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Derivative Financial Instruments | 12 Months Ended
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Dec. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments As of December 31, 2018, MPLX had no outstanding commodity contracts. Embedded Derivative - MPLX has a natural gas purchase commitment embedded in a keep-whole processing agreement with a producer customer in the Southern Appalachian region expiring in December 2022. The customer has the unilateral option to extend the agreement for two consecutive five-year terms through December 2032. For accounting purposes, these natural gas purchase commitment and term extending options have been aggregated into a single compound embedded derivative. The probability of the customer exercising its options is determined based on assumptions about the customer’s potential business strategy decision points that may exist at the time they would elect whether to renew the contract. The changes in fair value of this compound embedded derivative are based on the difference between the contractual and index pricing, the probability of the producer customer exercising its option to extend and the estimated favorability of these contracts compared to current market conditions. The changes in fair value are recorded in earnings through “Purchased product costs” on the Consolidated Statements of Income. As of December 31, 2018 and 2017, the estimated fair value of this contract was a liability of $61 million and $64 million, respectively. Certain derivative positions are subject to master netting agreements; therefore, MPLX has elected to offset derivative assets and liabilities that are legally permissible to be offset. As of December 31, 2018 and 2017, there were no derivative assets or liabilities that were offset on the Consolidated Balance Sheets. The impact of MPLX’s derivative instruments on its Consolidated Balance Sheets is summarized below:
(In millions) |  | December 31, 2018 |  | December 31, 2017
Derivative contracts not designated as hedging instruments and their balance sheet location |  | Asset |  | Liability |  | Asset |  | Liability
Commodity contracts(1) |  |  |  |  |  |  |  |
Other current assets /Other current liabilities |  | $ | — |  |  | $ | (7 | ) |  | $ | — |  |  | $ | (14 | )
Other noncurrent assets /Deferred credits and other liabilities |  | — |  |  | (54 | ) |  | — |  |  | (52 | )
Total |  | $ | — |  |  | $ | (61 | ) |  | $ | — |  |  | $ | (66 | )
(1) | Includes embedded derivatives in commodity contracts as discussed above.
For further information regarding the fair value measurement of derivative instruments, including the effect of master netting arrangements or collateral, see Note 16. See Note 2 for a discussion of derivatives MPLX uses and the reasons for them. MPLX does not designate any of its commodity derivative positions as hedges for accounting purposes. The impact of MPLX’s derivative contracts not designated as hedging instruments and the location of gains and losses recognized on the Consolidated Statements of Income is summarized below:
|  | December 31,
(In millions) |  | 2018 |  | 2017 |  | 2016
Product sales |  |  |  |  |  |
Realized gains/(losses) |  | $ | 4 |  |  | $ | (9 | ) |  | $ | 2 |
Unrealized gains/(losses) |  | 2 |  |  | 4 |  |  | (15 | )
Total derivative gains/(losses) related to product sales |  | 6 |  |  | (5 | ) |  | (13 | )
Purchased product costs |  |  |  |  |  |
Realized losses |  | (12 | ) |  | (9 | ) |  | (5 | )
Unrealized gains/(losses) |  | 3 |  |  | (10 | ) |  | (22 | )
Total derivative loss related to purchased product costs |  | (9 | ) |  | (19 | ) |  | (27 | )
Cost of revenues |  |  |  |  |  |
Realized losses |  | — |  |  | — |  |  | (3 | )
Unrealized gains |  | — |  |  | — |  |  | 1 |
Total derivative losses related to cost of revenues |  | — |  |  | — |  |  | (2 | )
Total derivative losses |  | $ | (3 | ) |  | $ | (24 | ) |  | $ | (42 | )

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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