterprise enjoys across multiple business lines and how that continues to spawn new growth opportunities for you guys. I was just curious if you could comment a little bit more on how you guys look at growing and expanding those barriers to entry so that you continue to maintain this leadership position.
I'm going to go back to Brent's words. Actually, you have a microphone, Brent? Talking of barriers to entry and how we plan on continuing our leadership position. Tell us what you told us before. You going to give up market share?
No, Tonet. I think once you have achieved barrier to entry, then you go establish yourself further downstream and for the right project, further upstream. In my opinion, as long as you got a piece in the chain that is high barrier to entry, then it just makes it incredibly difficult for somebody else to enter that space. You guys heard us talk about this. Crude gathering lines, there's thousands of them out in the Permian Basin. You don't typically see us go out there and do that unless a big producer says, "I want you to control my barrels the entire way." Okay. Then we'll talk about doing that deal. When it comes to just putting in a gathering line, land's not hard to get. Getting contracts, it's typically not the contracts that we like.
Credit risk isn't something that Chris McNally and his team approve of. Ultimately, it's just very difficult for us to do. To answer your question, I think once you've achieved barrier to entry on certain facets of your business, then you have it, and then you just go further downstream or upstream.
Jeffrey, back there.
Thanks. Chris Dichtl here with Jefferies. Just two questions if I could. Tony, if I look at your fundamental conclusions, particularly on the demand side, everything seems ultimately destined for Asia. It does seem a bit like an Asian GDP-levered story over time. That's also been the area where trade disputes have been discussed in the last year or two. I'm just curious, as you guys have traveled to that part of the world and talked to people about the supply we can offer, how do those two things sort of marry? Both, I guess, concerns, if they have any, around what trade tension might do to your ability to supply them. Second to that, any hiccup on their economic plan, and what that might lead to over time if there's a recession in Asia, for example. How do you risk your estimates for that? Thanks.
I'm going to take a stab at it, but I think Brent needs the microphone back again. The whole world is counting on Asia to grow in every way. Richard used the term that large sucking sound in the East. That is what it is. When you look at the data, you just look at the hard data compared to what their energy intensity is and what their population is, you realize that we are well into the information age, they're not going to be denied. Will there be bobbles in the economies around the world? You can read anything about when it's going to happen, how big it's going to be, how long it's going to last. They're normal. When you go over there, Brent, how do they feel about U.S. supply?
There was a while in there where there was doubts, you had to try to convince them that, we have Tony's slide, that's what we use, that this graph was real. What we always said is, "Hey, why don't you all come to Houston? We'll jump on a plane, fly out to Midland," you really have to see it to believe it. You really got to see all the activity to really believe this growth story. Once they saw it with their own eyes, they said, "Man, you guys aren't kidding." I'll tell you this, the first time Jim and myself and Bob Sanders went to China, you go out to these coastal cities and the reclaimed land for as far as you can see. I mean, as far as you can see.
10 years ago, you were standing in the middle of the ocean, and you see the infrastructure they're putting in, they'll bring you into a room that's probably three times the size of this, and it has these real-life models of what they're building. You could see them building it. You can see the cranes, you can see everything building. To believe Tony's chart of a red line that goes from lower left to upper right at a very high pace. It's the same thing on the demand side. You got to see it to believe it. You really got to see what these folks have going on to believe it. In terms of Trump and tariffs, those are the two words that when we go over there and visit, they always want to bring up Trump tariffs.
I'll say this, they have what we need. They have demand, and we have what they need. We got supply. I think we're fairly optimistic that all this gets resolved and we're off selling them a bunch of the stuff that we're producing. I mean, it could still happen, whether you have tariffs or not, that things get more inefficient. This stuff's still going to flow. It's just got to price harder to flow. It's still going to move, it's just the clearing price changes.
I hope we answered your question.
Yeah.
Hey, guys. Michael Lapides of Goldman. It's really for crude gas and NGLs, but primarily crude and NGLs. How are you all thinking about whether there are last mile constraints? This is something Randy Fowler and I were chatting about, just in terms of between Houston and Corpus or some of the other spots on the Gulf being able to move. I think constraints in terms of long-haul pipe to the Gulf cities obviously being dealt with, but how are you thinking about last mile to get it onto a boat?
That's always our story is that we say that we control the molecule the entire way and we're not dependent upon somebody else. When I see Tony's chart or a bunch of y'all have your own charts about midstream or Permian crude capacity, and everybody says, "Okay, well, the diameter of the pipe is 20 inches, square that and times it by 1.15. That's how much crude oil that pipeline can move." I don't think the answer is that simple. To me, you got to start back with, okay, this pipeline, do they have access to supply? Right? Do they have access to supply? There's pipelines out there that I can really question whether they have supply. You say, "Okay, could they physically move it?" That's typically yes.
You get to the point of the last mile is, do they have a dock that is going to move those barrels? Do they have storage necessary to play catch up when things don't always work out the way that they want to work out? I think there's misalignment unless you're operating the whole thing. Because if you're dependent upon a third-party dock that happens to have their own pipeline, I just think they're going to find ways to benefit their full long-haul movements. I think when you look at frac capacity, is frac capacity going to get overbilled? I don't think it's as simple to sit there and figure out how much frac capacity there is in the U.S. Because you got to figure out, okay, do they have access to Y-grade? There's fracs out there.
I don't know if they have access to Y-grade. Once they frac it, do they have the ability to clear the barrel from purity movements? Do they have storage to have the warehouse to sit there in case something happens? I mean, that's our whole story is that when you deal with Enterprise, it's a one-stop shop. The last mile, we are aligned with our customers to clear their barrels. I think there's misalignment, and I think it's somewhat naive to think everybody's going to play nice, that you have a frac, and I got Y-grade, and I'll bring it to you. I don't think that's the way the business works.
