OREANDA-NEWS. The Federal Trade Commission is investigating Enterprise Product Partners' acquisition of Oiltanking last year, a deal that merged two major operators of Gulf coast storage and pipelines.

Enterprise is complying with a civil investigative demand and subpoena received on 23 February from the FTC, the company said in a securities filing today.

"Based on the limited information that Enterprise has at this time, we are unable to predict the outcome of the investigation," Enterprise said.

Several companies have informally complained to the FTC about the deal. Enterprise last week dismissed complaints by others over how the Oiltanking deal changed its position on the Houston Ship Channel to export processed condensate and potentially crude. When asked during an annual analyst day presentation about complaints by some shippers that Enterprise dock fees at Oiltanking facilities were unfair, chief operating officer Jim Teague said the company expects its customers to pay fees similar to what they paid Oiltanking prior to last year's merger.

"We are honoring every contract we have got from Oiltanking, without fail," Teague said, noting that some Oiltanking customers had storage rights but did not have dock rights, although they may have been given waivers in the past.

"We believe if you want a service, you pay for it," he said, adding that Enterprise had paid an 85?/bl fee to load based on a 50-year contract.

"If some of these other guys complaining would like to do a 50-year term deal, we would do it without question," Teague said.

Long before the Oiltanking acquisition boosted Enterprise's crude-handling capacity, it was the dominant company in the US LPG business, with 24 natural gas processing plants, 22 fractionators, and at least 100mn bl of NGL storage in the Mont Belvieu, Texas, storage hub alone. The company spent \$13bn on projects since 2011 and has another \$6bn worth of new projects in the works through 2016.

Enterprise's LPG export terminal on the Houston Ship Channel has almost single handedly made the US the largest global propane exporter. The terminal's capacity was increased to 7.5mn bl/month last year and is expected to grow to 16mn bl/month by the end of 2015. The exporter focuses on long-term, fee-based contracts that lock-in profits, and recently expanded its services to include ethane exports through a 7.2mn bl/month facility in Morgan's Point, Texas. That terminal is not planned to start up until late 2016, yet already has 80pc capacity booked in 10-15 year long contracts. That facility will start up just after Enterprise's planned 1.65bn lb/yr propane dehydrogenation (PDH) unit at its existing storage hub in Mont Belvieu. Enterprise also reports that unit's capacity is 100pc contracted with fee-based contracts that average 15 years.

The partnership considers itself a toll road operator, and a strong enforcer of the rules of the road. Typical term contracts reflect a 13?/USG terminalling fee, but for those who are unable to lift cargo due to operational or market constraints, the option for canceling a scheduled loading costs lifters 10?/USG.

The competitive edge that Enterprise holds over its customers came to light last month as arbitrage economics forced some companies with scheduled loadings at the 7.5mn bl/month terminal to reconsider their commitments.

A trading firm recently sold its committed mid-March cargo at a 4.5?/USG premium against the Mont Belvieu benchmark, or at a 9?/USG discount to its contracted rate. The move allowed the trader to save 1?/USG on what would have been a 10?/USG loss. For a VLGC cargo, that equates to \$2.31mn, so instead the trading firm will give away \$2.08mn.

While Enterprise's customer was caught under water, the firm itself reportedly sold a spot cargo loading in early March at a 13?/USG premium to Mont Belvieu. Lifters at the terminal say that Enterprise will not sell a cargo below this level, as it would conflict with its current standing business.