Enterprise Products Partners L.P. (EPD) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us today. We're going to go ahead and get started. First remarks here from our Co-CEOs, Jim Teague and Randy Fowler. And just a couple of housekeeping things here. We've got Sheila -- in the back's got valet for your -- or sorry, validation for your valet parking tickets if you need that [indiscernible] And the WiFi code, you can see that up here. So hopefully, that will work for you. And with that, we'll go ahead and get started. You guys ready? Okay. Go ahead.

Yes. I want to apologize, I'm not wearing a tie. I didn't get noticed. Randy said, well, it went out by email I don't read half my e-mails, so I'll be comfortable. It was at this meeting last year that created our project line, it was one [ Becker ] asked a question of what do you see -- what would you like to see? And I just popped off, it came on and just came through my mouth. And I said, "Well, I'm tired of [ 8s ] its I'd like to see a [ 9 ]. I mean I was tired of our EBITDA starting with $8 billion. We'd like to see it start with $9 billion happy you all took that as guidance. I didn't think there was a prayer in hell, but I got back to the office and where is Tug Hanley. Stand up Tug. So I was talking to Tug and I said, how could we do something to get everybody -- that's good to Tug, that's good. How could we get everybody bought in to try and to reach $9 billion, and Tug said, let's call it Project 9. Okay, that sounds good. I immediately appointed Tug as the Chairman of the Project 9 initiative, and he brought a bunch of people buy. And what we did is we said, okay, if we make between $9 billion and $9.3 billion, everybody below officer gets $3,000. And if we make above $9.3 billion, everybody gets $5,000 as it came about, we made $9.309 billion. So you guys -- this meeting was responsible for Project 9 and Becker was responsible for asking the right questions. And if you're all really good at your jobs like Becker was, he might be a Board member with enterprise someday. Are you ready to get started?

Yes.

Have you got anything?

No.

Okay. We're going -- I love -- Randy and I are hell of a team. 1 reason is he's so good at putting these things together. So I'll be more of a color man. It's kind of like Frank [indiscernible] Howard Cosell and something like that.

I think it was Don Meredith, too.

Okay. So this is what Enterprise looked like when it went public. And that little pipeline over in Mississippi, it was aligned down to some processing plants around Mobile Bay at the [indiscernible] Enterprise used to have a small fractionator there in Mississippi. In Louisiana, we had a pipeline that -- our biggest customer there was Marathon for butanes, but that 1 going north tied into Dixie pipeline. And then in Mont Belvieu, we had then -- we had 3 fractionators. I think, 3 isoms, couple of splitters, 9 storage wells and an MTBE plant and an import facility. So a nice setup. But what did he not have. If you look at Enterprise at that time, we were an island. We didn't have any of our own feed systems to bring Y-grade in and we didn't have any of our own distribution systems. At that time, we had 500 miles of pipe. So we depended on third parties to get Y-grade into our system, no value chain. What we did when Dan -- and no processing plants, when Dan bought Shell Midstream we've ended up -- I forget how many processing food plants we had at the time over there -- 7, 8. And -- but we were selling our -- and it was Keep-whole contracts. We were selling our products at anywhere from $0.02 to $0.06 off Mont Belvieu. Otherwise, we were trucking LPG back. So when I -- so we decided we're going to build a pipeline from Louisiana back to Mont Belvieu. We didn't have a single contract. But Dan said, you know what, we'll get a return on this pipe. If all we have in it is air because the fact we can move those barrels back I mean we'll get a higher price on those barrels and it worked. Oh there it is. And That's what we look like today. So we went -- that import dock, we lease space and don't want thinking. So that -- and that 500 miles of pipe's now 50,000 the storage, we had 9 storage wells in Mont Belvieu. Today, I think it's 37 [ bom ] and 20 deepwater docks when we didn't have any -- we've got 29 natural gas processing locations but 40 cryogenic trains, 25 fractionators that includes the splitters, and we'll Chris will talk more about that. In 2 PDH plants soon to be and 2 iBDH plants. And Brent will talk about this, his group. But embedded in that system is a lot of options. The funny thing is when we first went public, we grew by acquisitions. And I'm going to plan a question, somebody can ask what's the most strategic acquisition we ever made. And we grew by acquisition. After we bought Maple and we did that in a week, we started growing organically. And I guess the last -- well, Navitas was the last acquisition. So you got it, Randy.

Okay. Michael, I think we. This summer we'll celebrate 25 years as a public company. And Jim has highlighted some of the successes and how we grew the business over that 25 years -- it also represents -- this year will represent 25 years of distribution growth. And some of what we want to do in the presentation today that you'll hear from us and the rest of the team is how we're geared and positioned to prosper for the next 25 years. And I think you have to start with the Duncan family DNA. And it really comes into the -- it provides the continuity, the consistency, the culture of going back and as Dan was found to say and doing the best you can every day, but it was that mindset of doing win-win deals with both customers and investors. And I think you and Dan had some interchange about doing win-win deals with customers.

Yes. The most I got my budget out by him was I had done a deal that admittedly was more favorable to us. And he gave me out because he was interested not just in that deal, but in the next deal that we did with them. So I told him myself, I thought my job was to make money. He said "your job's to make money over the long term."

And that long-term focus is there. In fact, you hear the expression of things like an owner we really do think like owners. And [ Randa ] said just recently, we think in terms of decades, not necessarily quarters. And quarters matter, and we pay attention to the quarters and pay attention to the detail, but when we deploy capital, we think about the success of deploying that capital and the returns on that capital over long periods of time. And so there's no shortcuts plants and equipment are built to last. And -- but it's that long-term focus that's also helped us avoid some financial fabs over the years, whether it was the 50% incentive distribution rights or whether it was coming in and maintaining distribution coverage right on the cutting edge of 1x or 0.95x. And I think that's served us well over the years, and that's been demonstrated.

The next bullet talks about the reliable cost-efficient value-added midstream energy are the most important? Two words on that is, in our 3 is integrated value chain from the minute -- we -- Randy got there 6 months before I did. But from the get-go, we were looking at how do we create a value chain and that first pipeline from Louisiana was what we called it was our -- we controlled that corridor when we put that pipeline in. And it's been to become one of the most important pipes we've got. But then from there, we started adding other integrated systems. So as we've grown -- whether it be acquisition or organic, whatever we build and are we buy, it has to fit what we already have. Or it has to -- we have to be able to see a pathway. For example, when we bought those processing plants from [ Gothera ] in South Texas that just like Louisiana, we're selling our ethane at Belvieu -- less $0.03 and we had ways out for everything else. We bought a pipeline from Exxon for $100 million. We put it in ethane service all of a sudden, ethane price would have to Belvieu even. So we add that into our anchor in Mont Belvieu. But if we're going to do something, whether we build it or we buy it, it has to fit what we already have. And then we're -- I'd like to say that as a country, we have been giving a gift and that gift is oil and gas resources shale that Tony will talk about. And we've been giving a gift because so much of it is right here in Texas. We're going to talk about the Gulf Coast later. But it's right where we live. And so we've been able to really capitalize on that.

And then, of course, we couldn't have done anything with this the success that we've had without the support and the consistent support that we've had from our banks, which are really our first line of financial flexibility and liquidity and as well as our debt and equity investors. So certainly appreciative and grateful for that. Yes. And then coming in and hitting on some of the themes that we're seeing as the year shapes up, the -- certainly, energy security and reliability have taken a whole new importance on given the invasion of Russia, Ukraine. And again, just the development of geopolitical volatility that we're seeing these days. Well, we've got a slide that will hit -- are we -- we think of it in terms of -- I think Jim talks about it being energy evolution energy addition as opposed to energy transition. I think energy transition is a misnomer, and we'll show you why. And then the thing I think the country is going to be challenged by and we continue to see it is permitting and permitting reform that needs to happen. And we hear that may be coming out of D.C. bipartisan effort around permit reform. It's certainly needed. I guess the proof will be in the pudding. And the people in this room, we all know of Keystone XL and Mountain Valley Pipe and Constitution Pipeline, but the permitting reform goes beyond that. And whether it's the -- it gets into some of these initiatives on these renewable sources of power, whether it's a resolution copper mine in Arizona that's running into issues as far as coming in and getting productive or the Thacker Pass lithium mine in Nevada that's running issues or the federal ban on copper and nickel mining in Minnesota, we're running into issues across the board, whether it's on green metals and mining because if not here, then where are we going to come in and source those green metals. And -- but then you also when we're talking about electrifying everything, there's the TransWest transmission line that's supposed to take wind power, wind-generated power from Wyoming and distribute it into Nevada, into Arizona and into California. And this is a project that started in 2007, and now the next expectation of when this project is going to be up and running is not until 2030. And given the pace that some of our elected officials want to come in and see more of the country electrified. I think we're really going to be challenged. And that's where I think oil and gas and frankly, coal have really been -- provided the reliability of the power resources at a reasonable price. And the next thing -- and again, what we'll also talk on is with this U.S. onshoring that's going to happen, we think there's a sweet spot for Texas and Louisiana, and we'll get to that. Here is a slide that -- some of the -- next 2 slides really come from information from a gentleman a professor Vaclav Smil. Bill Gates calls him his favorite Author. I think he collaborates in the JPMorgan Energy paper that, in fact, really just got published here the other day. But when you come back in and take a look really the energy and the supply of energy has directly led to population growth and improvement in life. And you see this, if you start early and see the impacts of the industrial revolution and the mechanization of more things and the use of coal as a supply source, coal and steam how you see population growth start to tick up. And then with oil led to more efficient machines. And then ultimately, when you get into the 1950s and where we're more prolific producing natural gas liquids, you see the first green revolution, which was agriculture. And when you come in there as far as what we were able to come in and do with seeds. But importantly, the introduction of fertilizers, herbicides and pesticides that all came from natural gas derivatives and NGL derivatives. And really came and really you're seeing an inflection in population growth there. But the thing to note in all that is the world burns more wood, a lot of times, I'd like to call it Biomass but we burn more wood today than we burn in 1,800. On coal demand, we're seeing record coal demand now compared to where we had historically. And again, more oil production, more gas production. And with that, the -- so we're not coming in and transitioning to anything. We're just adding more because of the world is demanding more energy. And what we're seeing is energy consumption for capita consistently goes up over time. And with that comes improvement in lives, whether it's life expectancy, whether it's education or whether it's income per capita too. So it's hard to see here how we can come in and transition, we think it will continue to be more about energy addition.

And I look at that chart and I look back to when I was in high school. From the time I graduated from high school to today, we've more than doubled the population on the planet. And I guess we expect to be another 1 billion in the next 10 or 12 years. So the idea that you're going to do a way with fossil fuels is comical. Are you watching that clock.

I am.

No, you're not.

It's a suggestion. The -- then the next thing, you pick your organization as far as what we're seeing and what the expectation is on fossil fuel growth over time. we throw out these -- the EIA and OPEC are more bullish, IEA, more things the hydrocarbon demand will be flat over time. And -- but anyway we throw that out there as a reference point. Okay, [ Mark ]. Here's another one of Professor Smil's thesis, is really when you come in and you talk about the 4 pillars of modern stabilization, it's ammonia, think again, think nitrogen-based fertilizers, steel, cement, plastic and petrochemicals. With this and the industrial heat that is required high levels of heat, like 2,600 degrees Fahrenheit to come in and do a lot of the fabrication that's required and each of these materials requires intent seat, and that's where you have really natural gas is the fuel for this. So these 4 products consume about 17% of energy supply in the world and are responsible for about 20% to 25% of CO2 emissions in the world. And currently, there's not another way to come in and produce these products without natural gas being the fuel supply to create this hear.

And if you go back in the 60s, I don't know that plastic would have been one of the 4 pillars of modern stabilization. I don't know how many of you were around in 1967 when the graduate came out and Dustin Hoffman has just graduated from college and he's trying to figure out what to do and this guy pulls him aside and he said the word, plastics. And God knows that was prophetic.

It was. You come in and just hitting on a couple of the examples here on ammonia and the impact of nitrogen-based fertilizers without nitrogen-based fertilizers, we can only feed half the people in the world. And Srilanka actually tried this here a couple of years ago that they came in and banned the use of fertilizers and they saw their crop yields go down 50% to 60% that next year. So they quickly did away with that ban. So I mean this is something that's critical just in order to be able to feed the world. And as Jim points out, the world just keeps growing. On cement, that's another one. Again, like 2,600 degrees Fahrenheit, that's what you need to come in and synthesize the limestones and the shale plays. And cement is after water, it is the most consumed material in this world. And you still have like 300 million homes in this world that have earth and floors that lead to disease and to parasites. So you still have -- I think, as Jim likes to say, there are a lot of people in this world that would like to have what we have. And so we see that demand for concrete and cement continuing to go up. And then obviously, on the plastic and petrochemicals, very close to our hearts, and it goes into everything that we touch in today's world and some things we don't think about like semiconductors and pharmaceuticals.

Okay. This next slide is the story of 2 days in December. At noon, on December 22, our [indiscernible] load was fed 41%, 42% by wind and solar. Natural gas by less than 40%. And then the clock changed to the next day around 10:00, Randy, this one's yours.

Yes. And on this, you can come in and say when the wind stopped blowing after the front blew through and we have the call and the wind stop blowing and obviously, at night, the sun wasn't there, you had natural gas and coal step up, and they were responsible for fueling 88% of the power generation growth that night. So some of what we're seeing and again, some of where we come back to that this is going to be energy addition, not energy transition is when you come in and you look at studies done on the intermittency of solar and wind, for every 100 gigawatts of solar and wind that you had, you only displace or replace 10 to 30 gigawatts of natural gas fuel supply. So you still need the natural gas in the thermal coal also to come in and back up the intermittent sources of power. So that's -- again, that's where we keep coming back that we're into energy addition instead of energy transition.

On the afternoon, another 23rd, the government call came and the whole purpose of the call was when they knew what was coming is are you guys ready. And we were ready. We never shut anybody and we have our plants wind arise. So -- but there's a heck of a battle. I don't know it's a battle. But in the legislature, there's a lot of talk of bills, and I think, Bob, you could answer that. There's a lot of talk about bills being introduced to address the need for thermal backup as it relates to ERCOT.

Yes. Here, the next 2 slides, we showed these slides last year, but they're still current because nothing has changed in a year. When you come in and you look at the demand that we're going to see for green metals to come in and whether it's EVs, wind, solar and again, just electrifying everything we're going to need multiples of supply of what we have today, and we've already talked about some of the barriers on permitting reform. But we still need a lot of these critical minerals if we're going to come in and make this even energy addition. And with that, it's -- our view is it's going to take longer and it's going to be more expensive.

Okay. I'll start it and [indiscernible] take it. You look at who controls all the process is China. I mean what are we thinking? That we're going to go from energy independence to dependent on an adversary. It makes no sense. Go ahead.

Well, and especially Jim, on your point, would the more and more that we're seeing resource nationalism and the trade embargoes, whether it's semiconductors or what next to come in and have this kind of reliance on other countries in the resource nationalism just isn't in China, I mean it's in South America as well. So these are going to be some challenges, especially when you come back in and you look at as Jim said, the United States is blessed with the shale plays.

I think you start this one, Randy.

Yes. Here, we still have 1/3 of the world, so call it, 2.5 billion people that live in energy poverty. So they're still cooking with wood or coal or animal waste -- and with that, just there -- the -- there -- the -- where they live and their quality of life is pretty low, and a lot of it just begins with their lack of access to clean fuels for cooking.

And if you've ever been to India and you see the poverty, and you have an appreciation for all the good we do because they've had a program over there to convert homes that are cooking on with wood and coal even done to LPG. And it's so simple because you can carry it with a bottle. And I think they've converted 100 million homes. I think Indonesia is doing the same thing. These folks want what we have. And every one of them has a cell phone. So every one of them can see how the West lives. They were ignorant of that at 1 point but they want what we have. And the idea that we think we're going to limit fossil fuels because that's the vehicle that gets that place looking clean in that bottom picture. That for yours?

Yes. And then again, this was a cool slide that we saw that -- you can see where the prosperity in the world is about who has the lights on at night. And as Jim said, there -- when you come in and you look at where population growth is going to continue to come sort of the next billion people it's really going to come in India. I think India is looking to overtake China in population this year, but then also sub-Saharan Africa is the next place we'll see the population growth.

Yes. We were the first mover on LPG exports. And Randall was a part of the negotiation that put together our ability to export LPG primarily propane, we had a joint venture with venture partner that we ultimately bought out. But Dan's idea was we'll import in the summer and export in the winter. It didn't work too well. We exported everyone's in a great well. But it was like a light went off in July 2009. I never forget it. Our phone didn't stop raining -- and at the time, we could load 5,000 barrels an hour, and we were full. We've expanded that now about 35,000 barrels an hour, and we're still full. The U.S. is the reason there's been LPG growth, you wouldn't have what you saw in those other slides of that clean cooking. You wouldn't have that without US LPG. Because it'd be too damn expensive. And the interest of TAM has moved along. I mean that's the point. No, I wanted to make 1 other point. Back in the day, when I was in petrochemicals our largest feedstock supplier was not Exxon, one shell, it was Sonatrach. We imported a boat load of Algerian condensate and LPG. They were our largest. Today, I'd have to travel around the world to see my suppliers. Today, if I were still at Dow Chemical, I'd have to drive across town.