Okay. Do we have time for one more, or do you want to get started with our next panel, Randy?
Our next panel is engineering and environmental health and safety. Our commercial team will come up and either hear from customers of what their needs are or looking out at the marketplace and see what value creation opportunities are. If you would, sometimes the commercial guys are sort of like the dreamers. Well, Graham’s team, with Angie and Kevin, and then also with Natalie Gayden, they’re the miracle workers to make sure that we can take advantage and sort of can come in and get opportunity capture with that. With that, we’ll turn it over to Graham.
All right. Thank you, Randy. Before we get started, I want to introduce the team. On my far left is Angie Murray. Angie is our Vice President of Technical Services. Our technical services group, I think, is one of the best in the midstream industry. They’re really the bridge between our capital projects group, standards specifications, and our operating group, to make sure that we execute both on building and operating facilities. In the middle is Ivan Zirbes, who’s over our environmental safety and transportation compliance groups, as well as training. One of the things that Ivan’s group does well, we’ll talk a little bit about this in the presentation, is a lot of companies, those functions are only for compliance purposes, whereas Ivan’s group is really integral and strategic as far as our ability to execute projects.
Then to my immediate left is Kevin Ramsey, who is over our capital projects groups. Kevin’s group is really the key in executing getting our projects from the commercial stage to up and operating as quickly as possible. Today, you’ll hear us talk a little bit about how we execute pipeline projects. Tug mentioned earlier about the time to market on the Shin Oak and how quickly it’s up and running, and we’ll give you a little bit of perspective on that. First, we want you to hear a little bit about our safety program. Ivan, tell us a little bit about our safety performance.
Sure. The slide you can see right now is our safety performance, injury performance over the last 10 years. Really this number, total recordable incidence rate, what it represents roughly is the number of injuries that we’ve had per 100 personnel that required some level of medical treatment. As you can see, we’ve had a nice decline over the years, which is the direction we want to see it go. In 2016 and 2017, we did win the first place for the GPA Safety Excellence. 2018 results are not out yet, we’ll have to see where we place. However, you can also see that 2018 had a little bit of an upswing, which is not something that we desire to see. We’re going to continue to work that number down and be vigilant on it.
Thank you. On March seventeenth on the Houston Ship Channel, there was a major fire that has had implications for the industry. Still going on today. Enterprise operates over 500 tanks, so one of the natural questions is what's Enterprise doing in terms of being prepared to prevent those type of incidents from occurring and responding if one should? Ivan, why don't you give us Enterprise's perspective on emergency preparedness.
Really when you think about emergency preparedness, the key theme that you need to focus on is being able to address an emergency event very quickly and very effectively. Because the way to keep a big event from happening is to not let it become a big event. You get on the small events fast so they don't grow. First and foremost, we do that through planning. Every asset that we have has comprehensive emergency response plans, including response scenarios. We drill those scenarios as a company. If you look at how big our asset base is, we're talking about literally doing hundreds of drills every year. Now, those drills could be as small as simple tabletop drills that take a couple hours, but we regularly do full mobilization drills including outside emergency responders.
We also prepare for it organizationally, by which I mean we perform incident command training with all of our personnel. When responding using those response plans that we have and doing those drills, we're doing it in a unified incident command fashion, again, so we can maximize that effectiveness. Of course, just the way that we build it in the first place helps us respond to incidents, which is something that Angie's shop handles.
Yeah. When we're building new assets in designing in the building stage, we follow all of the industry codes, we also have a comprehensive set of engineering standards that we follow that really dictate how we design and build the assets. On the safety side, our engineering standards provide exactly what we need for those type of facilities in terms of the safety systems, the fire water systems, and the foam systems. Those really are there to make sure, just like what Ivan was saying, that if there is an incident, that we are able to handle it quickly and effectively so that we can address that incident and it doesn't grow into something larger.
Our standards also address the spacing of our assets to make sure that our assets are spaced appropriately, that the area doesn't get too congested to allow for proper operations and maintenance of the assets. They also address containment. If there's a small spill, that is contained in the area and doesn't run off into something that could damage the area.
Angie, tell us a little bit, those are for assets that we build, what about assets we've acquired?
Yeah. When we acquire a new asset, one of the first steps we'll do is to perform an assessment of that asset, that'll include an assessment of the safety facilities. Just to give you an example, the picture you see here is our assets along the Houston Ship Channel. When we acquired those assets, we performed the assessment and ended up investing over $13 million to upgrade the safety facilities, including the fire water and foam systems at this location.
Yeah, any time there's an incident, we take the opportunity to review it, to review the responses and learn from it. It's just part of getting better. We learn from our own incidents as well as learning from others' incidents. Now I want to shift gears a little bit and talk a little bit about pipeline project execution. As we referred earlier, Enterprise's ability to get pipelines built into the market as quickly as possible is what we believe a differentiator. It all starts at the beginning. Kevin, why don't you walk us through how we go about setting up a route and setting up a pipeline project?
Absolutely. Getting the route developed is step 1. What we're obviously looking for is the shortest route, between the origin and destination points. What's important to us is that route follows either an existing pipeline or an existing utility corridor. Because if I can snug the new pipeline up against an existing pipeline or put it inside the easement of an existing, say, power line corridor, that represents the absolute minimum impact to the landowner. Happy landowners make right-of-way acquisition a whole lot easier. Of course, the other thing this does is it also represents the least amount of impact to the environment.
