The midstream company is working on several long-term growth drivers.
Energy Transfer ( ET 0.09%) has a lot of growth coming down the pipeline to expand its existing operations. The master limited partnership (MLP) has several pipeline projects under way and in development, along with building new processing and export capacity. It’s also working on some larger-scale projects to expand into LNG exports and petrochemicals . These expansion projects should give Energy Transfer the fuel to continue growing its 6.9%-yielding distribution in the coming years.
However, with all those growth drivers, it can be easy to overlook some under-the-radar opportunities the company is working on that could be big long-term growth drivers. Two that investors might have missed are its potential expansion into Panama and the emerging carbon capture and storage (CCS) market. Image source: Getty Images. Eyes on international expansion
Energy Transfer is currently a U.S.-focused energy midstream company. While it does own some assets in Canada that it acquired along with SemGroup in 2019, it has agreed to sell them in a deal that should close later this year.
However, the company is looking to expand into new international markets, starting with Panama. Last year, Energy Transfer signed an agreement with the country to study the feasibility of participating in the proposed Trans-Panama Gateway Pipeline project. It would include building terminals on both coasts and a pipeline connecting them to transport and export liquified petroleum gas to international markets.
Energy Transfer’s management team discussed the project on the first-quarter conference call . CFO Tom Long stated: We are working closely with the appropriate entities within Panama to successfully bring this project to fruition. Panama’s geographic location and favorable investment climate make this an attractive project. We remain optimistic about the Trans-Panama Gateway pipeline and the significant value it will bring to markets around the world. He further commented: “We think, at the end of the day, this could be a very significant international hub for the world, not just for the Caribbean or the Western Coast of North and South America, but also, of course, for Asia.”
He noted that it’s still too early to get into major details about the project but that they’re “very excited” about it. LPG is an important fuel globally because it can displace coal and biomass in electricity production. The U.S. is a leading exporter of LPG, thanks in part to Energy Transfer. It’s currently expanding its Nederland terminal to export more LNG. The Panama project could support additional LPG export capacity expansions for its U.S. operations. Looking for ways to reduce its carbon footprint
Another longer-term growth opportunity Energy Transfer is currently exploring is CCS. Long noted on the call: We continue to pursue a number of projects related to carbon capture, including sequestration, enhanced oil recovery, and utilization projects. We are in active discussions with several developers who have applied for Class 6 sequestration permits with the EPA in Louisiana in close proximity to our facilities that would be good candidates for carbon capture and sequestration. However, the CEO cautioned that the approval process for these permits takes years, so it will be a while before it can move forward with a project to help reduce carbon emissions.
CCS is a potentially massive market opportunity for Energy Transfer. Oil giant ExxonMobil ( XOM -1.63%) foresees a $4 trillion market for capturing and storing carbon dioxide by 2050. Exxon is currently investing $15 billion into CCS and other low-carbon opportunities and sees the potential for more than $100 billion of CCS investments in the U.S. Gulf Coast.
Several midstream companies are already working on CCS developments. For example, fellow MLP Enterprise Products Partners ( EPD -0.65%) recently signed an agreement with an Occidental Petroleum ( OXY -2.19%) subsidiary to pursue the joint development of a carbon dioxide transportation and sequestration project for the Houston area. Meanwhile, EnLink Midstream ( ENLC 0.18%) also signed an agreement with an Occidental Petroleum subsidiary for a CCS project focused on the Mississippi River corridor. These midstream companies plan to use new and existing pipelines to move captured carbon dioxide to sequestration hubs. Given Energy Transfer’s vast pipeline network in the Gulf Coast region, it has the infrastructure to capitalize on future project opportunities to reduce carbon emissions. More growth is potentially coming down the pipeline
Energy Transfer is pursuing a myriad of growth opportunities. That can make it easy to overlook some potentially massive ones that are still a long way from becoming a reality. However, Panama and CCS could […]
source 2 Under-the-Radar Growth Opportunities Energy Transfer Investors Won’t Want to Overlook