And then I think the other thing that we're seeing with this trend towards onshoring of manufacturing. And then frankly, also some of the trends that you're seeing as far as the development of carbon sequestration, ammonia, hydrogen, really Texas and Louisiana have a sweet spot. And in some of that, as far as when you talk about the economy, I mean, those 2 states combined are the eighth largest economy in the world after France, and so we already have a lot of industry here Jim, you want to hit the next one?

No, you got the first 3, and then I jump in.

Okay. Then when you come in and you look at it in terms of LNG exports...

How many times, do we practice.

Just once. Then when you come in and you look at just in terms of our footprint of the 2 states as far as LNG exports, ethane and LPG largest in the world. When you come in and you look at as far as being a global producer of crude oil and equivalents, fourth largest in the world, these 2 states.

Yes. I was looking at that bullet other night. And I got to think and I wonder if we're not bigger than that because our petrochemical industry, I don't know what equivalents are. So [indiscernible] is ethylene and equivalent propylene and equivalent or its crude, natural gas and NGLs. Our polyethylene pellets and [indiscernible] because those are hydrocarbons in a solid form. So I think we're higher than that. We've got 17 deepwater ports. It's 50% of U.S. water ports total tonnage. I think, Bob, the ship channel is larger in tonnage than Long Beach Long Island, Los Angeles New York combined? Okay. I got that right. And then from a tax business-friendly perspective, we can build a pipeline in Texas. We can build a pipeline in Louisiana. We can't build a pipeline out of the Marcellus.

Yes. Okay. And then here are some of the industries that really Texas is trying to attract in Texas and Louisiana are trying to attract and being successful in attracting to the states and many of these are energy-intensive businesses. And again, in states where we can actually build energy infrastructure. So we think some of this was right in our backyard, some of this opportunity.

With that, Tony, you've got some timing.

There was a discussion about whether I was going to stand up and do this feels funny looking down on all of you all, okay? And I'm kind of the busy body, so start walking around would be maybe not the best. So what I decided to do is make a game time call and pull a chair up, okay? And what's important about that is, for those of you that were here early, you might have seen Brent Secrest arranging all of these chairs and all of these tables. And I just rocked his world. Okay. Let's get started. We got a lot to cover. We're going to start. We're going to talk about prices. We're going to talk about prices in the historical and the future. I like to break things down into phases sometimes because it helps me think about where we may be going. So we'll do that. We're going to look at our supply forecast. And this year, we're going to look at it to 2030. We're going to give you our perspective on productivity, GORs and the lack of investment thesis that you hear a lot about. And then I'm really going to jump off the deep in, and we're going to look at oil supply and demand in 2030 worldwide. Same warning that I always give you. There's a lot of charts and graphs in virtually all of our stuff from a fundamental standpoint. I want you to think of them as images or pictures, although they all have a Y and X axis, so you can look at the math later. And with that, we'll get started. What we did here is we went back and looked at crude oil, and we broke it down into 3 phases relative to the shales. The first one is shale beginnings. And during that time period, really not much happened to price range between $75 and we have $105 here. So call that 2010 to 2014. And the growth from the shales was moderate and OPEC controlled the market, okay? Then we moved into Phase II. And what we say there shale surprises global markets. We were very, very focused on adding barrels in the United States [indiscernible] time. We added over 1.5 million barrels. So big numbers. OPEC at 1 point, decided, you know what, I'm not going to manage the market. I'm going to manage markets for myself. And they had a price war with the United States. It didn't last long. They realized that they couldn't outlast the United States. So they had an agreement to cut production. And now I see -- I believe that we're in this discipline and profit space. OPEC, it's clear they're setting market direction. We'll look at that in a few minutes. U.S. producers are highly disciplined. They realize it's not a foot race anymore. It's a marathon and capital market share requiring returns in more ways than one. But when we look at price, we're still a pretty benign or anemic, call it, $60, $70, $75, okay? So let's go to the next one. What are the crude oil price drivers in the next 12 to 18 months. I'm not going to read them all to you. There's about twice as many on the bullish side than they are all the bearish than they are on the bearish side, but that doesn't mean that the bearish side doesn't have an impact or meaning because some of these are pretty weighted things, and they've been weighing down the market. The big thing talking about bullish things, go to the next slide, please. And everyone had a forecast of see that previous expectation line down there. Everybody had forecast that kind of looked like that. And it pulled off something proved all the bulls wrong. And it's that second line Russian supply and Chinese demand. So when you look at what happened in '22, the world missed balances by about 400 million barrels, that's a lot. And what we do on the chart to the right is we just break that down. That's over 2 million barrels a day and we break it down between too much Russian supply, other supply besides just Russia and then global demand growth, and that's because of what happened in China and the knock-on effects. So what we know today is we know China is reopening. Their reopening is going very, very well. And so I would say they're fixed. Most people think that you can look at China and add at least 1 million barrels of demand in 2023 for what's going on in China, probably 900,000 at least directly and then some knock-on effects. But we're all still uncertain about Russia because it appears that their production is not coming off. This next slide, we show this just about every year, and I want to remind everybody that the forward markets aren't intended to predict price. They're a very poor predictor of price. If you go back and look at it historically, but there are people that are paid to predict price. And so what we've done is we've broken it down between consultants and banks. And I'll go to take some of the noise out of it, but I'll go to 2024, all right? And I'll highlight that consultant that has $117 in that bank that has [ 68 ]. You probably know who they are. And if you think about what they're saying and you listen to them, they're very convicted in their views, and they all back them with some really good data. So that's the spread. That's why people have a hard time. Everyone has a hard time predicting price. But that's where people's heads are. Next, I want to go to that same kind of graph as far as the phases for natural gas. Phase I, remember that natural gas is the easiest molecule to come out of tight rock, you come out of the shale. Okay. So we got a lot of it quickly. The second -- by the way, the second easiest molecule to kind of type rock is ethane, and we'll talk about that in just a minute. So for the first 10 years, when we started finding all this natural gas, there was not a way to have adequate markets for it. It simply wasn't. So in looking back, what had to happen is gas had to price itself to not coal out of the stack. And that's how you got this kind of $3 range because gas was pricing itself to not coal out the stack. Then all of a sudden, we had the invasion of Ukraine by Russia. And gas started getting some respect, but it really didn't last long. And then it came crashing down. And oddly enough, it came crashing down right in the dead middle of the winter in February of '23. And as we go forward, rather than the $4.50 forward curve that we had this time last year, now we have a forward curve, let's call it, $3.50. And right before we started this meeting, I looked and the prompt month and gas has one in front of it this morning, specifically, it was $1.99. So when we think about what happened, we had a warm winter in the Northern Hemisphere, 1 and then we had 1 LNG plant in the United States go down. And what that told us or what I think that taught us is the fragility of natural gas. And I don't think that, that's something that's easily fixed. There's a significant amount of LNG coming. But natural gas is counting on a lot of things, and it's somewhat fragile. Next slide, we look at the LNG plants. There's nothing new here. We all know that Russia decided that they were going to use energy as a weapon. And then the U.S. got a lot of love and became very quickly the largest LNG exporter in the world, the Qataris are second. We both are growing from where we are today. The only thing I'll add to this slide is if you look at the under construction number and if you look at enterprises dry gas forecast between now and, call it, '26, '27, the numbers just coincidentally are the same. So as we see it, where we're getting natural gas from today in our forecast, we'll talk about our forecast next. We have enough natural gas to feed what's under construction. But we're not drilling enough today for the likely and the potential and when you look at the magnitude of those 2 numbers together, we're going to need some help. We're going to need some help from the forward curve. You're going to have to get more gas out of Appalachia. You're going to have to get more gas out of the hands, you're really going to have to get more gas in places like the Lean Eagle Ford the gas is there, you're going to need permit reporting, particularly for Appalachian you're going to need some love from contracts and from prices to be able to get those incremental supplies up there. And next is our supply forecast. We show what we forecast in the third quarter of '22 here so that you can see it more comparison may surprise some in the room that the lines generally look a lot like this is for the entire United States. The only place that's really any deviation to speak of is on the gas side. So there's our oil number. What I'll point out is between in '23 to '25, we're predicting -- projecting 1.8 million barrels of crude oil growth in the United States, 2.7 on but up to 2030. There's probably going to be a lot of pushback on that number. People are thinking smaller and listening to what producers are saying and what people are writing about. But I'll remind you that if we go to November of the November actuals as published by the EIA, okay? That number was 743,000 barrels of growth in the United States, much smaller than we used to do, but a very decent number. The oil patch had a rough December because of weather, but -- so if you wanted to look at that and say, well, how do I divide it between '23, '24 and '25, if you decided to do it evenly, I think, at this point, that's as good as any because it's really hard to call it by year. The other thing I'd like to point out is 93% of the growth that we have in our forecast between now and 2030 is in the Permian Basin. 80% of our growth for NGLs is in the Permian Basin. About 70% of our wet gas is in Permian Basin and 60% of our dry gas. You'll notice the spread between the blue line and the dark line on dry gas and that's us marking down our production forecast because of the crash in prices. And when you think, well, where did that happen? Some of it happened to Appalachia, some of it happened in Haynesville, Cotton Valley, and some of it in the lean for example. Going to dry gas, just real quickly, we showed an incremental 5.0 Bcf between now and '25, 10.2 between now and 2030, and we show the growth there, you see Permian 3.6 Appalachia, about 1 million barrels -- Bcf's a day, Haynesville, 0.5 Bcf a day in the Eagle Ford in our prior forecast, we had much of many of those at a higher number. Now here's our Permian forecast. You see the slope on those lines, look a whole lot like the slope on the U.S. lines, and we've already talked about why I'm not going to read them to you, but I will say this, and I think it's really important. Jim, Brent and myself have the privilege of spending a lot of time with CEO types that are very focused on the Permian Basin, and we have for the last 3 years, a lot of those meetings, frankly, in offices with Mask on. That's how far it goes back. And Brent always asked them the question, always ask the question. Where do you think -- what do you think Permian Basins are doing in 2030? And that's not -- to be fair to them, that's not something that they think a lot about. They think about their own acreage. And so I would coach them a little, and it was always the same, why we coached them a little and didn't they would think about it and they would always answer almost all with a 6 in front of it. Okay. And at the time, I'd say, well, we're producing 4.5 million barrels of whatever the time frame was. I would tell you over about the last year, when we have that conversation. It's not unusual for them to say, I think it has a [ 7 ] in front of it, not a high [ 7 ], but a [ 7 ]. So I think that's where their head is. The last thing I have is to put this in perspective for you because I know you read a lot of things, okay? Our models say that if we're going to be flat production in the Permian Basin, for 2023. We need to put an immediate stop to about 30% of our activity because that's the only way to flatten it out. The -- Brandon Shaw, who leads our supply appraisal forecasting effort is here, as is our chief geologist, Lance Brown, you can see me at the breakout if you want to talk about any of this. Now then. I think this next slide for me is one of the most interesting ones in the package. And it's our perspective on the lack of investment hypothesis. What we did here is we looked at 6 international oil companies, and you see them listed there. And we looked at what our capital expenditures were in 2014 compared to where they are today. And we look at their production and their reserves. I'll say this about their capital expenditures. Those capital expenditures are upstream only. They're a publicly traded company, so you can see their upstream cap. If we go to the international oil companies, they spent in 2014, $180 billion upstream at the drill bit for [indiscernible] term. Today, there at $60 billion. If you look at their production profile, it's up. If you look at their proved reserve profile, it's down but of a very minor amount. So we thought that's interesting. So let's do it for 10 shale public players, okay? The ratios are about the same. In 2014, they were at $60 billion of upstream spending, okay? They're down to $20 billion today. So there's that 2/3 reduction and their production is up 25%. You go down to their proved reserve number, that number is up 20%. So I want you to hold this thought because we're going to talk about it for a couple of more slides. In this next slide is just some quotes from Darren Woods at Exxon he said for 2023, we're looking at major investments in Guyana increased spending in U.S. unconventional assets. He went on to say, we are targeting 1 million barrels in the Permian Basin by 2027. Chevron said, looking at last year, he said U.S. production was our highest ever led by double-digit growth in the Permian Basin. We expect production to grow led by the Permian and other shale and tight assets. And he went on to say, growth matters when it's profitable. So if you look and say, well, how did you reduce your capital like we just saw I mean, it's clear that they're getting a lot better at what they do. They're getting a lot more focused. Engineering only gets better. And on the other thing that people forget a lot is we had a massive land grab underway even in the 2014 time frame to the tune -- no one knows what that number is, but tens of billions of dollars every year, maybe even more, and that's all done. So this is now the oil and gas industry, particularly in the United States, is very profitable. The other thing that you see from these quotes is the majors have moved from saying, you know what, I'm going to -- I'm going to focus on exploration around the world. I'm going to focus on producing short life reserves in the United States. Going to this next slide here. You see a lot written about productivity, and particularly almost always, it's about production per lateral foot. And there's never a positive thing written about this stat ever, okay? And so when you read it, and it's often published by -- the Wall Street Journal or by consultants, you think the sky is falling. I think they do a poor job of telling you what really has happened in the oil patch, and that's that first group of graphs, okay? Lateral lengths have been steadily increasing since 2017. And up 50% in the Delaware and New Mexico side, 40% on the Texas side and 25%. And then we show you same data they're talking about what's happened per lateral foot okay? On the next graph, down 14% for the first 3 months, up 6% on the Delaware, Texas side and down 4% in the Midland. When I look at those ratios, they seem like probably a pretty good trade-off probably. So we wanted to take it a step further because I think that you drill oil and gas wells to make money and to have production, okay? So what we did here is we looked at cumulative production for both 3 and 6 months from 2017 to 2022, and we show you those numbers. And then we did the same thing on the Midland side. When you compare 2022 to 2017 through 2019, the Delaware Basin has a 20% to 25% improvement. The Midland Basin has a 10% to 15% improvement. Can you all hear me? No? You Got it Now? Still on yes. Bring me another one. You got it now. You're good. No, okay. Yes, you can give me a handheld. I'm good. give me handheld. Thank you very much. Can you all hear me now? Okay. Let's -- so when we compare 2022 to what happened in 2017 through 2019, I talked about those 20% to 25% and 10% to 15% improvement. That kind of improvement, I think higher volumes and profits are directly attributable to longer laterals and better management of reservoirs, both pressures and rates. I think also that the more production to get the first 3 to 6 months, the better off you are. Michael, I want to go back to that investment slide. I think if you look at what's really happening, and that is what kind of money are they making, again, I've never seen the industry this healthy and then you go and look at our supply forecast, it's really hard to make the case in my mind, when you look at it correctly that the sky is falling. I'm going to go to the GORs next. The picture on the left shows GOR curve. It shows what happens in a typical Permian well decline rate, and the facts are that oil declines faster than natural gas. It should be no surprise to anybody, okay? Going to the bottom line of what's happening with GORs. Again, oil declines faster than natural gas. Delaware Basin GORs are trending higher than the more established Midland Basin. And you see that producers in midstream companies are contracting accordingly. The good news is both the Delaware Basin and the Midland Basin have a lot of all 3. They have a lot of oil, and you can see our view of oil in our forecast. They have a lot of rich natural gas, and they all 3 have a lot of NGLs and then you go and look at profits and proved reserves and you see it in the results. This next slide, we show some version of it every year, and I'm going to cut to the chase, I think we have a habit of overthinking ethane. We have a lot of it. It's the second easiest molecule to come out of the shales. We've had a lot of it for a long time. And that fact remains, and it leads to a gas-to-crude advantage for the U.S. ethylene producers and really our basic olefin industry. So let's go to the next slide. Simply put, if we look at natural gas versus Brent, you see the spread, then we take that natural gas to Brent, and we compare them to feedstocks that come from those and that being ethane and then Asian naphtha, you see the spread. And then when you look at forecast, this one, S&P Global Platts put together and they go out to 2032 and you look at the spread that they're predicting. So it just tells you that now the world, as expected, the U.S. is the clock that everyone else just setting their watch to and there's not a reason when you look at the gas recruit story that's in front of you, that, that changes. Okay. Let's go to the next one. I just want you to go to the colors here. This looks at global oil demand growth, all right, versus 2010 versus 2010. And just separate it between the blues and the grays. The grays or think about it as transportation fuels, aviation, distillate and gasoline, and the blues are the naphthas that the petrochemical industry would use, NGLs, LPG, the petrochemicals we used and that emerging markets would use. And look at the preponderance of the growth in the blues versus the gray. That's what has been happening. It's what's going to happen. If you look at forecast by the IEA, they say that we'll grow on the petrochemical side, 3 million barrels of oil or oil equivalents by 2030, and that half of our incremental crude demand between now and 2050 is going to be related to petrochemicals. Next, I want to balance the world oil markets in 2030. And there's a lot of moving parts. But to us, it's really pretty simple. So if you go to the blue line and if you look at the forecast of oil or oil equivalents growth, we have between 6 million and 9 million barrels. The IEA in their base scenario, their step scenario says 6 million and OPEC says 9 million, okay? So mark that down, 6 million to 9 million. Then I go, and on the left side, we saw for where that supply is going to come from. We -- you see us at 3.5 million barrels in the Middle East, they have it, make no mistake about it. And if you don't believe it go and look at what the Saudi Oil Minister said, not only does he say we have it, but 2 weeks ago, he identified field by field, okay? North America, you've just seen our forecast and then Brazil and Guyana. So then you look and go, "Well, is it enough oil? Is it too much? And if you're on the low side of that demand number, what's going to come off." That's what we saw for in that middle column there. And certainly, Russia is going to come off. You just don't know how much. So to solve for it, we have them coming off 2 million barrels, and you can read the rest. If you look on the left-hand side, and you believe those 3 buckets the rest of it pretty much falls into place pretty easily. But there will be times, then -- when we won't have enough and there'll be times when we have too much. And so here, just a reminder of what OPEC does, when we have too much. And people tell you that the shale barrel is the swing barrel in the world, don't believe it. The swing barrel in the world, first and foremost has been the Saudis in it and will be the Saudis. The Saudis have massive entitlements. They get bigger every year. And MBS, his stated goal and he's doing it. He's going to transform their economy. They cannot take low oil prices. So you see them stepping in. They've stepped in today to balance rural markets. And then let's go to my last slide. This one was easy to do because it was a rip right out of the Analyst Meeting in 2017. Some of you may have -- I had breakfast with one gentleman this morning who was at that meeting, I actually remembered and he said, yes. Enterprise at that time said we were -- the United States is producing 8.5 million barrels of oil, and we said we thought that was going to 12% by 2022. We had exported 0.5 million barrels in 2016, we said we thought that was going to 4 million barrels. Lo and behold, that's where we ended up, okay? That's not the point of this slide, not the point of this slide at all. The reason that people come to Enterprise Analyst Meeting is because what you're interested in hearing is our perspective, holistically on things, okay? And we can -- I can talk about them like their forecast, but they really are perspectives, okay? The most important thing on that slide is that little yellow box. When we presented this slide in 2017, it became a destruction for everyone. I mean it was a distraction. And finally, I asked whoever was doing slides at the time, I said, go to the little yellow box. And I said it says light and sweet. If it said rich and sour, the calculus would be completely different, but it says light and sweet. We, Enterprise had a perspective because we had been in the global markets for LPG for -- in a big way, as Jim pointed out, since 2009, we had a perspective, okay? We had a perspective about the world's desire for light and sweet. So we were very comfortable in showing the slide and discussing it. What's most interesting is for the next 3 years, myself and the Fundamentals team fought this bugaboo people concerned about the world was going to be a wash in naphtha. We were going to be a wash in LPG. I mean you remember all the articles that no way that anybody can drink at all, okay? We always defended it, and we found out that, that's simply not the case. We appreciate your interest in our perspectives. And we are very interested in sharing with them next. I think this concludes my stuff. But next, I think we're going to take a break, and then Brent and his team are going to give me their perspective on the commercial environment. Randy, is that right?

