US terminals see recovery

OUT OF THE WOODS

USA • LOW COMMODITY PRICES AFFECTED MIDSTREAM OPERATORS IN 2020 JUST AS MUCH AS THE COVID-19 PANDEMIC, BUT OPTIMISM PREVAILS FOR 2021

WHEN THE HISTORY books write the story of 2020, it will undoubtedly be dominated by the Covid-19 pandemic. But for companies operating in the oil patch in North America, just as significant was the slump in crude oil prices early in the year, with a knock-on effect on natural gas and downstream prices and investment throughout the supply chain.

The extent to which those factors affected the financial performance of midstream operators varied widely, depending on each company’s exposure to the oil sector and the extent to which they were protected by take-or-pay contracts or similar dependable income streams. But all felt the pressure, with many of them reporting sharp reductions in revenues and income.

Enterprise Products Partners, for instance, reported revenues of $27.2bn for 2020, down 17 per cent on the $32.8bn recorded in 2019, with net income dropping by the same percentage to $3.89bn. Enterprise’s diversified operating base, together with a policy of strict cost control, enabled it to restrict the impact of the adverse market conditions, although it booked non-cash impairment charges of some $891m, largely relating to its natural gas pipeline operations.

NuStar Energy, on the other hand, was badly affected, reporting a net loss of $199.0m for the year, after non-cash impairment and operational charges amounting to nearly $400m. “As we came into 2020, we had just booked the best fourth quarter in company history and we were expecting a record year. However, by March 2020, the Covid-19 pandemic had devastated much of the global economy,” says NuStar president/CEO Brad Barron.

COMING OUT All senior executives have taken great pains to stress the importance of their workforces during the pandemic, and Barron is no exception: “I am also happy to say that despite a very difficult year for our economy, our industry and our company, our operations did not skip a beat in 2020 thanks to the dedication of our employees. We had no work-related Covid-19 transmissions and our safety and environmental record continued to be significantly better than our industry averages.”

Likewise, Jim Teague, co-CEO of the general partner of Enterprise Products Partners, says: “We are extremely thankful and proud of Enterprise’s employees for their dedication and perseverance in responding to the challenges and opportunities during 2020 caused by the effects of the pandemic.”

As we now near the end of the first quarter of 2021, the pandemic is still with us, although there are signs that the worst might be over. “We are optimistic that the combination of the vaccines, significant government stimulus and shorter economic

CASH WAS TIGHT DURING 2020 BUT MIDSTREAM

OPERATORS ARE STILL ADDING TO THEIR

INFRASTRUCTURE TO KEEP HYDROCARBONS

cycles associated with pandemics and natural disasters will lead to the world emerging from this economic sudden stop in 2021,” says Teague. “We are encouraged by the early signs of a rebound in the global economy that we see through strong domestic and international demand for NGLs, ethylene and propylene and the continuing recovery in the demand for refined products.”

“We are starting this year encouraged by the rebound we have seen, and continue to see, across our footprint,” says Barron. “January was promising, and we hope to see that improvement continue. Given all we accomplished in 2020, I am confident that NuStar is positioned to build steady, stable value in 2021 and beyond. To do that, we will continue to focus on our strategic priorities: operating safely, reliably and efficiently; lowering our leverage to further strengthen our balance sheet.” ENERGY EVOLUTION The increased focus on cost control has led many midstream operators to cut capital expenditure over the past year, although Enterprise still managed to invest some $3.3bn over the course of 2020, of which $3.0bn represented growth projects. It is also planning to continue this in 2021, with three major projects: one ethane pipeline, one natural gas pipeline and a new hydrotreater for natural gasoline.

Furthermore, as Teague explains: “We continue to look at opportunities to increase our use of renewable power and to economically reduce emissions. We estimate by 2025 that 25 per cent of our power will be from renewable sources. In addition, several of our growth capital projects in the early stages of development are consistent with the theme of energy evolution.”

There is a similar story at NuStar, where around half of its planned growth project investment is targeted at renewable fuels, much involving its west coast storage terminals. During 2020, one-third of revenues from NuStar’s west coast terminals came from services relating to renewables and this is expected to grow. “As we continue to complete our 2021 west coast projects, we expect renewable fuels-related services to grow to contribute about 35 per cent of total west coast revenue by year-end 2021 and approach 40 per cent by year-end 2022,” says Barron. “Our west coast renewables network is growing and will continue to be the key to NuStar’s ability to thrive as we all navigate through the nation’s evolving energy priorities.” www.enterpriseproducts.com www.nustarenergy.com