Yeah. On the environmental side, we follow the same philosophy. Folks in my environmental group are also engaged in that route planning, and we're looking for areas of ecological sensitivity. Immediately you might think about, we're talking about endangered species or protected species, and we are, but it also includes the habitat of those species. It also may include important prehistoric or historic resources, like important archaeological sites. In this slide, you'll see where we did do a really significant reroute on our Midland-to-ECHO pipeline. You see the original route in red. That original route passes through a portion of Central Texas, where there's amphibian species, the Houston toad. That toad is endangered. It only exists in a few counties in Central Texas. We wanted to make sure that we were going to minimize the impact around that. We routed around that.
This is important enough to us that we actually have a small dedicated group in Houston, in the environmental group that's just entrenched in this effort, making sure that we're routing these as efficiently or as low impact as possible.
While they're developing the route, Angie, your team is starting to optimize the design, setting up how the pump station's going to look. Tell us how you go about doing that.
Yeah, that's right. Early on in the design phase, first we focus on optimization of the design. One of the most important things we look at on optimization is optimizing the diameter of the pipe against the number of stations along the pipeline. Really what we're looking for there is the sweet spot between the initial capital costs and the long-term operating costs of that pipeline. We also look at optimizing the spacing between stations, and this is important because we want to make sure that we don't inadvertently limit the overall hydraulic throughput for the pipeline by improperly spacing our stations such that one section becomes a bottleneck for the entire pipeline. Another thing we'll look at early on in the design is expandability.
We want to make sure that our initial design is such that in the future, if there's a need to expand the throughput of that pipeline, we can do that in a cost-effective way.
There's been a lot of talk in the press recently about the eminent domain issues, landowner rights. There's bills going through the Texas Senate, and obviously Texas is an area where we build a lot. Right-of-way acquisition is very important to how we execute a pipeline project. Kevin, can you give us Enterprise's perspective on how we go about acquiring that right-of-way?
You bet. One of the very first things we do is we'll reach out to state and local representatives and let them know about the project. We'll go meet with county commissioners in every county that the pipeline crosses. Because what we don't want to happen is for a landowner to call their representative, and that's the very first they've ever heard of the project. One of the next things we do is we'll send out an introductory letter to the landowners letting them know about the project and letting them know that we'll be soliciting survey permission from them shortly. Once we have survey permission and we're out on the piece of property, I have a survey crew out there. I have what I call a constructability guy. It's an individual that's well-versed in pipeline construction.
He not only works with the survey crew to do detailed routing across the property, but works with the landowner, because often the landowners have preferences. If they want it on this side of the barn or that side of the property, or maybe they specifically want some trees saved that they really care about. Our philosophy has been that no reasonable request should be denied. I think that philosophy alone has gone a long way in helping us be extremely successful with our right of way acquisition, in that we typically have to condemn less than 1% of the folks that we cross. While we're out on the property, we also have an environmental contractor doing survey work, and the information that he acquires helps Ivan's folks prepare some of the permits that we're going to need.
Yeah, right. To get permits to do these pipelines, we need to do comprehensive ecological surveys, again, including historic resources. You can see a picture here of the aforementioned Houston toad.
Ivan, what makes that a Houston toad versus the toad that's in your backyard?
Well, it looks like that, Grandpa. Typically, in this region, we do have a toad called a Gulf Coast toad that looks very similar. The spots are bigger on that toad than on this one, and also it's hard to make out in the picture, but it's got this V-shaped bone ridge on its head. People are out looking for that toad, but actually out there looking for the habitat of the toad, so we can protect that habitat. We're continuing when we do this, and we do these surveys for our permitting agencies, and really the primary agency we're talking about is the Army Corps of Engineers. We're now refining that avoidance strategy that we talked about before.
This is really where the rubber hits the road from a business perspective is now I can go into that agency with my permit application. I can already show them the diligence that we've done, the money that we've spent minimizing the impact of this pipeline project. From step one, make that permitting process go much more smoothly and much more quickly than it would otherwise go.
Yeah, it's a major effort that's not often realized what we put into permitting and the amount of resources to address these type of species issues. Angie, there's also a number of other things that are going on while Ivan's group is permitting. You're working some design issues and really preparing a lot of details on the pipeline. Tell us about some of those details that maybe the average person's not familiar with.
Sure. During the detailed design of a pipeline, there's a lot of things that go into it, and some of the most critical ones I'll talk about, first and foremost, is the design of our safety systems for our pipeline. What we do there is we do a lot of studies, a lot of runs to make sure that every scenario that the pipeline might see, every transient condition that it could see, that our safety system's designed to handle those scenarios. Another area of safety is our leak detection systems. The screen that you see here is an example of the output that our controllers get on our leak detection systems.
These are comprehensive models that are built with thousands of data points from operations that get pulled into the system every second and provide the operators early and accurate indication of any potential issue. We also look at the design of our pump stations, and we make sure that our pump stations are designed so that they can handle all of the flow rates across our pipelines, and then also all of the various products that our pipelines might flow, so that the pumps will handle all the cases we intend. Another critical area, and you can see a picture of it here on the left side of your screen, is measurement. These are the measurements that we have that tell us the flow going in and out of the pipeline. It really just is our cash register for our pipeline.
We want to make sure that the measurement system is designed as accurately and reliably as possible. Also at the bottom of your screen, you see a pig launcher and receiver, and these are critical for us for making sure that we assess our pipelines and that we continue to have them maintained properly in the future.
Thanks, Angie. At some point, you have to go out and buy pipe. Obviously, in the last year, the administration's, the tariffs on steel, Section 232 tariffs have had an impact on the purchase of steel and pipe. Kevin, why don't you tell us a little about what the markets for pipe and materials are looking like right now?