That is absolutely right. I don't know if it's going up. But yes, we're going to take about a 10-minute break. Be back about, call it, about 10 minutes after 9 or so, we'll get started. [Break]

Okay. We're ready to get started, guys. If you can make your way back to your seats. Our next panel will be our Commercial Group. I'll let them introduce themselves. And we'll go and get started. Brent, whenever you're ready.

On my far left is Zach Strait. To my immediate left is Jay Bany. Right here is Tug Hanley. And then Natalie Gayden and then at that end is Justin Kleiderer. You heard Randy and Jim earlier talk about 25 years of distribution growth. And today we're going to tell you a story about why we are still well positioned for the next 25 years. What I want you to walk away from this room with is an understanding of how strategic this asset base is, the integration, the optionality, the flexibility that we have. I would hope that you have an appreciation for the Enterprise culture and the passion of our employees and their dedication. And then lastly, the discipline that we have demonstrated in the past and that we will continue as we build and execute on a business plan and a platform that can support another 25 years of distribution growth regardless of the commodity environment that we're in. At Enterprise, we have had solid financial performance, and we've done that quarter-over-quarter and year after year, but it's not always reflected in the Enterprise unit price. I recognize that midstream multiples have changed over time, but we firmly believe that not all midstream companies are created equal. The time horizon that we have, has been and will continue to be longer than the multiple in which we trade. Today, we're going to lay out why we are so confident about the long-term prospects of Enterprise and why we view that we have decades of opportunity and not just this next decade. On this slide, you're going to see 4 assets. And all these assets were built between 40 and 80 years ago. Terminal value is defined as the value of a business or a company beyond a series of forecasted cash flows. These assets, I'm going to make the assumption when they were built or acquired was far too conservative. If you were to look back at these assets, we think Enterprise suffers from some of that same fate. We think the market's recognition of the resilience and the longevity of our footprint is also suffers from the same limited assumptions. The runway that we have here is long and the opportunities that we have before us are robust. And we're going to walk you around -- or walk you through 4 interrelated themes on the commercial business. We're going to first talk about growth then we'll move on to discipline. We'll talk about barriers to entry of our assets. And then the last thing we're going to talk about is volatility. Help me out, Michael.

Here you go. Right there.

Okay. You heard from Tony earlier on our production forecast through 2030. And if you were to look beyond 2030, our belief is that these volumes will continue to increase before ultimately plateauing several years down the road. If you look at the breadth of our footprint in the proximity of these world-class resources, our assets are strongly positioned to handle these volumes to make them available for both domestic and global consumption. And regardless of the demand forecast that you believe in, we think the U.S. producer is going to be a large part of this supply picture. Randy had a quote in one of his earlier slides and the quote was, "reality is stubborn". And we believe that reality will win the day that even if energy intensity does decline in developed nations that globally, energy intensity is going to increase as the world's population grows. And the world needs what Enterprise and U.S. producers have to offer. Fossil fuels are going to remain a large part of this mix. We think fundamentals will prevail. We've made significant investments to position ourselves to handle these volumes. And we've had some prior announcements about gathering and processing that we're doing out in the Permian Basin, and Natalie is going to talk about that here in a little bit. The other thing we're going to focus on growth projects is what we're doing around our export docks. We think that's paramount in terms of the volumes that we see and the demand picture we see going ahead it's going to be around 2 themes. It's going to be about flexibility around multiple products using the same equipment that increases doc usage in our facilities. And the second thing is going to be about loading rates. And how do we get loading rates up. But both these all equate to time is money. It's time is money, both for our customers and its time is money for Enterprise. And with that, now we will start us off with gathering and processing.

On this theme of growth, there really is no better growth story than the Permian. Now Tony told us that 93% of oil production growth in this country will come from the Permian. And which means that about 80% of NGL growth will come from here too. And in our business, capturing that growth really starts with gathering and processing. We've been pretty successful in the Delaware contracting long-term gathering and processing deals and over the last year in Midland after we acquired Navitas assets last February. We've got 4 new plants coming online that will add 1.2 Bcf a day of capacity to our system. And Tony, if you're right, we're probably not done. While these businesses can stand alone with great returns, it's really more strategic for us than that. We like to have a front row seat at the wellhead because that's where the value chain starts. I'd like to think of it as the starting line to win business on every single molecule produced from that basin.

If you go back to the Navitas acquisition and why we did that, that's a highly integrated asset base. It gave us a presence in the Midland Basin, which we wanted. But if you look at the integration and securing terminal value in assets that are full for a long time, that fit us like a glove. If you look at that business, it's 7 touches for us. 7 opportunities to make money. We get a fee off of gathering, we get a fee off of processing. We didn't get a fee on residue gas takeaway, we'll move on to NGL transportation, then we'll get a fee on fractionation. We'll get a fee on storage, then ultimately, that barrel has to clear. It's either got to go to one of our pipes to consuming plant or it's going to go across the dock, and Zach's going to walk you through with Tug about what we're doing on ethane. We're going to talk a little bit later about the difficulty of getting long-term contracts in this environment. But when you look at ethane exports, which is a big growth area for us, our customers insist on long-term contracts. They recognize it's a single-source product. It essentially has to come from this country, and they recognize the correlation that's going to have between natural gas. I know it's going to be a preferred feedstock. But when you look at the term of these contracts, they are probably as long, if not longer than what you would hear about LNG contracts.

Yes. So last year, we announced we were going to build this new ethane terminal and we were intentionally vague on details. We were trying to figure out build to make capacity and timing. So let's talk about what we're doing. At Morgan's point, we're taking one of our ethane refrigeration trains and converted into an ethane-ethylene flex train. So once this is in service, we'll be able to load 100% ethane, 100% ethylene or any combination of the 2.

Yes. There's a reason why this is so important to us and our customers because if you look at a cracker there's a planned turnaround or unplanned outage. It's no longer producing ethylene. But oftentimes, the back end of derivative capacity is still online, so they can still consume ethylene. It means a higher utilization of our customers' asset and higher utilization of our dock asset as well.

So moving over to Beaumont. At Beaumont, we're adding a 5,000 barrels an hour ethane refrigeration train, which once it's in service, our capacity to load ethane increases by 50%. And then if you look at both sites, both sites were adding 900,000 barrels of ethane storage tanks, which gives us the ability to load ethane at 45,000 barrels an hour, and you ask yourself, why is that important? Well, today's largest ethane carrier will now spend less than 24 hours at our dock.

Yes. Our customers really value the system because the geographic diversity that it offers and the higher loading rates as Zach mentioned. But we know why is this important? So we expect global trade flows to remain disrupted for quite some time to come. And Brent said it time is money, but every minute, the ship is sitting and waiting on a dock that is a wasted opportunity. And we're seeing this market go across all commodities is higher loading rates and larger ships to optimize and maximize freight. We're positioning ourselves to capture those opportunities. So there currently are a limited amount of VLECs on the market, the largest ethane carrier. And another benefit of higher loading rates is efficiencies in freight, but we're going to also achieve higher turns. And I'll give you an example. We have one customer with their existing VLEC fleet. They can increase taking 10,000 barrels a day across our terminal because today, it takes 4 days to load VLEC and in the future, it's going to be less than 24 hours. So with their existing assets and our higher loading rates will be able to get higher throughput. But sticking with the theme of growth, ethane exports are really a story of a demand pull. And again, as Brent mentioned, we fundamentally believe U.S. ethane remain correlated to U.S. gas. Make it at the most economic cracker feedstocks. So if you want to continue to be competitive, you want to debottleneck or you want to expand, you're going to be looking towards ethane. And we're also seeing the effects of LNG prices on ethane as well. Those who can consume ethane internationally and they can consume it as fuel, they have been doing so. And this is no different than what we could do here at Enterprise. If the price of ethane goes below natural gas. For example, we'll convert our fractionators to fuel off of ethane in lieu of natural gas. So we've been successful in contracting our new expansions at Beaumont and Morgan's Point, with long-term take-or-pay contracts, emphasis on "term". And we have recently executed several contracts. And when we leave here today, or we signed another contract for 240,000 barrels a day of assay and a term of up to 20 years. And we still have a strong international interest in ethane across our facility. And I'll tell you my passport is evidence of that.

Yes. I'll leave you with the demand for this facility, as Tug was saying, is still really high, and we can expand either one of the facilities by just adding additional refrigeration.

So speaking about easy expansions, we're bringing back there, we're bringing back the Enterprise Houston Ship Channel Rev expansion. This project is similar to the ethane, ethylene expansion and the fact that it's all about increasing refrigeration capacity, load rates, optimizing our existing refrige system and dock and then adding flexibility around the products that we load. The project entails a new propane, propylene refrigeration system a direct butane flow path to an existing unit. And overall, we believe this will add an incremental 8-plus cargoes a month to the capacity of the asset. They'll do that through an incremental 6,000 to 8,000 barrels an hour of loading capacity based on products ranging from propane to butane to fully refrigerated propylene. And when we think about that optionality in our dual cargoes that we know today, this project will shave off 20 hours from those cargo load ops.

Yes. We have enough docks. This is no different than ethane. It's all about higher loading rates. As the LPG story is consistent with what we have said in the past, it is a supply push. And if you look at some of Tony's numbers, exit '23 to exit '25, we're expecting propane and butane production to increase around 350,000 to 400,000 barrels a day. Those barrels will have to clear across the water. Unlike ethane, there's not a home in natural gas. So it's ultimately going to have to go across the dock. And our export facility already offers the greatest flexibility. We can fully load a propane cargo or butane cargo or any combination thereof, unlike some other terminals in the Gulf Coast that require their customers to load a fixed amount of butane or a fixed amount of propane. We like to give our customers a choice. And with the addition of fully refrigerated propylene, this will allow our customers a broader access to freight by being able to utilize the LPG fleet.

Just having spent a little bit of time talking about what Enterprise is doing expansion wise at the docs in the Houston Ship Channel. Probably a good time to talk about what the ports doing or give an update on that. Last month, the ports completed their segment 1A of the -- their Project 11, the deepening and widening of the Houston Ship Channel. So this month, we'll see a reduction in the daylight restricted travel up to an hour. That will double by 2025. And at the end of the day, what that means for Enterprise is ships are able to stay on dock longer, still meet a light cell and still show up earlier than before, and to Brent's point, time's money.

We've seen the upstream community maintain discipline since 2020. They've done a fantastic job. Chasing volumes at all cost is no longer the stated goal for producers. Producer discipline increased borrowing costs and higher capital costs due to inflation, that forces discipline midstream growth. And this is a very good thing for this sector. The great midstream build-out, it really took off the last several years of the previous decade, and I saw a graph a few weeks back, and it said there was a total of 4 interstate miles have gas pipeline built in this country, this past year in 2022. If you were -- that graph went back 30 years, but far and away, that was the least amount. Producers used to have production curves that all went from lower left, upper right, midstream companies like Enterprise would go into their office to try and get contracts. We get acreage dedications or take-or-pay commitments. But ultimately, you had midstream companies that felt justified to go in the right capital and move forward with projects. In the world that we live in today and with the restraint that producers have shown, trying to get 5-year, 7-year and 10-year contracts, those are much difficult to obtain, but that leads to more caution and leads to more discipline when companies try to figure out how those midstream growth needs are met. There's 2 things that are needed to secure revenue it's volume and fee. And today, I think there's a lot more conversations going on between midstream companies on how these projects get executed. The graph on the bottom right talks about access to capital for private equity. We think that market has slowed down significantly just from what we see in the rooms that we're in with and the producers that we meet with and an exit plan for these firms selects a lot that likes clarity in terms of how they get out. In summary, disciplined midstream growth is a much healthier environment than the one that we experienced the last several years of undisciplined growth that led to all these excess capacity issues of certain products.

Yes. When you think of what Brent is talking about with respect to discipline and look at just overall Permian takeaway for the 3 primary hydrocarbons, you see these 3 charts, and they all have 3 kind of distinct stories, but this theme of discipline really underpins them all. Talking specifically a little bit about the NGL side, a data point that I think is relevant. From exit 2017 to exit 2019, we grew production by 1 million barrels a day, so 2 years 1 million barrels a day. Based on exit '22 production, we won't hit that same 1 million barrels a day -- 1 million barrels of growth until exit 2029. So 7 years to do what we did in 2 years during the last major midstream build-out cycle. So what this means is, to Brent's point, that midstream operators have more time to be thoughtful about how we solve for this coming production growth over the balance of the decade. You'll note specifically in the NGL chart that we don't have the Shin Oak expansion in these numbers. We excluded that intentionally because of the amount of options we have in front of us within our own asset base as well as working with other midstream operators to solve our capacity needs. The expansion may still go on as announced. However, we're committed to the right project, not just a project to solve capacity needs.

And while you might call pipes to have a moderate growth, I'd say dry gas may have been a little too disciplined. It's likely no surprise anyone here, but dry gas takeaway still is the bottleneck for midstream takeaway out of the Permian this year as it was for last. Now there's 2 new brownfield expansions coming online at the end of this year and 1 new 2.5 Bcf a day pipe coming on at the end of next year schedule holds. And just to get that pipeline to FID, it definitely took several midstream parties and obviously, producers to make that happen. I only point that out because you ask yourself why, and one of the reasons could be that, that commodity only represents maybe 5% of producers' total revenue. So it's definitely a great challenge. There is no time to have commitment fatigue on the next pipe though, might say 1 or 2 pipes because you can see on that top right chart, the need is pretty quick, considering how long it takes to get a pipeline built.

The crude story is a little bit different than both the NGL and gas story. You could argue the industry was largely undisciplined in our approach. You saw 2 million barrels a day of production growth from 2017 to 2019. It prompted the great crude Permian build-out of which we participated. Although Enterprise did it in a disciplined fashion, I would say, different than the industry. From a capital perspective, we were disciplined. We repurposed an NGL pipeline for one of our pipes, entered into a JV with Wink-to-Webster for relatively cheap capacity. And from a contracting perspective, we were disciplined in going out and getting long-term, take-or-pay, contracts with creditworthy customers. Now as we look forward to the coming days really is Corpus pipes are full. We see the incremental barrels. They'll head their way to Houston. So as we value our uncontracted space, we're set up nicely. And then when we think about recontracting and, call it, the '27-'28 time frame, and you can look at the graph. We think that environment, we can be disciplined there as well.

