Major operating sector
Currently close to 130 MLPs that trade on major exchanges have a primary focus on midstream and downstream activities in the oil and gas sector.
The above graph shows that most of the MLPs operate in natural resources with the majority of them operating in midstream and downstream activities.
MLP midstream activities
MLP midstream activities include:
- Gathering & Processing: Gathering involves collecting natural resources from various fields through a network of pipelines and then transporting them to the processing unit. Processing involves processing the natural resource through a series of complex techniques so that it can be transported further to refineries or can be taken up by industrial users.
- Transportation: It involves transporting the natural resources to the processing centers or if it is processed, then transporting it to the end users or storage centers.
- Storage: It involves storing the natural resource in tanks so that it can be taken by industrial users for further processing.
Some of the MLPs that have interest across the midstream activities are Buckeye Partners (BPL), Plains All American Pipeline (PAA), Enbridge Energy Partners (EEP), Magellan Midstream Partners (MMP), and MarkWest Energy Partners (MWE). These companies have a combined weight of 31.7% in the Alerian MLP ETF (AMLP).
In the next part of the series, we’ll discuss the structure of the MLPs, the difference between general partnerships and limited partnerships, and the importance of the parent company.