Okay. Well, first of all, Enterprise has bought pipe almost exclusively from domestic mills for quite a number of years, and we do an awful lot of pipeline projects. As a result, our supply chain management group has developed excellent relationships with all the domestic mills, and we keep a close eye on these metrics. If you look at the price of steel on the top chart, you'll notice it's been declining since last summer, but the cost of pipe has gone up dramatically, both due to tariffs and supply and demand. The other metric we keep a close eye on is, of course, labor rates. On the bottom chart, you'll notice that they've been steadily increasing. Both metrics we keep an eye on to help us accurately forecast our projects.
All right. We've been doing a lot of design and behind-the-scenes work. Now it's time to actually go in the field and build it. Tell us what's going on there.
Well, all this work that we did up to now, we've put a very comprehensive, detailed design package together that's got all the technical details in it that you would expect. It also has all the details from right of way acquisition, the trees that we're supposed to miss, extra depth of cover, fences, that sort of thing. All that is baked into this package, as well as any environmental restrictions or concerns that we have to adhere to during construction.
Yeah, we're going to maintain that same level of discipline that we did in the planning right through the construction phase and make sure that we're not impacting areas that we shouldn't. That includes environmental monitors that we actually put out there on the pipeline project, just making sure that we don't stray off where we shouldn't go, making sure that we maintain a right of way like this.
We'll competitively bid these projects out. We'll hand-select the contractors that we allow to bid, making sure that they're qualified for the individual applications. We'll go through their execution plan, we'll vet their subcontractors, and we'll check their safety records, right?
Yep. Just like the major project contractors that Kevin uses, just like every other contractor that works for Enterprise, we track and monitor their safety, and they're all graded on their safety on a regular and ongoing basis, and we definitely use that when we make decisions about who to use in the field.
Once we have our contractor selected and we're out in the field and we're actually building the line, our project management and inspection team keeps a close eye on the contractor, not just for monitoring progress, but we're making sure the line is being installed safely, per code, and per Enterprise standards. We'll X-ray 100% of the welds on the pipeline, and we maintain a live database for the entire project that ties all the information together. When the PHMSA auditor comes out during construction, and they do on most all of our big projects, they can point to any individual joint of pipe or weld, and we can immediately pull up metallurgy from before the pipe was even made. All the mill inspection reports, the welding reports, the welder qualifications, the coding reports, X-rays, everything is available immediately, right then, right there.
It's been a great tool for us.
Angie, what else are we building while we're building out in the field?
While Kevin's building the pipeline itself, our team is building the controls for the pipeline. You can see a picture of this on the screen. On the top left, this is an example of the control screen that our operators have to control the pipeline. We do the programming for this. We also build out the design for it. They all look very similar in the style and the layout, the symbology, the colors. They're consistent across all of our pipelines. You can see here in the bottom picture of our control center where our operators are operating the pipeline. What this does is it provides them a consistent way to effectively and safely operate our pipeline.
When we do it right, we've met our commercial expectations, our customer expectations. The pipeline is flowing, the right of way is restored to its original condition on down to the details of the native grasses that are used. Thank you. Okay, we're in the home stretch. Let me introduce this panel. Daniel Boss is our Senior VP of Accounting and Risk Control, and then Chris Nelly's our Senior VP of Finance and Treasurer. Enterprise has had a history and a proven track record of delivering returns on capital throughout the business cycles. What this slide shows here, the blue bars, if you would, are unlevered returns on invested capital. Going back to 2005, we just announced our 59th consecutive distribution increase earlier this week. If you would, this takes us back, and this graph encompasses that entire period.
You see on the unlevered return on invested capital, we've, if you would, sort of averaged right around 12%. We've gotten about as low as 10.5% and as high as a little over 13%, depending on where we are in the cycle. Here we came in and added another, a gray bar, which is showing returns on equity. If you would, this is sort of the textbook definition that we got back in the back in the appendix. That it's just really net income divided by shareholders' equity or partners' equity. You see how that's ranged over time, but certainly since 2011, sort of ranged between 12%-18%. If we come back in and look at this more as a, if you would, an unlevered cash return on equity.
If you would add back DD&A, that range has been between 20%-28% return on equity. Again, showing the consistency throughout the business cycles, whether we come in and measure it in cash flow metrics, whether it's the MLP metric of distributable cash flow per unit or the GAAP measure cash flow from operations, you see that we've been able to come in and consistently perform throughout the business cycle. And like we talked about earlier, with some of the investments that we made during the last cycle that really set us up for the success in 2018. And with that, I'd like to turn it over to Daniel to come in and walk us through some of the attributes of our fee-based versus non-fee-based businesses.
Thank you, Randy. 2018 was a record year for Enterprise. We saw gross operating margin come in at about $7.3 billion for the year. This was a 28% increase over 2017 and a 35% increase since 2015, which is really the beginning of the commodity cycle. In order to provide some additional perspective into our performance, we've attributed our gross operating margin across this four-year period to three different categories that are really the underlying drivers for our results. Those are fees, commodity prices, and differentials. You can see from the slide, the vast majority of our earnings are fee-based. These fees are derived from business and transportation, fractionation, storage, and a variety of terminalling and product upgrade services. During 2018, we had about $6.3 billion of earnings from fee-based activities. On the surface, many of our businesses and assets appear to be differential based.
You heard Chris D'Anna do a nice job of describing the propylene splitters in the PDH facility. As you look at that facility, it turns out that the way that that business is conducted, the actual feedstocks are purchased on an index. In many cases, and actually the majority of the time, the production volumes are sold on that same index. There's also a variable adder to cover the variable cost of the plant, a fixed adder to cover the fixed operating cost of the plant and to provide a return. That return then flows through as fee-based earnings. Similarly, on our exports, you've heard a lot about exports today. We have customers that will contract directly with the terminal facilities to bring their own volume, and they'll pay a fee for that.