Jay said this, with that graph on the bottom left, that is the definition of undisciplined growth. There's at least 1 crude pipeline that, in my opinion, should not have been built you could probably make the case of there's 2 pipelines. As we move forward, the opportunity set for Enterprise is as our contracts roll off and these incremental barrels that come on their pathway is to Houston. So we'll have a lot of opportunity. My opinion is you're not going to see a greenfield Permian crude pipeline built, again, less Tony's forecast as well understated in the growth percentages start getting a lot higher. So I think we're in pretty good shape when it comes to crude oil when it comes to recontracting and the opportunity that we see moving forward.

So just sticking with crude briefly on the disciplined approach with WTI inclusion into dated Brent happening later this summer, we find ourselves in a unique situation to help ensure our customers can access the global market through that platform, specifically around quality. Given our integrated assets, we've got gathering terminals, both at Midland and ECHO with both receipts into and out of the system, our long-haul pipelines and then our Platts approved docks. We plan to, at key locations, update our tariffs to mirror the specification on Platts, increase our sampling around be captains and metals specifically, and please the system. We want to do our part in ensuring that the WTI that clears our docks can blend in dated Brent.

Yes, the way we view fractionators it is the same as what the group's described. It's it's the right project, which means the right volumes and the right timing. I think we're unique in that we bring up new fractionators and they're full the day they go in service. So how do we do that? Well, we go out and we contract above what we consider kind of our base capacity, and then we lean on our South Texas, Louisiana satellite fractionators. We lean on our storage assets to warehouse volumes until these units can come online. In 2021 at our Analyst Day, we talked about idling 2 of our least efficient fractionators. And one of those is in service today. The other one will be in service later this year as we wait for fracs completion. And the way I'd like to think about it is our system flexibility allows for discipline. And as we look forward, we're going to continue to have discipline, user flexibility as we figure out when we need to build another fraction here.

We touched on this last year, and it still holds true. Any effort to replicate what we already have in the ground has gotten much more difficult to construct and more expensive. We've invested a significant amount of capital in strategic areas where existing footprint in right-of-way matter. It tends to construct what we already have in these corridors, it does require a best amount of capital. And frankly, in this high inflationary environment, that does provide its benefits. We think the cost between brownfield and greenfield expansions has gotten wider. We think that theme is here to stay and will continue to get wider. You're going to hear Graham and Angie talk a little bit later about how Enterprise maintains its assets. And I don't think it's ever been more important how we do that because of the difficulty to replace what we already have in the ground. And when we discuss barrier entry, I think you need to look at the map on the bottom of this page and look at the vertical integration, the Enterprise offers. When you layer in our existing assets, you couple that with the growth that we're seeing from certain areas, specifically in the Permian Basin, I think it tells a very compelling story for this company. I told you earlier that volume and fee are what is needed to build new pipelines. And both in declining basins and also small diameter pipes and highly congested corridors, neither one offers the volume that is necessary to have the right capital. This in itself is a barrier to entry.

Yes. When we talk about our network of assets, we always talk about connectivity and market access. But what I'd like to -- for you all to understand is just how difficult we think it is to replicate our system. So our Gulf Coast distribution system consists of over 8,400 miles of pipe, using an approximate replacement value of $2.5 million to $3 million. You're using -- you're talking about $21 billion to $25 billion to replicate. And frankly, I've seen some of those last mile cost closer to $10 million model. Building pipe in and around the Mount Belvieu area, around the Ship Channel, Houston Ship Channel, and through parts of the state of Louisiana are not an easy task, they're not getting any easier. For example, in and around the Mout Belvieu area. Sometimes we have to do deep directional drilling, sometimes 60 feet deep, which is much more costly than pipe would ditch.

Another example is our crude distribution system. These are large diameter pipes that leave ECHO and Enterprise Houston Ship Channel, accessing refinery road to the Houston ship -- or the Houston refineries down to Texas City. Those refineries are out to Beaumont. These last miles they're hard to access, right of ways are full. You have industrial, residential encroachment, natural waterways. It's cost prohibitive if not impossible to replicate.

Yes. If you move east towards Louisiana, we call that group of pipes delivering to industrial complexes around that Geismar, Baton Rouge, New Orleans area, the river corridor. And if the new pipeline is required to supply this region, say, from the Texas side, you've got to cross the largest swamp in the United States called the Atchafalaya, and not to be so literal, but that swamp is a barrier to entry.

Look, I think this slide does a really good job of highlighting what we call it our direct connectivity. But what I'd like for you to take away is that through our direct connectivity or indirect connectivity, we're connected to every ethylene cracker in the United States, and we're connected to every refinery on the Gulf Coast. And Brent mentioned earlier, it takes 2 things to make a pipeline project successful, volume and speed. And a lot of the pipelines on this map deliver smaller volumes than the larger long-haul pipelines that we traditionally think of. Smaller volumes makes it that much harder to replicate.

So moving to spot. Spot is all about barrier to entry. I think that's evident just in the permitting process alone when we started evaluating this project back in 2018, a project to fully load VLCC in 1 day with a fundamental belief that it should not take 5 ships all the greenhouse gas emissions, the cost associated with that operation and 2 weeks to fully load a VLCC. So we put our permit in, in January of 2019. Our application was originally 10,000 pages, and we expected a record of decision based on the regulations within 356 days. Well, fast forward to November of 2022, we finally got our record decision, the first. And our application had grown to over 30,000 pages, cost exceeded $50 million. And it took roughly 3 years over the time frame that we thought we would have received. One, I think that's -- it shows the determination of Enterprise and our fundamental belief in this project. I think the bar to barrier to entry was raised also in the scope of this project, tying it into our ECHO facility. We have access to 7 million barrels a day of supply, crudes from every one of the major crude basins. Then you talk about the environmentally. We offered up vapor destruction, 1 of 2 in the initial permitting process. And I think what you see there is the greenhouse gas emissions and the vapor emissions reduction 95% for vapor, 65% for the greenhouse gas. And so now that we have our record of decision, we go into contracting. I think this is where it could have been put in discipline. We're going to be disciplined. Similar to the Midland ECHO systems. We're going to go out and get long-term contracts with creditworthy customers. And we see, as we're doing that, the fundamentals for this project are even better than we first looked at it in 2018.

Yes. We've seen this playbook before using LPG as a reference. When that story started, first, those barrels went to Mexico, then they went to South America and they went to Europe. And as we stand here today, virtually every incremental barrel across our LPG dock is going to Asia. As that supply push continued, those barrels price in further and further away to get to market. Crude is no different. Today, we're around 3.5 million to 4 million barrels per day of crude exports with U.S. production continuing decline. We believe that crude exports will grow up to 6 million barrels per day by 2030. And as exports grow, the distance to get the market grows correspondingly and freight becomes a critical link in the supply chain. The terminal that provides the max benefit to freight, and this is on any commodity, we've talked about ethane and LPG is the one that can turn the ship the fastest and load it the fastest result in more turns. And in the case of crude oil, that is spot.

So I hand it to some of the inefficiencies that we're seeing today in loading VLCCs like to dive into a little detail about that and then layer on Tug's comment about these incremental barrels that are coming to get exported. And you can see here on the graph on the bottom left, VLCCs that require partially or require reverse lightering. Those numbers have trended up over the last year. You can see that we're exporting $30 million to $35 million through reverse lightering. It is -- it correlates very well with production growth. And what we've done here has been broken up the VLCCs into 2 categories based on inefficiency. The bottom; darker blue are VLCCs that are loaded at a Corpus dock, dock that can partially load. They go out to a lightering zone, and you'll see another 1 to 2 ships required to completely load that VLCC. But the top bar, those are VLCCs that leave the Gulf Coast that are completely reverse lighter. So I think 4 additional ships to get those loads complete. And as we think about the incremental barrels that Tug talked about, they're going to find their way into that most inefficient category. Corpus pipes are full. There's a cap to how much of the partially loaded vessels we can have. And so spot offers at the end of the day, a more cost efficient, time-effective and a much more environmentally friendly option, not only for what we're doing today but what we'll see in the future.

All right. Our last theme is volatility. In the new world that we live in, it's a much more volatile world. When I look at the Enterprise platform.

Go back one line.

Go back a couple.

When I look at the Enterprise platform, what I see is it's a bunch of options. The value in option is based on time and volatility. Volatility is created by shocks to the system, where the incremental molecule sets the price for commodity in that specific area. And when these things happen in enterprise, we could have a front row seat. And the front row seat is to watch the market's willingness to pay for certainty. Are they willing to pay for certainty and that's certainty that they want, that's what increases this volatility that we've been seeing. We think the volatility that we've seen since 2018, we think that's probably the new norm as we move forward. And we've got to experience that the last several years. Some examples of volatility that we've seen around the enterprise assets. If you go back to COVID, that offered us -- a record opportunity for us to capture contango. It's values that we have never seen before. We all know the story about negative crude prices. That's really what helped us get us through 2020 as that continued opportunity. If you go beyond that 9 months after that opportunity, we had record at record backwardation. That was the best opportunity that we have ever seen. We had gas trading around $600 to $700 at MMBTU around in Texas and Oklahoma, it wasn't a week after that and gas was back down to $3. If you look at geopolitical unrest and you watch the Russia invasion of Ukraine, you watch what gas prices did in Europe and Asia, they approached $100. That's the market's willingness to pay for certainty, all right? They had to pay for certainty. And the last thing is just the overall economic uncertainty that we see right now and it has existed for a while. I think, in my opinion, that creates some capital allocation polices are as companies are afraid to step out and figure out how to solve these issues. Tug is going to highlight some volatility that we've seen around our assets. And we're going to talk at a high level about how Enterprise participates and how we participate in the last couple of years and some opportunities as we move forward.and the fact that all these assets are so integrated, that further enhances our opportunity to capture these volatile moments.

You've heard us talk in the past about what our core strategies are to capture volatility. We've said we'd like to embrace volatility. Those strategies are time, location and product upgrades. But if you look at this slide, you can really see that the value of those strategies have gone up and how important it is to be able to capture that volatility. So I'm going to walk through a few recent examples on each specific strategy that we've seen, and I'll start with time. And using refined products, as an example, we have a tank position in the Gulf Coast. And in the month of December, this past December, we started the month out in motor gasoline and diesel were contango, the market set the store. So we went into the futures market and executed that strategy financially to receive barrels in and deliver them out at a later period in time to capture that contango value. Well, then we had a winter storm around Christmas that resulted in several refinery outages. The market was now backward, do not store. So we unwound that position in the futures market. And I will tell you, we did not even put 1 single barrel into a tank. So just by having the option to physically do so allow us to capture that volatility. Moving on to location. There are so many examples of list. So I'll try to keep it to a few. It could be Midland to Houston on crude, it could be Waha, East Texas on gas or Waha to the Gulf Coast on gas, many, many more NGLs, it could be our dock assets as well. But specifically on our dock assets, we have seen healthy premiums across every single commodity. We are at near record levels on ethane, LPG and crude oil across our assets and Brent said it earlier, but there is a premium for certainty in uncertain markets, and our docks provide that and it's called reliable supply. On the product upgrade. It really always amazes me how many different products we can get to talk to each other here at Enterprise. If it's normal to iso with our isom, if it's normal to motor gasoline with our MTBE plant, if it's gas to ethane or ethane a gas with our gas plants, there's others I'm forgetting. But just to highlight a small example, we have a limited refined products blending operation in the Gulf Coast. With that blending operational loan, we can get 8 different products to interact with each other, just show you the breadth of what our assets can do.

Periodically, we get asked on earnings calls about outsized marketing spreads. And I think Dan, you took a look at it and you gave me some numbers yesterday, but -- if you were to look over the last 5 years, that range is somewhere around the lowest is around the low 700s, the highest as we got up around $900 million. It averages about $815 million a year. right? It's hard for us to predict where these opportunities are going to come from as we go into the year. But invariably, they always appear. And we always go around and capture these volatile type markets. And we always say that we embrace volatility. So if we think the new norm going forward is you're going to have much more volatility, especially in these regional type markets, that could probably make a case that we'll even have more opportunity capture these type of opportunities.

Now we haven't shown you a rocky slide in a while, although somebody did ask me about it last night. So I'm proud to have a slide to represent it. But who highlights the declining basin. And this is just certainly one of those. But it's a great example of an overlooked region that still provides significant value to the integrated value chain today -- or significant cash flow to the integrated value chain today. So while production buying these assets may not be growing like the Permian, the lack of production, combined with volatile demand from the West Coast market which you might blame on renewable energy bobbles and lack of pipeline infrastructure expansions. It's really one of the reasons we're able to extract even more value from volatility from these legacy assets. Lower supply has certainly added to volatility for the gas markets in Western Wyoming.

They're no longer a watch in gas. And as Natalie mentioned, they serve markets like California that have made big renewable pushes without having backup generation. But if you look at this slide, you can see that the volatility is very pronounced in SoCal, Kern, CIG and San Juan. But if you look on ethane, it's pretty boring relative to those gas markets. So we need a couple, it's time for us to exercise a product upgrade strategy. Kern was over $30 in MMBtu. So we rejected ethane, propane and butane significant margins relative to gas. So what are gas processing plants. There's just another option in our kit. They allow us to take NGLs from gas or put NGLs back into gas. Enterprise is technically not a gas producer, but I will tell you, we can sure make a lot of gas if the market tells us to do so.

You heard from Randy how fragile the grid becomes when the sun isn't shining and the wind isn't blowing. And really when those things turn off, how dependent the energy mix is on natural gas. So during these times, we've seen our Texas pipeline demand swing almost 200%. In 12 hours, we can see a high winter demand and a perfect weather, no demand in just 1 day. Last year, we didn't really advertise it, but we doubled the outbound capacity of our Texas salt domes caverns gas storage because we knew that during times of volatility, the market would have a call on immediate demand. What you see during harsh winter events is basin production frees off. and the market willing to pay for certainty and most of that certainty is in the ground during those times. The background of this map is population density by county in Texas. And I kind of wish we showed Texas population growth against the U.S. Because if you think of the growth of population in Texas and the lack of or nonexistent investment in new gas-fired power gen, it's really one of the large reasons for how fragile the grid can become during those times. So a major point here. I did have transition to renewable energy as the gift that keeps on giving, but I turned that one off. And if you think about it, transition to renewable energy creates more volatility. Why? Well, renewables are intermittent, intermittency creates agility, fragility creates volatility and then we participate and embrace it.

As marketing; last year, we said we had around 400 million a day of open capacity along this system from Waha to East Texas or a to the Gulf Coast. We like that position. We still have it. Natalie touched on it, but the volatility that renewables have added to the grid are pronounced. But you couple that with tight infrastructure that we talked about earlier in the slide. It really does add a lot of fertility to the gas market. And we feel there's going to be great opportunities for spread capture until new infrastructure comes online. But I just don't want to discount the fact that even once that new infrastructure comes online, there's still going to be great opportunities due to that volatility associated with the renewable push along the system.

Yes. So we've been talking about volatility with respect to how we utilize our existing assets to take advantage of those opportunities. But water refined product system and really what we're doing on TW really shows you is how we use it as a guide on where to go because that's really at a cool what the volatility is when we think about where we should go as it's a guide. Brent, you often call this project the COVID baby because it emerged from a challenge during that time to do more with what we had. And identifying the volatility in this Rockies corridor, we'll call it, was a product of that effort. As we look at what's changed since we announced this at Analyst Day last year, and you can see in the chart, the signs of volatility and the market needs shows and reinforces us that this is the project we should be pursuing. The TW system will serve as markets that are structurally short products, often leaving rail imports as the marginal barrel to solve that imbalance. And when disruptions do occur, such as refinery maintenance or unplanned outages, that marginal barrel can often command a significant premium. Again, you can see that in the charts. On the project execution front, specifically, the Permian and Jaw terminals will be on at the end of the year and the Albuquerque and Grand Junction terminals will now be on at the end of the first quarter of next year. And when you look back at our TE system, that system really gave us the blueprint on how we intend to execute the TW system commercially. The system can offer 11 different products. They all have their varying puts and takes and relevant geographies. And really, you can sum that system up as a volatility catchers smit. And that is what we're going to try to replicate on the TW side as we bring that project forward.

Yes. If you look at this slide, you can see that in the Chicago component of it that Chicago versus the Gulf Coast started experience and volatility following February of 2022. But prior to that, it was pretty quiet. Now if you look at the PADD IV spreads from Albuquerque and Grand Junction as an example. Those spreads have been volatile in the past, they're volatile a day, and we expect them to be volatile in the future. I'd like to think of the PADD IV refined products market as the wild west of refined products basis. And there's been also some refineries that have shut down or converted to renewable diesel, which is adding to further volatility in these markets. Justin mentioned it, but this is really about us chasing volatility. So how does marketing participate in this? One, we are not a refiner. We do not have to clarify on products on a daily basis. The market tells us the movement from the Gulf Coast, we will. Honestly, I could see us being a buyer of refined products and importing them into our terminals. The market tells us to do so. You can see there's been some time periods where the basis went negative in those various markets along the TW system. There's another value add here that you can't readily see, but those markets are a higher altitude, requiring different grade specifications, lower octane ratings. So this will add another product upgrade or blending strategy for us to execute on when it comes online. But I started off by saying how we like to embrace volatility. This product is a prime example of us just doing that.