Our marketing group also provides an added service to actually supply the volumes to certain customers. In that case, the sales price associated with that would be a commodity price plus some type of terminal premium. To the extent those are term agreements, we would consider that terminalling premium more of a fee-based revenue, and to the extent it's more of a spot agreement, we would call that differential based. As you can see in the big step up from 2017 to 2018, our marketing and commercial groups were very creative in adding incremental volume, incremental dollars, and they found commodity-based and differential-based opportunities to the tune of $450+ million. However, the majority of the growth, $1.2 billion of it, is attributable to fee-based activities. It maintains its 86% share of the overall portfolio structure.
When we look at gross operating margin attribution by segment, you can see that even at the individual segment level, the fee-based is the largest component. Not surprisingly, the NGL segment and the pet chem segment have the largest differential-based earnings. In our NGL segment, that's primarily related to our processing activities. We also have several transportation positions, so think of the North-South strategy that involves moving propane and other products from Conway to Mont Belvieu. It also involves transporting volumes either by pipeline or rail from evacuating Marcellus. In our crude segments, predominantly fee-based, we do have an exception with respect to product upgrade and product blending activities, where some of that is more commodity-based. We did have transportation differential earnings in 2018. Those were offset largely by unrealized mark-to-market losses.
If you subtract the unrealized mark-to-market losses from that segment, you'd end up at about a 3% share of earnings for differential-based business. In natural gas, this one's a little bit different. You have 12% of this earnings profile that's based on commodity-based pricing. This really is related to our San Juan natural gas gathering system in northern New Mexico, where about 90% of our revenue stream is tied to a percentage of the natural gas index in that region. That translates to about 35,000 MMBtu per day of fixed price link in our risk position. Finally, the petrochemical and refined product segment. We have the differential-based business there. Again, that's the propylene business that Chris described, the portion of that business that's not RGP+ or PGP-.
It also includes the normal to MTBE spreads that we earn using our octane enhancement facility, and it also has some gasoline blending margins across our various refined products terminals. There is a small portion of commodity-based earnings in that segment that's really attributable to sales of byproducts around our isomerization and dehydrogenation activities. Finally, as a bridge from our 2017 earnings to 2018, you can really see that the first step of that bridge was around new and expanded asset contributions, and those were mainly the Midland to ECHO pipeline, the PDH plant, and also the Permian gas gathering and processing assets that Brad's team described. The second step of that is our existing assets with operating leverage. Think of that as spare capacity that was in demand during 2018, mainly as producers were fighting for takeaway capacity.
There was also a large demand for fractionation, for storage, and access to the water. Our legacy gas plants, this does not include the new Permian assets. Those businesses benefited from wide gas-to-liquid spreads, and those mainly affected our CPOL contracts, then higher outright NGL prices also benefited our percentage of liquids and percentage of proceeds contracts there as well. Adding all other changes to that, you arrive at a gross operating margin for the year of about $7.3 billion. Pretty impressive results. That enables us to achieve 23 operational and financial records. Some of those records include fractionation volumes, marine terminal volumes in every commodity. Every business segment had record gross operating margin, record in gross operating margin in total, record EBITDA, and also net income attributable to limited partners.
With that, I'll turn it over to Chris to talk about our capital structure and more.
Thanks, Daniel. I think one of the consistent themes you've heard throughout the day today is that we're long-term thinkers, that long-term thinking absolutely applies to how we think about capitalizing the business. What this slide demonstrates is that financial discipline that we have around the investment dollars that we have back into the business. You can see from an organic perspective, we've consistently spent about $3 billion-$4 billion on new organic projects. In the gold bars, you see what we've been spending with respect to acquisitions. To reiterate that long-term thinking, this goes back to Tony's fundamental outlook and their commitment to the rock.
That long-term commitment to that supply is what gives us the confidence that through one of the worst commodity cycles that we've seen in history, through 2015 through 2017, that we were able to continue to spend this level of CapEx. What's apparent here is that you'll see in 2016 is that leverage ticked up to 4.4, which is outside of our normal range. Our normal range historically was three and a half to four times leverage. What we did in that timeline is we were investing in those high barrier to entry projects. Whether it was a PDH or the first Midland-to-ECHO pipe, some of the processing plants out in West Texas that Brad's group were working on.
As Daniel pointed out on the previous slide, you saw that cash flow starting to come in in 2017, then the bulk of that came in last year, 2018. Without reducing the numerator, our aggregate amount of debt outstanding, just from the increase of cash flows, you've seen leverage decrease basically a full turn since year-end 2016. We'll point out that also for 2019, in fourth quarter earnings, we gave guidance that we expect to spend $2.9 billion in net growth CapEx, and really that net is netting off about $640 million of JV contributions that we expect around the Cheniere and the ethylene export dock. Just more spending and reinvesting in the business. We think that's a good, prudent long-term strategy. Dive a little bit deeper into the debt side of the portfolio.
Over the last decade, we've talked a lot about, long-term is that underlying theme. We're building long-term assets, we want to fund those long-term assets with long-term capital. On the debt side of the portfolio, you can see roughly 50% has been reinvested in 30-year notes, and as part of that was one 40-year note, and then another roughly 30% in 10-year senior notes. 80% of our debt portfolio has been in 10 years and plus. Looking to the right side of the page, what that's enabled us to do is increase the duration of our debt portfolio from roughly 15 years to 19 years, all while reducing and taking advantage of this low interest rate environment that we've been enjoying since the financial crisis. We've reduced our overall cost of our debt portfolio from 5.8 times to 4.7 times.
I'd also like to point out that that number could be lower because we're 99% fixed. To the extent there are other midstream companies out there that have a higher floating rate as part of their debt mix, we like to take that refinancing risk off the table, I think we've absolutely executed on that, and it's demonstrated on the slide here. On this next slide, sticking with the long-term theme. In October 2017, we announced the moderation of the distribution growth so that we could self-fund the equity portion of our growth CapEx. We thought that would take us two years to accomplish that feat. We did it a year in advance, maybe we're sandbagging a little bit there. I think that just speaks to the conservative mindset that we approach the business with.
The distribution guidance that we gave for this year will result in a year-over-year increase of about 2.3%. We do plan to self-fund all of the equity. What we also did with the fourth quarter earnings is we announced a $2 billion unit repurchase program. Randy mentioned this earlier, that we have a lot of conflicting views from various investing groups of whether or not they like us to use that or not. I will remind people that it took us 20 years to exhaust the prior program, so don't expect huge numbers from us here. Again, I think what's important to keep in mind is that we like to keep the financial flexibility. Going back to the October 2017 timeline, where we announced the moderation of the distribution growth. One month later, we filed a shelf to recharge our ATM.
We got a lot of questions from investors saying, "Well, that's a little bit of a mixed message. You're talking about self-funding, but yet you're recharging your ATM." Well, that's one, we want to be prepared so that if an M&A or acquisition opportunity came up, that we could execute on that and then immediately look to de-lever if it was a cash acquisition scenario. Think of the buyback in the same vein. It is another tool that we can utilize to better balance out our financing plans. The Duncan family as our general partner has been extremely supportive. They've invested over $1 billion since 2010 in the business. Just to remind everybody how they're different and how we're structured different, their only economic interest is the same as every other LP holder. That's their only interest that they have.
We got rid of those IDRs quite a long time ago, we don't have the same issues that others had as far as trying to clean up their structure. As I previously mentioned, the debt is all on balance sheet, what you see is what you get. I like this one here where the normalized leverage of 3.5 area. Randy mentioned this during the fourth quarter earnings call where we reported 3.5 gross leverage, yet we backed out some $300 million-$400 million for some of the outside spread opportunities that we recognized in 2018 that Daniel walked through. I would find it hard to find any other company that actually when they adjust leverage, they adjust it higher.
What we did is said, okay, if you backed out that $300 million-$400 million of spread opportunity, that may have taken our leverage to 3.7. When we think about our leverage, again, we're just trying to be very conservative with how we capitalize the business. We're not going to be counting on those outside spread opportunities for the long term. All right. Randy, turn it back to you.
All right. Thank you, Chris. I'd like to come in and hit a few slides on environmental, social, and governance. Ivan spoke earlier this morning about our Friday meetings, where we have senior management meet, and basically we review incidents from the previous week, as well as coming in and planning and setting some objectives for the future. Again, we try to stay on top of all of our activities and any developments out in that space. We also have as part of our governance committee. Our governance committee comes in and, again, reviews our results from an environmental and health standpoint, as well as helping us set policies in those areas. Our safety program is called Goal Zero because that is our goal, and we work very hard at achieving that.
One of the other things that we talked about and we've actually developed back in the appendix, sometimes we get asked about our maintenance CapEx, and as far as investing in the maintenance of our assets. If you would, maintenance CapEx is only one component of that. I want to say typically maintenance CapEx runs around $300 million a year. When you come in and you look at the asset integrity that's actually in our expense, part of our income statement, it works out to be about $1 billion a year that we're coming back in and spend as far as to maintain our assets. Come back in also invested class training. We had over 280,000 hours in safety, technical, and compliance training in 2018. We also have a Right of Way College.
If you would, with that Right of Way College, whether it's our internal landowner relations or the contractors that we use, there we stress coming in and dealing with landowners in a respectful and responsible manner. Coming in and taking a look at some of our other principles. We're continuously monitoring our environmental data. That allows us to come in and track operational and emissions data and help us identify areas of opportunities where we can improve on that. We come in and again, as Kevin and Graham talked about, we actively engage with our stakeholders in the community, whether that's individuals or at the government level when we come in and when we have our activities in those areas.
One other area as far as community support, since 2015, we've invested over $50 million to help support either economic development in the areas where we operate and where we have assets, or supporting first responders, and also educational development in the school systems as well as public safety awareness. What I'd like to do now is really just come in and look at some of the direct emissions, and if you would, some economic intensity. If we come back in and we look at what we call CO2 equivalent emissions. If you would, this is greenhouse gases, both CO2 and with methane, the equivalent.
The chart on the right comes back in, and as we think about our gross operating margin compared to direct emissions, we've seen a 40% improvement in dollars earned compared to our metric tons of emissions. Then when you look at the bottom where we've increased our petrochemical facility volumes, our plant volumes by 47%, our frac volumes by 44%, liquid pipeline volumes 36%, fee-based processing volumes 21% since 2011, our emissions have only gone up 4.6%. We come in and again, look at efficiency, when we just think about total barrels handled, barrels of oil equivalent handled, again, this emissions on a per unit basis, we've seen a 12% decrease over that time period as far as intensity on total hydrocarbons handled. When we look in our natural gas processing business, we see a 19% improvement in emissions. NGL fractionation, 27%.
In our propylene business, another 7% improvement as we come in and continuously look at ways we can come in and look for improvements in emissions in the system. Finishing up, Randa started it out, the presentation in a little bit hitting on our culture about doing the best you can every day. Being collaborative, having teamwork, the humility that we practice, the creativity, the execution. If we did not have that, and I think sometimes culture can sort of get sometimes overlooked, but if we did not have that culture, we could not have had this 20 years of performance and built the system that we've built. I think this track record, again, there are a number of business cycles and a financial crisis that's embedded throughout this time period.