I think by most measures, Enterprise has had a very successful first 25 years as a public company. And I think the graph on the bottom of this page shows you a portion of those 25 years. And it's a graph that I think all employees of enterprise past and present should take a lot of pride in. What you heard today is the story about why we are so well positioned for this next 25 years. The value of this company is going to be extended by growth. Tony talked about what we see coming out of the Permian Basin. It's going to be strengthened by discipline. Let's recognize that producer discipline is a very good thing for midstream. It's going to be protected by barrier to entry. Everything we have in the ground today is worth more money than it was yesterday. And lastly, it's going to be enhanced by the volatility that we have experienced recently that we think is the new norm as we move forward. Individually and collectively, each of these increases the value of the fully integrated asset base. Individually and collectively, each of these increases the value of the fully integrated asset base. It increases the value for our customers, both domestically and internationally and also for Enterprise unitholders. And the last thing I'd like to add is what separates sustainable versus short-term success is the culture of an organization. And I think what we have here at Enterprise is very special. Dan had a motto. And it was a very simple motto, it was do the best you can every day. I think Randy showed it earlier. But that motto still lives on at our company today. Thank you for your time.

If you hadn't figured out, it was a few years ago, we decided we weren't going to curl up in a corner when things got volatile. We decided it was -- we were going to embrace it and make money out of it. And I think these guys just showed you, we've got the footprint to do that. A lot of you ask about outsized spreads every year, and we say -- we tell you what they were. But we also tell you we're going to always have them. They'll just be in different places, and that footprint is what allows us to capture wherever they are. We broke Petrochemicals out from the commercial group because when Becca came on the Board, the first thing she wanted to talk about was Petrochemicals, right, Becca? So you take that first slide, and then I'll get into the other.

Every year, we start off the petchem segment with a review of fundamental concepts because I think it's pretty important to understand where the industry is going before you can really understand how it's going to impact the Enterprise petchem business. So this year, I have 2 concepts that I want to go through. The first one is around growth. So the chart on the lower left there shows per capita GDP versus petrochemical consumption. And you can see that as a country becomes bigger or more affluent that they consume more petrochemicals. And this makes a lot of sense if you think back to what Randy talked about, about how petrochemicals were 1 of the 4 pillars of modern civilization. It's because petrochemicals go into virtually every product that you buy. Virtually every product that is manufactured today has some tie to petrochemicals. And so as someone becomes more affluent and buys a bigger house, all the products that they put in that house have more petrochemical demand. The second concept is the crude to gas spread. Now you see this chart every year on the lower right. And usually, it's for different reasons. What I want to talk about today is the impact of petrochemicals. And really, this chart is the whole reason we have a petrochemical industry in the U.S. It's because of crude to natural gas. And the way to think about this is the rest of the world uses a crude-based product to make ethylene. They use naphtha. In the U.S., we use predominantly a natural gas-related product, ethane. And so the difference between crude and natural gas is the advantage that the U.S. producer has. But it's not just that. Lower natural gas means lower energy costs. And petrochemical facilities, in particular, use a lot of energy. So there's 2 key advantages that the U.S. petrochemical has -- industry has over the rest of the world. That's feedstock and its lower energy costs. So if you think about this: one, the world is going to need more petrochemicals because the population is growing and becoming more affluent; and secondly, the U.S. is one of the most cost advantaged place in the world to do it because of feedstock and energy costs. So we should see more petrochemicals in the U.S.

And back in the early 2000s, a huge petrochemical consulting firm came out with a statement that said that U.S. ethylene production would shrink from over 50 billion pounds a year to 35 billion pounds a year because U.S. crackers could not compete with Middle East crackers. Today, we have 94 billion pounds a year of ethylene production in the U.S., most of it located on the Texas, Louisiana Gulf Coast. Okay. This is what ethylene and propylene volatility looks like since 2005. And it was like that prior to that. Believe me, I lived that for 23 years. This is what I think a lot of you guys think about when you hear us saying we're in petrochemicals. But that's not us. And what we want to show you is that you can apply a midstream model to petrochemical commodities and have a much more stable earnings than -- the other thing is when things are good, petrochemicals are their own worst enemy. They just go out and build plants. I have sponsored a couple. But invariably, they work it off. Earlier this week, I was with some CEOs from 3 different petrochemical companies, and they were asked, are you in a recession? They said, no, we're in a trough right now, near term. But what they said was they expect the second half of '23 to be much better. And I was surprised when they said, we think '24 will be like '21, invariably grow out of your inventories, you invariably eat up your overuse capacity and then here comes another. But this is not us. So much [indiscernible].

So the chart there on the lower right, you can see the same line, the same volatility from the previous chart we just looked at. So ethylene, propylene prices very volatile. You see the chemical industry being affected by that and their profitability. The blue chart or the blue bars beneath that those lines is Enterprise's Petrochemical gross operating margin. So you can see that we have a stable base. But then when prices blow out, we take advantage of that or are advantaged by that. So why is that? Well, a lot of it has to do with the fact that we're fee based for predominantly most of our revenue. But the other piece is how we structure our contracts. So I'll go by business segments, so you can understand a little bit better. On the Propylene side, we have PDH. We talked about this many years in a row. We're all cost plus on that. So that's all fee based. We do get a little bit of benefit if we run above nameplate, we get to take advantage of that propane-propylene spread. Our propylene splitters. We buy refinery-grade propylene. We sell polymer-grade propylene. The way that we turn this into a fee-based business is that we buy our RGP on a PGP minus basis, and we sell our PGP on a PGP basis. So what we've done there is we've created a fee base. But then on top of that, about half of our contracts, we added a provision so that we get a kicker when the RGP-PGP spread blows out. So we take -- we're allowed to take advantage of that spread or participate in that spread when it's wide. And that's why you see the Propylene margin for our business growing when that spreads wide. Our Ethylene business is almost all fee based. The only piece that's not is only run above nameplate on our export facility, we're able to take advantage of that volume for the Arb. But our C4 business, that has some commodity exposure to it. Our iBDH plant that we started up in 2019 is the same model as PDH. It's all fee based. Our high-purity isobutylene plant, again, we sell on a cost-plus basis, so that's fee based. But our MTBE plant, we're exposed to the normal to gasoline basis. So MTBE is octane. It goes into gasoline blending. So the way that we try to turn that more into a fee based is that we hedge the normal to RBOB spread. And we do that 1 to 2 years out. We still have a little exposure on what we call the uplift, which is the premium that MTBE will sell at versus natural -- versus gasoline. And you'll see in years where that spread has blown out like last year and the first quarter of this year so far that we benefit on that spread quite a bit. But we are still predominantly fee based as a total segment, and it's because of the way we structure our contracts.

So what I like to call it is we want an annuity with upside. And that's what we're trying to build in. And without mentioning any names, what about your idea of creating more refinery-grade propylene?

I mean even on that, it's fee based with an upside kicker.

Okay. What are you talking about? Do you want me to do it?

Sure.

Okay. I was in India, Brent and I were, and Bob, and we met with Reliance. And they took us up to that huge refinery. And it's 1.2 million, I think, barrels a day. And we went back to Mumbai and we had a meeting with the Reliance CEO. And he said, Jim, that refinery you visited is going to be a huge petrochemical complex. I'm going to do crude to chemicals. Now they're primarily interested in the aromatics in Asia, I think, while here, we're interested in olefins. So Chris' team has been in discussions with several refiners about how do you produce more propylene and less gasoline? Do you believe gasoline is flat to declining and propylene is growing at -- ended up totally screw you up and propylene is growing at 1.5 times GDP. It looks to me like we want to produce more propylene. We're trying to be creative in how we grow this business. I don't think you're going to see a PDH 3. There's only one person who can authorize a PDH 3, and I think I can talk her out of it. We have plenty of dehydrogenation. Where we want to grow is building on that annuity with upside concept, and then I think you're going to get into the other. Okay. This is [indiscernible]. Okay I can't -- I can barely see it. But that's not in my package. But what I wanted to make a point of, you see the growth of our Petrochemical business. And you noticed in 1979, if I'm not mistaken -- I don't know where Randy is, but I think that was the first tower that Dan built in Mont Belvieu, oddly enough, it was a refinery-grade propylene tower. And then you can see the steps along the way as to what we put in. But I want to focus on the one that says DK, Diamond-Koch. As I look back, the Diamond-Koch acquisition, where we got salt dome storage and how many splitters?

3 splitters.

And 3 splitters was the most strategic acquisition our company has ever made. And I'm not convinced we knew it then, but we had 9 salt dome wells. Because of that acquisition, we now have 37 salt dome wells. And you wouldn't see all those towers. You wouldn't see that high rate export without those salt dome caverns. That's the base that you -- that allows you to put up 12 fractionators, a PDH -- 2 PDH plants, 2 iBDH plants, an ethane export, an LPG export, an ethylene export, a propylene export, it all comes, the base of that whole thing or those 37 caverns. And that's what we got. And Randy, I can't remember what we paid for it. DK, Diamond-Koch $150 million? $120 million. So not only was it the most strategic, it was the best price.

I want to talk a little bit about why we're fee based. And really how we're the same as the rest of Enterprise. So as I think about all the Enterprise businesses, there's really 4 core competencies, 4 things that we all do the same. And it's no different for Petrochemicals. We store, we like hubs, and we build those hubs out. We transport through connected headers. We export and we process. And if you think about the Petrochemical business on those terms, it's really no different than any other business within Enterprise. In fact, if you think about the products that we handle in Petrochemicals, they're really very similar to the NGL business. Think of propane as propylene, think of ethane as ethylene, think of butane as butylene. And really, for that matter, a lot of our customers are the same. The only real difference is we have smaller volumes in petchem and our price -- the prices that we get are a little bit higher. And they have to be because of the smaller volumes. We show this picture most every year in some part of the presentation. I don't think we've ever shown it for Petrochemicals. And I wanted to show it this year with all the Petrochemical assets, so you could get a sense for the scale of the business. And really, we have massive assets. If you look at -- in the upper left-hand corner, you can see all of our PDH and iBDH assets, they really take up that whole section. But even in the front ground of that, you can see all the Petrochemical assets. So our Petrochemical business is the largest producer of propylene in the U.S. And with PDH 2, we'll be the largest global producer. And the same with our isobutylene business, we're the largest producer in the U.S. So these are massive assets with very good scale.

Okay. For the longest, how we priced our propylene frustrated me to no end because it was called a contract price. And buyers and sellers would talk most of the month until somebody caved and everybody agreed to a price. It was the 25th of the month and what you were producing before you really found out what your price was. And we decided this doesn't work for us. Now at the time, our propylene system was like Hotel California. It was easy to get in, but you could only get out through Enterprise, which discouraged people from wanting to do storage deals with us. We wanted to go to an index price, but there's no way to go to an index price with a closed system. So we opted that we were going to open our system up, allow people to nominate out on our pipelines, on their pipelines. We were going to make it a storage hub with a distribution network and an export capability. That index price brought in supply. And hydrocarbons is, has been and always will be a supply-driven business. But it also brought in options, things like backwardation, more opportunity to do contango when it made sense. So we've been pretty successful on creating a hub for propylene. And the traded volume is just going to the Northeast. I have a lot of hope that this becomes much bigger as time rolls on.

Yes, the way to think about hub, it's not just a storage facility. It's really the connectivity that you have that makes it a hub and makes it valuable, makes people want to be in that system. And as you saw from the chart a couple of slides ago, the history over the petchem business, we've built our propylene system out over the last 40-plus years. And it's a really massive system today that stretches the whole Gulf Coast. We go from Corpus Christi all the way to the river. We gather RGP from all the refineries along the Gulf Coast. We have pipeline connectivity to the Midwest, where we also receive RGP. So we're able to receive RGP from 2/3 of the refiners on the Gulf Coast that export refinery grade. And we're connected to almost 85% of the consumption on the U.S. Gulf Coast. So the system that we have is very well connected, and that makes the hub valuable.

So let's talk about exports. On propylene, you get about $0.06 a pound. Is that right?

It's -- at times, we can get that. Typically, it's $0.025 to $0.03 per pound.

So how much is that a barrel? $5, $6?

$5, $6 a barrel.

Yes. On ethylene, how much per barrel do you get?

It's about the same.

Okay. On ethane, I'm looking at you, Zach, what do we get? So give it $2 per barrel? $2.50? $3? Okay. Same thing on propane, Ted? $3. Okay. My only point is, we're talking about $3 to $7 or $8. So you hear a lot about Corpus Christi and crude oil exports. And we're having a record year -- a record month, I think, in crude exports. But Jay, what is the spot rate for crude export? $0.40. I'd rather have $3 to $8 on the light ends, and we're going to export over 73 million barrels of hydrocarbons, I think, Zach, this month. And a vast majority of it is at $3 to $7 a barrel. Now yes, we've invested in refrigeration, but I'd still rather have what we have until spot comes on. But I just wanted to make it the point that we are a huge exporter of hydrocarbons, but we certainly like the light ends better than the $0.50. And I can tell you, spot won't go for $0.50. Okay. That's what our ethylene system looked like in 2018. We just -- we had a dream.

Yes, this is what it looks like today. So in a pretty short period of time, we've built out the system. And so today, we've modeled this after the propylene system. We have a pipeline that stretches from South Texas to Mont Belvieu. You hit the Houston Ship Channel and all the consumers and producers along that. We have connectivity to our hub, and you can see the volumes that have grown in our hub. So this is a system that's grown pretty quickly. And if you think back to what I talked about on the very first slide, the fundamentals, that's the reason why because petrochemicals, ethylene and propylene in particular, the production and demand have grown. And that's what's driven the need and the demand for our system.

The dream that these guys have is to have that pipeline all the way to the river. And we've got a pipeline we can repurpose if we find that we've got the demand over there. The 2 companies that I'd like to point out you have connectivity to are Celanese -- go back one. Celanese and Oxy, both huge shorts. Celanese doesn't produce ethylene. Oxy's is down in Corpus, and it's tied to a Mexican joint venture, if I'm not mistaken. On the river, you've got people that have huge shorts, I think, in ethylene. So the dream is to have a header system from Baton Rouge to Markham which ties into Equistar and Oxy pipe all the way to Corpus. The dream is to have a header system much like the Aegis ethane system.

I'd call it a strategy rather than a dream, but...

Well, he's looking, it's not February [indiscernible] bonuses. Okay. We operate -- I think Zach already hit on what we're doing in terms of expanding our ability to export ethylene in combination with ethane in our flex train. And then the expansion at the Ship Channel on the LPG, which I think I mentioned, gives us more capability to export propylene. So from an export perspective, if you look at the chart last year, we exported almost 35 million barrels of petrochemicals. And remember, those are $4 to $7 a barrel exports.

And the reason we're doing the expansions is because the demand is there. So higher fees, more volumes, it's a good business to be in.

That's yours.

Yes. I'm going to wrap it up with where we started at. A couple of key concepts I want you all to walk away with today, one is that the margin that we produce for the Petrochemical business is stable, fee based, but we also participate in upside when spreads blow out. So it's a really good business to be in, but predominantly fee based.

And 2019 or '20, I gave these guys a challenge. I said I want to say $1 billion of gross operating margin out of Petrochemicals by 2024. They did $1.1 billion in 2021. And 1.12 -- $1.2 million in last year.

A little over $1 billion in 2021, $1.2 -- $1.15 million this last year.

You should have rounded up. So these guys have gone far beyond what I expected. And the problem is there's no going back. It's only up to the northeast from here. And I think is it Graham and Angie?

I think we have question and answer next.

Oh, do we? Randy, do we have question and answer now?

Yes, we do.

Okay.

Okay. We're going to take questions.

Randy, do you want to come up? You're going to get some questions, you may as well come up.

[Operator Instructions] So over here.

Neal Dingmann with Truist. My first question, maybe for Chris, just following on what you were just saying on propylene. I'm just wondering near term, could you talk about what the growth opportunities, I would say, between this year and next year. You mentioned that you're the largest producer right now of propylene. And Jim mentioned about the -- obviously, the margins are superior versus some of your other products. I'm just wondering what is the growth opportunity maybe through next year that you see.

I think the most significant that we have coming up is the start-up of our second PDH. So we'll be mechanically complete here in a few weeks and by the end of the first half of this year. So end of the second quarter, we'll start that facility up, and that will start generating a whole bunch of fee-based revenue cost plus propane-based economics on that.

And then just lastly, you mentioned you can take advantage of some of the blowouts and different things. Can you tell us again, I'm just trying to make sure I understand that based on sort of the fee base that you all have, how do you take advantage of when you have some of those blowouts -- temporary blowouts and such?

Yes. I'll take that. I'll give you an example of a contract. One of the things we decided is we really need to give these guys exposure to polymer-grade propylene. The refinery-grade propylene index doesn't do justice. So what we did is we said, okay -- in one particular case, we said, okay, we're going to give you exposure to polymer-grade propylene. We'll buy your refinery grade at polymer grade less 7 or whatever it was 8, I can't remember. And -- but if it gets above 14, then we share that spread 50-50. Well, this month, it's been about $0.34. So that's how that works annuity with an upside.