Just remarkable that we've been able to pay out $31 billion to LP investors over that time period, and then reinvested almost $11 billion back into the growth of the company. Again, while it's been tough sledding over the last few years, we come in and back up as shown here on the page, there's not that many investors who you can invest a dollar in 1998 and it'd be worth almost $18.50 today. With that, I'd like to close on why Enterprise. I think we've tried to show you today our view of what strong industry macro fundamentals look like, and then also closer to home, the opportunities that we see in our backyard. We see good visibility to continued cash flow growth. We have $5.1 billion worth of assets that are under construction or went into service since the beginning of this year.
We've talked about another $5 billion-$10 billion worth of assets that are under development that we're trying to commercialize. We've positioned ourself well to be able to come in and finance the business, if you would. When we see new opportunities that we can come in and finance that. We've provided with what we see and the opportunities that we see, we think we can continue to come in and, if you would, self-fund the equity portion of our growth CapEx, we think that's just going to lend itself to cash flow per unit growth. We're levering the business right, again, to provide the flexibility to be able to react and execute on good growth opportunities. We know eventually the market will come in and recognize that more and more. We could not have done this without your support over the years.
Whether you're on the debt side or the equities side, we're very appreciative of the support, and we will need it in the future also. With that, I'd like to open it up for last Q&A in here. We will adjourn for lunch, and at the lunch we'll come in and do our usual where we'll split up and actually the panel participants will be available at their tables to come in and continue the discussion in the Q&A there. Be glad to open it up for Q&A now. Sure.
Hi, Randy. Shneur Gershuni with UBS. You mentioned earlier that you're not pursuing a C corp conversion, and you're looking to preserve the option, which does make sense. There are other avenues out there to close perceived valuation gaps with buybacks being one of them. In your comments just before, you sort of said it took us 20 years to do it last time. It would take 20 years to do it again. Just wondering how you plan to be opportunistic with it just to close valuation gaps.
Okay. I think the first, as far as the whole MLP versus C corp, that's something that we continue to monitor developments on that front. Again, when we look at that there are, if you would, maybe three primary focus areas that we look at. Whether it's actual cash income taxes, relative valuation of MLP versus C corps, and if you would, then the last bucket is actually the depth of the equity capital markets and the access for capital. With that, especially on the valuation side, that's evolving. We're looking as we're beginning to see More dollars come back into the space, where are they going? Are we seeing more from the C corp standpoint or a relative outperformance there? We continue to come in and monitor that. We've not seen anything yet that is compelling enough to come in and make a change.
We're not going to let what did a couple of C corps do in the first quarter compared to what we do influence a decision that's a permanent decision. I think we'll be deliberate on this front. As I mentioned earlier, continuing to operate as an MLP is not costing us anything from a flexibility standpoint. We think we can still come in and execute on all the opportunities in front of us as an MLP. On the buybacks, we'll come in and take a look at that. I think you've heard with all the organic growth opportunities that we have, our first choice in deploying capital is deploying capital on projects with good returns on invested capital. We see that from an organic standpoint.
Especially when the equity markets are as shallow as they are, the buybacks, boy, that is precious capital that you're consuming in coming in and doing a buyback. I think our focus on the buyback is more opportunistic. I think we've said that before. Certainly, if we come in and see dislocations, we saw dislocations there at the end of last year, and we're able to exercise on that. On the buyback, you just really need to be very deliberate on that.
Again, someone asked me during breakout, a buyback or a C corp is much more efficient because whether it comes in the form of dividends or if it comes back, if the buyback winds up with a higher stock price and a shareholder wants to take advantage of that higher stock price to go ahead and monetize the long-term capital gain and the dividend rate, same thing. With the buybacks are not as tax efficient for partnerships just with the deferred income nature of the partnership, that if a partner wants to take advantage of price appreciation that a buyback might drive, or you've got deferred income recapture going back for as long as you own it. The buyback isn't necessarily as tax efficient as just distribution growth is. We're mindful of that too.
That makes sense. Just one more follow-up question. There's a range in your CapEx for this year. You also talked about $5 billion-$10 billion worth of projects that are being evaluated. Assuming any of them FID this year, would you have to adjust the range, or does the flexibility in the range sort of cover any potential FIDs for those projects for this year?
Yeah. When we come in and look at, if you would, after we net our growth CapEx for the contributions that we're expecting from joint venture partners, I think we're talking about $2.8, $2.9 billion. If we come in and FID some of this project, that may add $300 million, $400 million this year. We still have a lot of flexibility, especially when you think last year we had $4 billion of organic growth CapEx, another $200 million of acquisitions. We've got a lot of financial flexibility this year around self-funding.
Thank you.
Hi, Keith Stanley from Wolfe Research. Just following on the last question on CapEx. You've laid out $5 billion-$10 billion of projects under development right now. Is it fair to say that's over, call it a three- to four-year period? How would you see the $3.5 billion spend this year gross, the trajectory of that going over the next, call it three years or so?
Yeah, Keith, good question. You're right. Most of these assets that you've heard about, especially the chunky ones, whether it's the offshore port, we still have probably, what, another at least 10 months in just getting through the permitting process. The construction around that, a PDH will take some time to build that. Some of the chunky ones, you do have some lead time. Probably, yeah, that would be spread out over three or four years. In our mind, probably just from organic growth CapEx, it could range from anywhere from $2.5 billion-$4 billion. I think that would pretty much cover the range, what it could be on an annual basis.
Hi, David Amos with [inaudible] Energy. It's the first time I've heard you talk about the ATEX expansion in a while. Can you kind of update us on what that project may look like and what the decision criteria is to proceed with that?
Yeah. Could we get a mic for Tug?
Yeah, no. Actually would prefer not to talk about the scale of the expansion because we do have some flexibility around how much it could be based off of additional horsepower or partial looping. We do have some flexibility on the scale depending on the customer need. Just simply put, there's a lot of interest in alternative takeaway in the Northeast down bound to the Gulf Coast versus some of the other options they have up there. We're in discussions with folks right now, and we're evaluating expanding.
Mike.
Great, thanks. Two questions. One, You previously slowed down your distribution growth to get to self-funding and hit your leverage target. Is that a permanent change, or is that something that once you get to that level, which you're pretty close to, would you consider in the future accelerating that rate? I noticed your opening remarks, Randy, you said you've heard 10% and 0, if I take the midpoint of that. Anyway, that's the first question.
Okay. Yeah, on that one, I wouldn't say that's a permanent change. I think when we came in in October 2017, we saw some opportunity the first objective was to get to equity self-funding. We had, if you would, just a wave of EBITDA that was going to come on from all projects under development. That was going to carry us most of the way. We also just banked into that, let's come in and moderate distribution growth for a couple of years, and then let's firmly get to more, if you would, a traditional financial model and break away from the MLP model. I think we're well on our way of doing that. We've also come in and brought leverage down. We've got some good flexibility.
I think what we'll do is at the beginning of next year, we'll take a look at it and see what makes sense as far as returning capital.
Great. Second question is just clearly you have a lot of investment opportunities in the petrochemical area. The question is how do you think about petchem as a % of the total cash flows of the company, is there any parameters around that where you wouldn't want it to get too big as a % because it changes the complexion of the company, are you just going to invest where the opportunities are, and the chips will kind of follow their fall?
Yeah, Michael. Probably today, the petchem segment is probably, I'd say, 10% to 15% of gross operating margin. With the other growth opportunities that we have on the NGL side and the crude side, and to an extent on the gas side, I really don't see it. I think it would just sort of keep that relative ranking going forward. I think it'll get larger. When we come in and look at it, our best returns on capital are NGLs, crude, and petchem services.
I've got one back here.
Hey, guys. Just trying to think about the value chain a little bit given what's going on with some of the commodity prices. Asia gas prices are near lows right now. Forward curve's a little higher. Probably means that LNG export volumes, not contracted amounts, but the actual volumes are a little bit at risk. Back that up, how do you think about how that flows through kind of working backward on the value chain, the rest of the chain?
Okay. I'm looking at Tony, then maybe Tony, after you take the first shot.
Okay. When I think about LNG, it's no different on the water than it is here, that is gas is in a world of its own. When I go to the U.S. and I think about what we're going to export, look, the U.S. producer, we see it where propane values are where they are today, they're going to price their product to export. That's what they have done in the last six to eight years, that's what will continue. Make no mistake about it, the U.S. is a price taker, what it takes to make that number is what it takes to make that number. When we think about propane, its competition is not natural gas, it's not LNG.
When we think about propane, the marginal market is either going to be for heat, that market's going to be what it's going to be, or it's going to be in the petchem space, where it's going to compete with naphtha and oil. Brent, anything to add to that?
Nope. That's it.
What have we got?
Will Su from BlackRock. Just a follow-up to the share buybacks comments from earlier. Curious how you guys think about some of the harder-to-quantify benefits to the buybacks when you compare that against obviously a very robust growth capital investment potential. As an example for general investors, as the kind of shareholder base turns over, there is a general preference for companies where the share counts tend to decline over time versus growth. We look at a company like Apple that competes for investment capital that does do a systematic buyback, even with a 36% return on invested capital. Just curious how you guys philosophize about that.
Yeah. Will, I think also I go back to October 2017, and we were more operating, I won't say we were fully under the MLP model, but more like an MLP model. I'd sort of like to think what we're doing here is doing a soft landing, if you would, into more of a traditional financial model. We've avoided some of those hard landings that some of the other guys took. I think a buyback has its role. I come back in and there might be a time we come when we get to a more programmatic approach. Again, in trying to navigate this soft landing that we're doing, I don't think now is the time to do it, especially when we come in and we've got all these organic growth opportunities that we have.
That's where we come back in and think from a standpoint of more opportunistically. What we saw there at the end of the year, when we think about cash yield on the units that we bought back and the price that we paid, it was 11%-plus cash yield. That comps well against our organic growth projects. I think where we are right now, probably opportunistic fits us better. I'm not ruling out programmatic in the future, but we need to finish this transition to a more traditional financial model.
Thank you. Maybe another way to look at the distribution and buyback question is from the credit side. How do you think about the 3.5 times leverage and potentially going lower? You talked about the length of your debt profile, but a single A rating is not seemingly out of grasp. You've led the industry continuously on credit rating strength. How does that play into things?
Dennis, I think where we are is, when we say our objective right now is 3.5 times area, we sort of interpret that to be 3.25 to 3.75 times. I'll have to say, an A rating is not an objective. Leverage can be good for shareholder returns, we want still some amount of leverage in the system. I think, if we can come in and manage in that 3.5 times area, we think that'll give us enough flexibility to come in and be able to finance and execute on some of these organic growth opportunities. frankly, there may be some acquisition opportunities more for disparate assets that may fit us well, too.
I think with that, we probably should cut it off. Thank you very much. As Randy said, lunch is served next door, buffet style. You'll notice these little tent cards on the tables. That's for our management teams to split up to have lunch with you. Thank you. Thank you.