Michael?

Michael Blum with Wells Fargo. I think I have a couple for Tony, and then maybe one for the commercial group. Just for Tony, just you talked about the need to the extent there are LNG exports above what your current forecast is and need more gas. And one of the places you listed was Appalachia, but I'm wondering how you think we get any more gas out of Appalachia? And then second question for you is just you manage that, OPEC is going to manage the price. What do you think that price now is that OPEC needs to float their economy?

Okay. Both good questions, Michael. We modeled that Appalachia has something bigger than a B and probably something smaller than 2 Bs, somewhere in that range of incremental capacity that's coming even before Mountain Valley. So it's not a lot, Michael, but it's not nothing. Other than that, you have to have permit reform. And I think the poster child in all of this is Mountain Valley, we'll see what happens. But do I think you're going to have sweeping permit reform in the Northeast? I wish. It'd be good for liquids business on the Gulf Coast. But Jim, I don't know how you feel. I have my doubts.

Yes, I'm a little more optimistic. Randy and I were in Washington not long ago. And we got from Democratic senators that there is a bipartisan support for permit reform, but you think about it. If they want to electrify, they've got to build transmission lines, and if they're going to build transmission lines, they've got to have permit reform. And you're not going to -- and there's a certain senator from West Virginia that is not going to let that just be transmission lines. So I'm a little more optimistic when I was at AFPM this week. The CEO of AFPM that spends -- lives in D.C. I said -- he asked me what I hoped for this year? I said I hoped for permit reform. And his comment was, I expect permit reform. So we'll see.

That would be wonderful. Relative to OPEC, I think the quote that a lot of people have or a number that they have is they look at Saudi's entitlements. And they'll say -- people do a calculation and say they need $100-plus a barrel, for example. If you go back and you look at because they're public, which is really great because people like I can -- myself and our team can dig in, that's really not their marker. I think their behavior has been that once crude gets something that either has a 6 or even a 7 in front of it, they begin to have trepidation, they begin to speak up. It's not that they do it overnight, but they begin to speak up that we're watching these markets, and we don't like these prices. So do I think it has to be $100 for the Saudis? I do not. Exactly what their range is going to be. I don't think there's a fixed number, Michael. I think they don't completely control the market, and it depends on a lot of factors. But I also don't think that they want $140, to be honest with you. I don't think Saudis want $140 at all.

And then just one quick follow-up, if I may, just on clarification on the Chinook expansion. Can you just -- I want to make sure I heard that correctly. Are you now not doing that expansion? Just where does that stand?

In relation to Chinook? So I think we have some opportunities to move Y-grade, and we're working with other pipelines where we have JV ownership in. And we're trying to just figure out -- I think Justin said it, we're just trying to figure out the right deal. So that project is on the table. We're just trying to figure out if there's a better way to do it than doing it with Chinook.

Well, let me do -- let me add a little clarity. We're going to do the Chinook expansion, just not now.

Keith Stanley with Wolfe Research. So you gave a lot of details on seeing more marketing opportunities, just given volatility across markets, locations, obviously, hard to predict. But I guess my question is, last year, I think the company had a record, about 25%, 26% of gross margin from marketing and spread-related opportunities and commodities. Do you see that as kind of a new normal going forward for the company that you could have those levels of opportunities? And when you talk about Project 9.3, what are you assuming for that area of your business, which is pretty sizable?

Let me be clear about something. And Randy, you may help on this. When you say marketing, marketing has a lot of contracts that are fee based. So most of our LPG exports, for example, go through marketing. Marketing holds those contracts, and those are fee-based contracts. So don't get confused with what's shown in marketing and what is spread based. Is that fair, Brent?

Fair.

So I don't know how to answer your question without understanding -- without knowing -- it's not 25%, it's something less than that because all of our -- do all of our export deals go through marketing?

They all do.

So be it ethane, propane, propylene, whatever, it goes through marketing, and those are fee-based bid deals.

Okay. Let me -- maybe I could rephrase it. Just you had a really good year last year in terms of having a lot of commodity and spread-related opportunities. And it doesn't sound like the tone is that that's dying away or moderating in any way in the future. So how are you thinking about that in your outlook?

The way I think about it is we will have those opportunities. They will just be different, and that's what I tried to say earlier. The footprint gives us the opportunities. So right now, he's talking about MTBE uplifts. That's been $0.85 on top of $1.40, $1.50 normal butane. That's $0.85, and that's a gallon. So it was -- there was one time, hell, it was flat, but it's blown out now. If that doesn't blow out, then refinery-grade propylene will blow out. Are you going to have a North-South spread? Are you going to have something on crude oil? Are you going to have West to East? It's always something. And I hear this a lot. And we've said it in an earnings call, spreads are normal. It's just they're different every year. So I probably didn't say it, I'm sorry, but that's the answer.

Okay, over here.

Theresa Chen from Barclays. I actually have a question for Tug related to the demand pull aspect of ethane trade flows and the many stamps on your passport. As we think about the substitution in terms of ethane for natural gas fuel switching, what are the limitations of that in your industrial customers for thermal gen at all? And then also, as we think about ethane as a feedstock in the far east for petchem cracking, as Russian naphtha incrementally makes its way to India and other markets and our ethane has to compete with that, how do you think about that as far as ethane export economics go? And I have another question for Chris afterwards, please.

All right. I'll try to answer your first question on the fuel component on LNG. So each facility is different. Certain facilities, for example, can consume or burn more ethane, but still have to have a limited amount of natural gas coming in, fractionator, cracker or refinery. So it's kind of a mixed bag on the question. But I will tell you that higher prices when we saw LNG prices at those really elevated levels last year, people started to get creative. And we saw refineries bringing propane internationally. When refineries consume propane in lieu of natural gas, there is more propane demand across our docks, those facilities that can receive ethane specifically, you start to really tune your asset to knock out that expensive LNG price. There's a big economic motivation to do so. But it's by a facility. So it's kind of a mixed bag on that. And your second question was naphtha weight on ethane in Middle East?

Deeply discounted Russian naphtha.

Yes. On that note, just I look at the naphtha barrel and it's got a lot more homes. It can make its way in a lot of different markets versus just the cracker pool. So we'll have to see how that plays out relative to ethane. But if you look at the Middle East, you can see the CP Chem deal with Qatar. I mean they're acutely aware of as well the advantages of that thing. So others are making investments over there as well.

Let me give you an example. When we had a Zoom call recently with the CEO of Reliance -- I should have said a big Indian [indiscernible] company. But they take about 85,000 to 90,000 barrels a day of ethane from us. And when we -- I talked to him about what the guys talked about that we were doing to expand our capability to export ethane. His right-hand man was also on the Zoom, and he turned to him and he said, you need to order another ethane ship because we're going to want more. And he knows how to crack naphtha, but he's going to take more than 100,000 barrels a day of ethane. Also, I am convinced that at least in India, they burned a lot of ethane this year because it could land at a heck of a lot cheaper than LNG.

Chris, on your views on the octane-enhancement business, can you talk about your outlook? And generally speaking, is it possible for you to repeat what you did in 2022, just given the global tightness of octane and in part due to the sulfur restriction stringency increasing in multiple markets that typically has an inverse relationship with octane?

Sure. Our MTBE is 100% exported. So as you think about naphtha, and Tug alluded to it a little bit, it's placed in the fuel market versus petchem, but cheap naphtha has generated a demand for octane. And to go back to what Tug talked about, even though if naphtha is discounted, it's still -- and Jim hit it as well, ethane is still much more competitive than naphtha. But I mean octane, our view is demand is going to remain pretty strong.

I looked in [indiscernible] this morning, I think ethane is selling for 12% of crude even at rate, and that's pretty damn competitive feedstock.

Okay, next question, Gabe?

Gabe Moreen with Mizuho. Brent, I just wanted to maybe ask on spot in terms of how costs are trending there as this takes a little while, I think, to get across the finish line and also to what extent costs are -- Enterprise is trying to mitigate those potential costs and plan for them? And what extent is coming up with customer conversations and then the prospects for having a financial or strategic partner in the project?

You want to take that Jim or you want me to?

I think Graham can take the cost part.

Question, Graham, was about cost on spot.

Yes, certainly, in an inflationary environment that we've been in since -- and you look at when we filed the permit back in 2019 to where we are today, costs are up considerably. We are still working to mitigate those costs. It depends on when we get the license and actually what the market for some of the final commodities and labor is going to be when we actually move forward with it. But certainly, costs are up quite a bit from when we first initiated the project. And you can look at we're in probably growth rate of 20%, 25% from that time.

But -- and we have been scrambling. Brent and Tug spent 18 days in Asia. When was that, November?

October, November.

And I met them in Mumbai. So I didn't spend 18 days in Asia. But I've met with CEOs of major producing companies and major oil companies. And my pitch has been, you ought to want this built as bad as we want to build it. And by and large, we're getting positive comments. Now you've got to get them across the finish line, but I personally think this is a project that needs to be built. And I think it's going to be something -- we just need a few. And we're getting -- I had one guy that -- he was our anchor, one CEO said, if it worked for us then, I don't know why it wouldn't work for us now. Another said, Jim, this is a topic of discussion in our commercial group every day.

I think if you look at costs, and yes, the cost to build this have gone up. But if you look at freight, and we spent a lot of time talking about freight, the cost of freight has gone up even higher on a percentage basis. If you look at Aframax vessels and what's been taken out of the pool, you look at the order book as you move forward, that order book is not very deep. So when you look at how we commercialize this, yes, we want long-term deals, and we're going to need long-term deals, and it's going to be apart from a producer push. And in the end, I think producers are going to have to sign up for something. And we're going to watch the flow patterns as more and more barrels make their way to Houston. And as more barrels make the way into a market, that's how arbitrage opportunities start opening up. So if you look at the class of shippers on this, I do think you're going to have larger U.S. producers step up to help push this thing over. I think you're going to have people that have a large freight position on the water, that are very large crude traders that want a piece of this. We'll probably -- we've had conversations on the demand pull side. I think we may get a couple of those. But I think the majority of this is going to be from a producer push here, U.S., I think it's just more consolidation upstream in the Permian Basin. I think that helps, frankly. And then also just the trading community that see the advantages from a freight perspective.

And then maybe I can just ask a quick follow-up to Tony. You've got to have to be come out of Haynesville through '25 in terms of growth. It seems a little stingy relative to some other folks out there. Is that just a function of the forward curve, the LNG growth air pocket we've kind of got here? Is there some other fundamental you've got on the Haynesville or Delaware basin?

We adjusted it "real-time" for what's happened to prices. If there's anything in our forecast that is likely to change first, that could be it. But had we not adjusted it, we've shown, for example, 4 Bs of Haynesville growth. There've been a lot of doubts about that, too. So we felt we had to address it.

Okay, we have time for one more Brian.

Brian Reynolds from UBS. Maybe just a quick follow-up on spot. Curious if you could just discuss some of the signposts that could support the FID in a few years. I think, one, you talked about still looking for licensing. What's the update there from US EPA in terms of time line? And then second, what upstream infrastructure are you guys looking at that needs to be done before you could start seeing more flows ultimately coming to Houston, either from Canada or Permian?

Bob Sanders, answer that.

All right. This is Bob Sanders. As far as the timing, we've submitted everything to [indiscernible] relative to the license, all 8 items. We've had very good conversations with them. I would say we expect the license in the early summer time frame of this year. I'll pass the second portion of that off to somebody else.

It was about the capital associated with upstream for spot?

It's all embedded in spot.

Yes. I mean everything in the capital we're talking about is everything that's in relation to spot building a pipeline down from ECHO to Oyster Creek. And then everything we're doing offshore in terms of infrastructure that's needed upstream of ECHO, we've spent all that capital already. I mean we're -- Jay talked about the position in terms of supply up to 7 million barrels of excess to crude barrels. I don't think there's anything that's needed upstream.

Okay. With that, we're going to go ahead and take a 10-minute break, and we'll have another Q&A session at the end of the presentation. So let's get back about 10:55. Okay. Thank you. [Break]

Okay. If you could return to your seats, we're going to get started. Our next session will be with operations, Graham Bacon and Angie Murray. So I think as people gather, if you want to, go ahead and get started, good?

Okay. Are we on? Sounds like it. Good morning. My name is Graham Bacon and with me is Angie Murray, our Senior Vice President of Technical Services. You'll hear us discuss 3 major themes this morning. First, you'll hear us cover our safety and environmental performance. You'll also hear about the supply chain and associated costs and how we're managing those in an inflationary environment. And then you'll hear us discuss the reliability and how we sustain our assets for the long term. You'll also hear about how we incorporate data throughout all of these areas and use that as a means of driving continuous improvement. Jim talked about Project 9 earlier and the goal of reaching an EBITDA of $9.9 billion last year. But one of the keys to that was making sure that we didn't compromise on our safety or environmental performance and/or setting up our assets for the long term. As I switch to safety, you can see that our TRIR last year was another record of 0.33 continuing a long downward trend in incident rate that we've had. Our safety programs are focused not only on preventing employee injuries, but they're also focused on preventing those large disruptive events that can have an impact on a community for our business. And the way we go about managing that is through strong safety management systems. We've got safety management systems for processing pipeline and integrity management and they really drive and guide how we function. And the key to any safety management system is really strong leadership. And at Enterprise, I think we've got an outstanding leadership from Jim and Randy on the safety side. We meet with them weekly to cover any type of safety issues, and they really drive accountability through our organization from a safety standpoint. We're held just as accountable for our safety performance as our commercial groups are held for their financial performance. We also continue to drive a culture in our organization for strong safety performance. I personally meet with all of our field supervision and management regularly to drive that consistency of culture and how we manage our safety performance. We're also continuing to use data more and more to evaluate and drive our programs, whether it be categorizing every incident that we have and then looking for trends and -- so we can find ways to continue to improve in that area. Another example is the amount of audits that we do. We conduct a significant amount of field safety audits. And we analyze that data a lot more rigorously than we did just a few years ago because it helps us really focus and drive our safety programs. The other way we -- area that we're really focused on and probably lead the midstream industry is in our training. I think everybody has heard the shifts of people in this industry retiring and the next generation of workers coming on. And the way you get those new workers up to speed as quickly as possible and replace that experience is through strong training programs. And it's those training programs that we use to focus on not only regulatory compliance, but really skills training. On the regulatory side, we did over 37,000 qualification -- task qualification trainings just to meet FEMSA regulatory requirements. And we trained over 3,500 people on new skills to allow them to do their jobs better. And being able to do their jobs better and be more confident in their jobs also leads to better safety performance. Safety performance and environmental performance really go hand-in-hand as well. And last year, our -- the release volumes that we've had were about 50% of the 3-year average -- the previous 3-year average. So we're continuing to drive down the incidents that drive those type of releases. And then the other area that we're driving down environmental emissions is on the greenhouse gas side. And Angie is going to talk a little bit about that.

Yes, that's right, Graham. And this last year, our greenhouse gas emissions intensity for 2022 for our base assets was a record low of 1.8, down 5% from our previous year low. We've incorporated the impact of the Navitas acquisition on our emissions reporting, which you can see here. And over the short term, we're really focused on targeted and cost-effective method to reduce that emissions intensity from those assets. We're looking at methods such as recovering product during maintenance activities and also including emissions and considerations in the initial project design. Whether it's a small project or a large project, making sure that we design our projects with low emissions on the front end really is the most cost-effective way to drive long-term emissions intensity reduction. Many of you may have heard about the methane rule that came out this past year as part of the Inflation Reduction Act. And this is basically a tax on methane emissions. And we have evaluated the impact of the methane rule on our business and can confirm that we do not expect any financial impact as a result of this rule. And this is really due to our longstanding commitment to sustainable operations with emissions and low emissions design in mind from the front end. And then thinking out towards the long term, we're really focused on step change reductions in our emission. And we see 2 primary methods to achieve this: one is expanding the use of hydrogen fueling. We burn hydrogen today in our fractionators. We use the excess hydrogen we produce off of our facilities to burn hydrogen, displacing the need to burn natural gas. When our PDH 2 facility comes online this year, we'll significantly expand the use of burning hydrogen in that facility to reduce the emissions from that facility. And then we've also developed areas where we can further expand the use of hydrogen fueling across our heaters throughout our facilities. Another area that we're focused -- where we're focused on step change reductions is by implementing carbon capture and sequestration at our gas processing facilities. This is the highly concentrated CO2 that comes off of our gas treating facilities where we can cost effectively capture and permanently sequester the CO2 that's emitted, significantly reducing our CO2 emissions. And not only are we focused on reducing our own emissions, but we're also developing solutions to provide industry opportunity to decarbonize their assets as well. We're jointly progressing a project with Oxy to provide a complete CO2 transportation and sequestration solution across the Gulf Coast area from Houston to Beaumont. And once complete, this project will have the ability to permanently sequester 1.2 billion tons of CO2.

Yes. I think one of the things that's key to Enterprise is we really integrate our environmental group and our business practices. And the methane rule is just one good example of that, where we're not going to be subject to those taxes, which allows us to focus in other areas. Let's shift gears to supply chain a little bit. Last year, supply chain was all the issue, particularly in relation to the chip shortages and how it could impact our business. And we discussed how we had done some prebuying of those type of components and gotten ahead of the market. And that really paid dividends this past year in terms of our ability to execute both capital projects and maintenance projects where we didn't have the shortages of those type of components that we need on a regular basis. A lot of our supply chain issues have really abated from where we were a year ago. Yes, there are still pockets where there's some -- where there may be some delays. Probably the most significant area that we still have issues with is that of electrical infrastructure, not only for our own assets, but those of our transmission providers. We continue to see some issues there, more so delays, some cost increases that we are seeing in those type of components, but our -- both our supply chain and our project teams are hyper focused on looking at creative solutions to address that. The other big issue coming out of last year is inflation. And can't go anywhere without being asked, what's the impact of inflation on our cost. I really like to put that into 3 different buckets: we've got our fixed cost, we've got our variable cost, and we've got our project cost. I'm going to catch the first and the latter, and Angie is going to talk a little bit more about -- in detail about the variable cost. But on the fixed cost side, when we look back at 2022, we were about half of the inflation rate on our fixed cost in 2022 and a lot of it attribute that to. I think a lot of it's just diligence in spending. But our supply chain over the years prior had really -- the team over the years prior really done a great job of getting out in front of our service contracts and putting caps on escalation that we could be exposed to in any year. And year-on-year, we continued to build on that and rarely had to utilize those. But last year, it really came into play as price increases came into the market, and we had effective caps. We also leveraged the size of Enterprise's organization to achieve economies of scale. We don't often always know what that means, but when we acquire an asset like Navitas, it gives us a glimpse into what we're paying and what a smaller midstream would be paying. And I can tell you that the savings are real. Last year, we also really doubled down in our supply chain group on understanding the cost and the impacts on all of our suppliers and analyzing the supply chains of our supplier, so we could get a look into the future on where we might see disruptions either in cost or schedule. And that also paid out dividends as we've been able to get in front of the market at times just because of that extra research that we've done. On the variable cost side, we don't often control the underlying commodity price such as natural gas or power that influence those. Yes, we can do some hedging and we have we have some ways to recapture some of those costs. But what we can really control is the efficiency of how we operate assets. And a couple of years ago, we stood up a group within Enterprise, our operational analytics group, to really focus and use some of the new data tools. And I can tell you, they've really far exceeded the expectations that I had for that group going in. And Angie is going to go in and dive in a little more detail on that.

Yes. If you remember last year in this meeting, we talked about some of the data initiatives that we were implementing to really drive down our variable costs. And we talked about how we believe the success of these initiatives were due to our ability to get the information in the hands of the key decision makers, allowing them to make better, faster and more informed decisions. And we've really expanded the use of the philosophy of that over this past year and also expanded the content in these models. And in order to explain what we've done and where we're headed, I wanted to take a minute to contrast to where we started. So if you think back 5 years ago and you think about the way that we scheduled volumes across our assets, we really focused on 2 main things. One is how much volume do we need to move; and two, is did our assets physically moved that amount of volume. And the concept of optimizing our variable costs and our day-to-day decision-making wasn't really factored in during that time. And so looking back over the past few years, we've brought in models and tools to allow us to incorporate that decision-making on a daily basis. And initially, they were built out with considering the efficiency impact of our operating assets to trying to minimize our power consumption, our energy consumption. And then also looking at historical prices for power and gas and optimizing around that. And we got -- we saw a lot of benefit from these models. But one thing that the last couple of years has taught us is that using historical pricing for power and gas is not a good indication of prices for today. And so the price -- and even the price today may not be a good indication of the prices we may see tomorrow or even this afternoon. And so we knew that we needed to expand our models and make sure that we incorporated the real-time aspect of power price fluctuations and gas price fluctuations. And so we've done just that. We've built out the models where we have the ability to bring in real-time power and gas pricing, the ability to forecast prices. And also, we've incorporated the complexities of our power contracts across our asset base. And by doing this, we've really seen an incremental variable cost savings. We're all in. We're looking at about $20 million per year of variable cost savings across our assets. And we're not done, we're going to keep optimizing and keep finding ways to drive down those costs.

Yes. Thanks. On the project side, the cost impact on projects really varies. If you look at some of our projects that we've done and are doing, if you take a PDH 2, for example, or even a Frac XII, we contracted those years ago on a lump sum EPC basis. So we're not seeing any cost impact at all on those projects, and they'll be coming in under budget. So that strategy has really paid off. Those projects will be finished and up and operating this year as well, as Chris touched on, on PDH 2. So those are really on track. When we look at some of our newer projects such as the facilities projects that we're building, we're probably seeing on the order of 10% to 20% increases in price. That's driven by labor increases, material increases, some of which we've shown on the -- they showed on the previous graph. But those can vary based on location. Wage rates vary on location, wage availability varies. So it's hard to put a number on -- a general number because of those differences. But again, I think it's probably on the 10% to 20%. When we look at pipeline projects, those are a little bit different. And Angie, I don't know if you can go back to the screen that shows the relationships that we have between underlying price of steel and pipe mills. Oftentimes, the pipe mill have better availability. And when they do, we can take advantage of pricing and sometimes we'll do prebuying of pipe in order to take advantage of that dislocation between the price of steel and the price of pipe. When the mills are full, that -- again, that can dislocate even further. And so we're trying to avoid those type of situations. When we look at the labor market for pipeline installation right now, we're seeing that still to be very competitive. So from a pipeline project, we're not seeing quite the amount of increase that we like to see on a facilities-type project. Let's switch gears a little bit. And we talked in the commercial marketing groups, talk a little bit about embracing volatility. And from an operator's perspective, it's -- I can't say that we're truly out to embrace volatility, but I can tell you that Enterprise, over the last few years, has developed new tools that really allow our operations group to take advantage of that volatility and give us insight into how we can manage that better.

Yes, that's right. And when Graham talked about the disruptive events and volatile events, think about the hurricanes, the freeze-related events, even the significant power curtailment on the Texas grid that we've seen over the past few years. These events are typically highly volatile, very disruptive to our business, very short in duration. They may be a couple of hours long. They may be a week long. But one thing that we've learned is that we can really perform during these events. And one of the ways we do it is by making sure that we have information in the hands of all of our decision-makers so that they can make quick decisions during this time. And so we've spent a lot of time and energy on making sure that we've created dashboards and tools and information that's readily available for our employees. So when we have these type of disruptive events, that they're ready and armed with information to make good decisions so that we can keep our assets running and take advantage of these type of volatile situations. And when I was thinking about what we were doing related to the disruptive events and kind of reflecting on the past year, it reminded me a couple of years back in this meeting, when Brent Secrest talked about the elephant in the room. And you all may remember, he had a big elephant on his slide at the time that he was talking about the elephant in the room in the context of the overbuild of crude pipeline takeaway capacity out of the Permian and [ him and Dave ] when talked about that a little bit earlier today. But when I think about this past year on our industry, the elephant in the room for me has been the disruption to the Texas power grid during these freeze-related events. And I'm really proud to say that during these times, we delivered on all of our customer commitments. We delivered much needed gas to power generation facilities so that they could deliver power to our communities. And we were able to accomplish this through several factors. One is intentional investment in hardening and winterization of our assets. Jim talked on this a little bit earlier. Also mentioning the training that Graham talked about earlier, making sure that our employees are trained and ready for these events, making sure we have the right procedures in place so that we know how to respond. And then also the expanded use of data, and so that our employees have the information that they need when these events occur so that they can make the right decisions at the right time.

Yes. That increasing use of data has really allowed us to drive towards solutions and improve the way we respond. If you pick up the paper, listen to the news, everybody is talking about artificial intelligence these days. And in the maintenance world, that's been an issue that we've been hit up with year-on-year about how to improve reliability using artificial intelligence. And there's a lot of salesmen out there trying to pedal new products. And at Enterprise, we always look at something that really will fit uniquely to our situation. And so we've developed some tools in that area, I think, that are going to allow us to take us the next step forward in how we evaluate maintenance and reliability.

Yes. We're responsible for the reliability of our assets. So we get approached by many companies who have developed tools for around predictive maintenance and improving reliability. We've evaluated many of these tools. And what we found is that they can be costly to implement and also very time consuming, given the breadth and diversity of our assets. And so what we've done is our reliability engineers have teamed up with our data scientists and developed an in-house cost-effective really targeted tool for advanced asset monitoring where they've leveraged the massive amounts of data that we pull in every single day that we collect across our assets, and they've overlaid advanced machine learning techniques that identify outliers in our data, and those outliers provide us clues into where we need to look for potential problems within our assets so that we can get in front of those early improving the reliability of our assets. And then another way that we really improve the reliability and focus on reliability is investing in our assets. And if you think back to the slide that Brent had early on in his presentation where he talked about our TE assets that have been in the ground since the 40s, our Seaway of litters have been in the ground since the 70s. These are still operating today safely, reliably and highly utilized. And that's through the investments and the maintenance and safety and integrity of those assets. We spend over $400 million each year investing in our assets and their safety and reliability and modernization. We spent $150 million of that $400 million each year just on asset integrity related projects. And when you think about all those, you need to buy them up into the projects. They execute 1,600 projects each year on asset-related and maintenance-related projects each about $250,000 or less. So these are typically small projects in scale but big in impact in terms of modernizing our legacy asset base, improving the utilization of our assets and making sure that our assets are safe and reliable for the long haul.

Yes. These are not the type of projects that we typically get asked about in investor calls, but they are critically important to sustaining the long-term viability of our assets. And if you think about these projects in aggregate, almost all of them have some type of very attractive returns. So year-on-year on that $400 million, we're getting a very attractive return. But many people believe sustaining-type capital projects, but often, they also have some growth elements to them as well as just the cost savings. I'm going to close out from an operations perspective, year-on-year, quarter-on-quarter, we continue to set operating records. And we do that because we're focused on continuous improvement, whether that's in the safety and environmental side, the way we manage cost or the way we work to sustain the reliability of our assets for the long term. But it really doesn't happen without a culture and a group of people that are really driven towards continuing to improve our assets and keep them there for the long term, and we want to just take the opportunity to thank each and every one of them for what they bring every day. And with that, I think we're ready to turn it over to Chris and Daniel.

All right. I guess we got the last section of the day. Before we dive into the numbers, I thought I would just take a few minutes and just update what Enterprise has done over the past year with respect to ESG and sustainability. As Angie just mentioned, we've seen a 26% improvement in our CO2 intensity over the past 12 years. As a result, we've been noted by Institutional Investor magazine of being a leader in both ESG governance and governance for that matter, and then Sustainalytics also named Enterprise as one of top rated in the industry for ESG and sustainability. And then just 2 weeks ago, Newsweek magazine named Enterprise as one of the most trustworthy companies in America. I think how we accomplished and Angie touched on a lot of this with respect to how we've accomplished this emissions reduction. So I don't really want to belabor that point. But I will point out in addition to just focusing on absolute emission reductions, we're also focusing on how do we improve the design of new assets going into service. I think if you take a look at the second PDH plant that will come online midyear this year, by retrofitting that design to utilize the hydrogen that's coming off of that plant as a fuel source, it has a 90% reduction in that plant's carbon footprint as opposed to powering that facility with natural gas. One of the other things that I wanted just to hit on quickly, the Enterprise has a very diverse and collaborative workforce. We're committed to having a safe working environment for our employees, where they can thrive. And again, as Graham just alluded to and closed up with our operations folks do a tremendous job keeping our assets up and running each and every day. Daniel, with that, why don't you take a couple of minutes and go through what Enterprise do when protect against cyber attacks.

Okay. Thank you, Chris. It's been nearly 2 years since the cyberattack on Colonial Pipeline, and we certainly haven't forgotten about it or the attacks that have affected multiple others in our industry and others since then. We continue to maintain the most effective tools and technologies for managing cyber risk. This includes our network infrastructure, our filtering services and monitoring tools. We strongly embraced the Zero Trust framework, which we've implemented in part through our integrated systems review process. This process enables supervisors to review the access levels to critical files, directories and systems on a quarterly basis for all employees and contractors. Because employees are our first line of defense, we've recently enhanced our phishing awareness campaigns. In order to provide more tailored and targeted phishing test to employees in order to increase their skepticism of incoming messages. We've -- an uptick in click rates initially upon rolling out this program. But since then, we've seen them return to more historical normal levels despite the higher level of complexity. I'm pleased to report that the TSA approved our cybersecurity implementation plan in January of this year. Enterprise submitted this plan in response to the security directives that were issued by TSA in '21 and then extended in 2022. Just this month -- earlier this month, we submitted our cybersecurity assessment program to the TSA and expect their staff in our offices within the next couple of weeks to review the program with us and provide their feedback. Lastly, we continue to invest time and resources into our business continuity in cyber and continuity and recovery capabilities just in case there is an attack that ends up disrupting one or more of our networks. So unfortunately, we don't expect the bad actors in this space to give up or go away anytime soon, so we'll continue to focus on these areas long into the future. So shifting gears into our financial results. In 2022, Enterprise reported $9.4 billion in total segment gross operating margin. This was an increase of $850 million over the previous year. The partnership's performance was driven largely by records in many of our assets. We had higher margins in our gas processing and octane enhancement businesses and a strong contribution from our Navitas Midstream acquisition. As Graham alluded to and the commercial team described, we've -- our operational performance was excellent in 2022 with filling the pipe and maintaining it. We reported 10 operational records, including natural gas liquids and natural gas pipeline transportation volumes, total equivalent pipeline transportation volumes and NGL terminal volumes. We reported 13 financial records, including gross operating margin for 2 of our business segments and in total and records in adjusted EBITDA and distributable cash flow. Our strong cash flows last year helped us fund $4.1 billion in distribution paid to our equity investors, $3.4 billion in acquisitions, $250 million in equity buybacks and $1.8 billion in sustaining and growth capital expenditures. Next slide. This slide is, I think, demonstrates our long-standing history of building assets that provide attractive long-term returns on invested capital. And I think it also shows the resiliency of our business model even during some of the various commodity cycles. I think these returns and our financial performance has enabled us to continue focusing on strengthening our balance sheet, on funding additional capital growth projects and it's also provided some flexibility in our capital allocation approach. Chris is going to talk about each of these areas in more detail and give us further insights into this approach. So Chris, I'll turn it back over to you.

Perfect. Thanks, Daniel. And starting with the balance sheet. I think what we've noticed here over the last couple of years is and the commercial team talked about it, too, is increased volatility in not only commodity prices but also in financial markets. So when we saw this, we saw a lot of our customers, both upstream of our assets and downstream of our assets look to reduce their leverage and their businesses are more directly exposed to these swings in commodity prices. Typically, Enterprise's business runs at about 80% fee-based cash flow. Then as a result, we can run at a little bit higher leverage than some of our customers. But we made the decision earlier this year to reduce the midpoint of our leverage down from 3.5x down to 3x. As a result of this, S&P took note of this change in our financial policy and upgraded Enterprise to an A- rating with a stable outlook. We feel like we're setting the new standard for what a midstream balance sheet should look like. And I guess before we kind of get away from this change in the rating, I think I probably should clarify some of the comments I made on the last earnings call when the question came up of do you want to get upgraded. I made the comment that we wanted to retain financial flexibility. I think what Enterprise has done over the years is worked tirelessly to get the balance sheet in the position to where we can go -- make a $3 billion acquisition, like Daniel just mentioned, without having to go preview that for the agencies. So up until, call it, mid-Feb, we had no idea what the upper leverage threshold was for an A rating for a midstream infrastructure company. So we needed to get that clarity before we could really come out and tell the investing public that we're comfortable that we have enough financial flexibility at the A rating. S&P came out and said that we would have to see our leverage increase north of 3.5x on a sustained basis for them to consider a negative outlook for our A- rating. So I think with that, we are very comfortable with the new rating and happy to have it. I think when we look at the right side of this page, what you'll see is that we have no additional maturities for the remainder of this year and a very manageable debt maturity schedule for the forward coming years. And I think that's noteworthy, especially given what we've seen in an inflationary environment, Enterprise took advantage of the Fed's zero interest rate policy over the prior decade. It really went long on to getting fixed funded cost of debt. We've issued approximately 82% of our $28 billion debt portfolio in 10- and 30-plus year securities, and that's got a weighted average cost of debt of 4.6%. That's 98% fixed. And again, it's got a 20-year duration on it as well. So despite the record increases in interest rates that we've seen over the prior 12 months, we've not seen a material increase in our interest expense. And then again, as you look at the graph of what's coming up for maturity, we don't anticipate seeing a material change in our interest expense in the years to come as well. With respect to growth capital projects, we do have, let's call it, ballpark $6 billion of projects under construction that will come online later this year through 2025. Most of these projects are fee-based in nature. So Keith, to your question earlier, this will continue to increase our fee-based component of our cash flows. These projects are, as Jim and Randy mentioned earlier, they are in the sweet spot. If you look down the list of projects on the left side of the page, the bulk of these projects are located in Texas and Louisiana. These projects are, again, on the left side, group by reporting segment. But as you heard the commercial team described earlier this morning, they really developed more along the lines of that vertically integrated network that we've built. So the gas gathering lines that Natalie is building out in the Permian basins will feed the gas process -- the 4 gas processing plants. Those mixed NGLs coming off of those plants will flow through our NGL pipes to the frac complex that we have in Chambers County. Zach's got a new Frac XII that will come online midyear this year. And then from there, we can take those purity products, upgrade those in PDH 2, for example, or we can transport, store or export at those products across our docks. This slide is my favorite slide in the deck as I really think it speaks to the attributes of the business over the last 5 years. And really, why am I focused on the last 5 years? Well, you all probably recall, in the fall of 2017, Enterprise made the decision to moderate its distribution growth. Historically, we had grown the distribution at a 5% to 7% per year growth rate. And then again, in the fall of '17, we shifted that down to about a 2% to 3% distribution growth rate. We did that because we wanted to become less reliant on external capital markets to fund growth, and we wanted to be more self-sufficient. Said another way, we wanted to use some portion of retained cash flow to reinvest in the business. As Daniel mentioned, with, call it, 12% to 13% historical returns on invested capital, by doing that, you've seen in just since 2017, a $3.7 billion increase in our EBITDA. So that growth in our base cash flow had a compounding effect where it lowered our leverage from 4.1x to 2.9x at the end of 2022. And then also, if you look at the graph on the lower left, being more disciplined with respect to deploying capital, capital has come down from a peak spend of $4.2 billion in 2019 to $1.6 billion in 2022. I think if we've talked about our spend for 2023, it's going to be somewhere in the $2.4 billion to $2.5 billion area. And then again, a longer run, I think we're comfortable that our growth spending organically will be $1.5 billion to $2 billion per year. And so what that does is if you take that combination of growing base level of EBITDA with more disciplined capital spend, you see in the bottom right side of the graph, a fourfold increase in our free cash flow per unit metric since 2017, going from $0.70 a unit to $2.81 a unit. And then let's take that one step further and layer in that distribution growth moderation of 2% to 3%, you can see, again, that combination of growing the base level of cash flow, disciplined capital spending and reinvesting in good returning projects, we've seen our discretionary free cash flow or said another way, free cash flow after distributions go up from a negative $0.99 per unit in 2017 to a positive $0.91 per unit in 2022. So how does this impact and relate to investors? Well, it allows us to do what Enterprise has always done. Return capital to our investors. We've got a 24-year track record of returning capital to investors. And as an MLP, that's primarily been through the form of distribution growth. Over the last few years, we have opportunistically bought back stock. And so that's added to that amount. I think as you see the bullet here at the top of the page, since our IPO, we've returned over $47 billion to investors. But again, you can note it in some of the call-outs that Enterprise along this 24-year history has taken measures along the way to improve distribution coverage. And so if you think about that 2017 to 2018 time period, where we moderated our distribution growth rate from the historical norm of 5% to 7% to that 2% to 3%, what impact that had on distribution coverage. We went from an average of 1.2x coverage immediately prior to that decision to more like a 1.7x distribution coverage. So that should give investors confidence that we have the ability to continue to grow our distributions back to our investors. And again, just continuing to focus on that 5-year period, over that 5-year period, we have grown even with 2% to 3% distribution growth, we have returned over $24 billion to our LP investors in that time line. So to put that number in a little bit of perspective, if you think about the number of midstream companies that have a market cap of $24 billion, there are only 8. So Enterprise is an absolute big believer in returning capital to investors. As Randy mentioned earlier this morning, this -- later this summer will mark our 25th year of consistently growing the distribution. And this will put us amongst the bluest of the blue chip. So when we thought about that feed, and that's something that we're extremely proud of, we wanted to put a slide together that kind of demonstrated where Enterprise ranks amongst this peer set. So on the left side of the page, you can see in the graph how Enterprise's metrics stack up against those that have grown their distribution for 25 consecutive years. And then on the right side, you can see how we measure up against those that have grown their distribution for 40 to 50 years. The energy industry is a capital-intensive industry. So our returns may not ever equal those that you see in consumer discretionary and health care industries. But if you look at dividend yield and cash flow yield, our metrics do measure up and compare very favorably against this dividend aristocrat peer set. And as I mentioned earlier, our credit rating and our leverage metrics, we believe, are setting the standard for the midstream industry, and we feel like we screen very well against this peer set. Throughout the day, you've heard everyone at Enterprise talk about how we're building long-term assets. We fund those assets with long-term capital. And I think here, as you focus -- this page focuses in on the equity owners side of the equation. If you exclude EPCO and affiliates from our unitholder base, 63% of our units are held by individuals and trust. And again, that's not surprising to us. The MLP product was generally marketed towards retail investors. So this doesn't come as a surprise at all. And then in the graph, the pie chart on the lower right side of the page, again, Enterprise has a long-term nature and outlook. So 51% of our units have been held by -- for over 5 years and 82% have been held for at least 1 year. So our investors -- our equity investors share a similar mindset as Enterprise. And then what finance section would be complete without talking about capital allocation. So kind of close things up here today talking about that. Really no change from what we have been saying. I think that's one of the themes. And Angie mentioned and brought out the elephant in the room. For me, the elephant in the room is we want to be consistent in the message that we deliver to our investors. And we're going to continue with the all of the above approach. We're going to continue to reinvest capital into our business, both from an organic project perspective. And then when acquisitions make sense, we will be acquisitive. But as Jim mentioned this morning, acquisitions have to be 2 things, first and foremost. They have to be complementary to our existing asset footprint and they have to be accretive. So that's -- we're going to continue to try to grow the business but do it smartly. And then as I mentioned earlier, we have a long track record of growing the distribution. And as an MLP, that is going to be the primary way in which we return capital to investors. Buybacks will continue to have a -- be a part of our capital allocation philosophy. But because they are not as direct to all unitholders and they're less tax efficient, they're going to continue to be opportunistic. So we're going to look for that market volatility in periods of dislocation when we come in and be aggressive with respect to buybacks. And then again, we're absolutely committed to a strong balance sheet. I think it's evident by the recent upgrade by S&P. And we do feel like with this upgrade, we still have a sufficient amount of financial flexibility continue to grow the business as we see fit. And I think with that, Randy, I think we're ready for Q&A or Jim, you guys after closing remarks.

Yes. All right. We want you to get to sit down during Q&A.

Well, thank you for that.

Okay. Good deal. Well, you can sell from the presentations that you've heard this morning why we're excited and why we think we're well positioned for the next 25 years. And I think you can see with the one, the history that we've had where we've demonstrated that we can deploy capital at attractive rates of return. Given the capital projects that we've talked about and what we have that will come in service later this year with PDH 2 and Frac XII, 2 more natural gas processing plants, you've got visibility to an additional ramp-up in cash flow coming later this year and more so in 2024 is when you'll see it, but we're excited about that. Jim?

Proven business model. I remember it was before we went from Shell Midstream Enterprise, but the deal was all but done, sitting down with Dan and some of his folks and mapping out what we wanted the value chain to look at look like. So at that time, before Dan didn't have -- Enterprise didn't have any gas processing plants. Now we had and I said something about this earlier, but we started mapping out where we stood and each step of the value chain as it goes across from processing through storage and distribution pipelines. And that's where it all started. And that's been the business model every since. It has to fit. We have to -- Brent calls it touches, I call it paying ourselves. But that business model you see with our ethylene story and our propylene story, it's the exact same business model. And that business model works. So if it works, don't try something else. You won't see us buying some terminal in California, for instance. We don't do one-offs. The business model works.

And then the other thing we're, again, looking to be a responsible company and trying to be a good citizen in our community, you've heard that from Graham and Angie and Chris highlighting some of that, but really a responsible provider of energy product and services to the world and the world has got to grow in appetite for energy. And then Chris also hit on our track record of returning capital to investors. We think we've built a durable company. We talked a lot in here about geopolitical volatility in the world and volatility of commodity prices in the world. We felt like we built a durable company to come in and be able to come in and take advantage of opportunities through that volatility. And then -- and again, that sort of fits into the financial strength. And it was one of those things when we lowered our leverage objective, it wasn't necessarily to come in, and we didn't even think about an upgrade to A- at that point in time. That wasn't the goal. But I think the A- is more of a representation of the way we've managed the business and the margins of safety that we want to come in and build into the organization.

But I think that A- is also going to be a commercial selling point because it tells our customers that we'll be there for you. And reliability is absolutely key in our business. They'll always try to leverage you with the lowest common denominator. And you just have to say no. We'll give you reliability. And in some cases, we'll guarantee it to a point, ex force majeures. So let me do the recognition. There's 2 executive vice presidents that did not have speaking parts that I wanted -- we wanted to recognize and share with you some of what they have done for us. That'd be Bob Sanders. Bob has -- I said Executive Vice President. What did I say? What did I say? Executive Vice -- I called Bob the Executive Vice President of everything. He's been around 44 years. He has the right to stick his nose anywhere he wants to, and he takes full advantage of that, right? If you don't believe me, ask Brent Secrest. But one of the -- some of the -- you heard about spot today. Bob, along with Graham and Hap were totally involved on getting our recorded decision. They were the drivers. They were on the phone with Marriott every week, Graham and in Washington countless number of times, but they push that. And they also -- Bob also was highly involved with the Houston Ship Channel on getting the ship channel widening in the [ word of bill ]. And he was up there with the port and on his own a lot of times lobbying and he kind of likes it. He loves this stuff, seeing Senators and Congressmen and all this. But when we got the word of bill, there's this thing called a new start. And you have to have a new start designation in order to get funding for your -- for what you have in a word of bill. We all felt like Norfolk would get at least one of the major port new starts because of military. And we were hoping that there would be 2 major port new starts. Well, Bob and Hap and our lobbyist in Washington, D.C., they never gave up. And 2 days before the inauguration, I got a call, what's his name? Jeff Miller, I think. And he said, look, and I'm not going to mention the guy's name, but he said, "You need to call this CEO because he's tight with the White House. And you need to tell a story and see what he can do for us. So I did. Two nights before the inauguration, I got a phone call from the CEO or actually a voice mail. And he said, "I don't want to upset the apple cart. So the only thing I'm going to tell you is read the news tomorrow." So the day before the inauguration, Houston was named as a new start and these guys had a hell of a lot to do with that. Finally, we have been -- I think Bob lives in Austin. We have been really involved with the Texas state legislature. And Bob was one of the driving forces that got us legislation from the state that says the Houston Ship Channel will always have 2-way traffic. That was important because we could see large cargo ships coming up the ship channel that would have put us in one-way traffic. And as a daylight restricted company, we can't have that. We've been taking a much more proactive role imminent domain every year. We have to fight the farmers and the ranchers and this is one of those cases where the people and the liberals were on the same page, which is a dangerous combination. We decided to get proactive, and Hap was instrumental. You didn't stand up Hap. Hap was instrumental in getting imminent domain legislation and getting everybody on the same page. And really, what we decided is we don't need imminent domain for the lowest common denominator, we need him in a domain for the standards we set.

And that's back to win-win with landowners and top line company.

Yes. And I'll end with this. Thanks to Graham and Kevin Ramsey is we take less -- where's Graham? Less than 1/2 of 1% of our right-of-way purchases to imminent domain is what I remember. And when you have a Chairman, who's got a lot of ranch buddies down in South Texas, you well don't want to take them to imminent domain. I think where we'll open for questions.

Yes, we're going to go and take some questions. Okay. Questions? You guys are going to be like a bank meeting. We never get questions from bankers.

John Mackay from Goldman. Spent a lot of time today talking about kind of shifting from greenfield to brownfield, trying to do more with less, trying to be more disciplined overall, also showed that chart of ROIC over the last couple of years averaging around 12%, let's say. With this kind of new shift of again doing more with less, is there a chance we start to see that ROIC move up on some of these assets? Is that kind of base in all this?

Yes. I think when you start -- I'll let Jim speak to the new assets, where Enterprise is a big ship so there's a lot of deployed capital under what we currently have at that 12% level to come in and inch that big shift up further is it may take -- you may need to see more capital employed over time at higher rates of return to nudge that up. But we feel very good about the projects that we got coming.

Yes. I look at 2 ways. If we got a PDH costs a lot of money, then I want it to be an annuity. So we'll take a little lower rate of return on an annuity. If I see something that we think has a lot of upside, we may take a lower -- to make the investment, but we expect the rate of return to be pretty damn before it's all said and done. The classic example of that is Lou-Tex pipeline. We didn't have a single contract, but we knew we had our own production, and now that's one of the most important pipelines we've got. Does that answer your question? Just hang on by units. We'll returning money to you.

All right. We got one over here, TJ.

I don't know if he had a follow-up. Randy, TJ Schultz with RBC. Randy, I think one of your comments earlier was that Enterprise over the last 25 years has avoided a lot of the fads and pitfalls that others have fallen into, and I think that's pretty clear in your track record. Here more recently, you have maintained the phrase energy transition is a bit of a misnomer. But how active or not active are you in looking at things like CO2 transportation and hydrogen? What were some of the learnings from marketing Oxy, CO2, LOI? And how could some of that stuff compete with more of your growth capital that's leveraging your footprint?

Yes. Everybody knows we've been public. We're working on a deal with Oxy. I think we're getting close. Where is Carrie? We're getting close to locking down with them, Carrie? Okay. But we're approaching it a little differently. They are permitting the poor space. And we will build a pipeline from Beaumont -- ultimately, Beaumont to Houston as a header system to move CO2 from emitters. But we really can't use tax credits. So we tell them we don't want 45Q. You guys -- we just want a fee. So we'll build the pipeline. We'll bring it to the sequestration site, just pay us a fee. But no matter what we do, it's got to make money. And the other thing that we're doing, and I don't know if Angie touched on it or not, but the other thing we're doing is trying to look at our own house. So how do we capture? We capture CO2 at our gas processing plants. Where do we sequester that? How can we sequester that and pass the 45Q back to the producer, in many cases, owns the CO2. I think Graham, you all mentioned using hydrogen in PDH 2, yes, that's a 95% reduction over what it would be with natural gas. Every company from Korea and Japan that come in our office wants to talk about ammonia exports. Now I think that's a ways down the road, but we're perfectly positioned for ammonia exports. We've got the docs. We know how to do it, and we know how to build pipeline. So -- but right now, the immediate opportunity, I think, is taken care of. We produce 150 million feet a day of hydrogen. And historically, we've sold that to people like Air Products and Air Liquide. As those contracts roll off, we'll probably burn that hydrogen in place of natural gas, which help reduce our emissions. But -- we'll see where it goes. We've got a team that's dedicated. We've got a commercial component in that team, and they're talking to everybody and their brother. And they even -- I guess, Carrie, you traveled internationally yet? Okay.

Chase Mulvehill, Bank of America. I want to come back to spot. And I'm not sure if you'd be willing to kind of talk to the cost competitiveness of SPOT versus Corpus, and you've talked a lot about SPOT. And -- but we haven't talked about the potential partnerships and the sell down. So I don't know if you could maybe speak to kind of how you're thinking about that, how much you might be willing to kind of sell down? So just a little bit of SPOT.

Yes, we are open to joint venture in SPOT. I think it's a little early. I think what we're finding is this regulatory decision has some value. And I think some of the things -- people don't have to put their money where their mouth is. Using SPOT, Bob, it is a 95% reduction in greenhouse gas emissions...

[indiscernible].

So 95% reduction in VOCs versus lightering, 65% in greenhouse gases. So do you want to be environmentally sound or not? That's one of the selling points. The other selling point, and I think Jay mentioned it, you're going to have a constraint in Corpus, and that's going to be pipelines and I don't see anybody underwriting a new pipeline. So that -- a lot of these barrels, I think they're going to be drawn to Houston. And I think SPOT becomes a magnet to your pipelines to be -- but we're open to joint venture partners, and we've danced with a couple. But we had -- we're not down to the serious stage yet, but we would be willing to be. Hell, opened another question?

[indiscernible].

Well, I got a chairwoman back there that she loves anything on the water. If I had a set number of contracts, the answer is yes. And it doesn't have to be contracted full for us to sanction it.

Tristan Richardson with Scotiabank. Jim, you and Chris, Nelly talked about, even with financial flexibility, there's a very high strategic bar for acquisitions. A couple of deals you've done over the past few years have been really focused on the supply funnel. Just seem -- are there any opportunities out there you see more downstream, whether it be with your PGP strategy or TE Products corridor that you couldn't replicate organically?

Yes. We're trying to think -- and we're not there yet. Okay, what's our next step in petrochemicals? I think we've pretty well played out our C3 value chain with our PDH plants. But I think our C4 value chain, maybe that has some opportunities, and we're looking at some things. I'm not going to tell you what they are. But we said, wait -- but we -- I'd like to extend that value chain. Now Carin Barth, one of our directors is back there. She originally came out of the Sterling group. And if I say I'm going to build an ethylene plant, she's going to raise 10 kinds of hell. So I'm not going to say that. That's not in the plans.

Okay. I'll tell you with that, we'll have -- we're going to have lunch, and you'll have an opportunity to ask more questions with management. So with that, we're going to conclude the presentations. Lunch is served out the door around the corner here in Grand Ballroom 2. And again, if you have parking or valet that needs to be -- valet tickets that need to be validated, Sheila has got those stickers. And thank you very much for joining us today, and that concludes our presentations.