Natural Gas Liquids

A few months back we introduced Whoville, the emerging NGL hub in a small corner of Pennsylvania and West Virginia.  Now that hub is coming on like gangbusters.  Between now and 2015 nearly 4.7 Bcf/d of additional cryogenic natural gas processing capacity is due to come online along with 500 Mb/d of fractionation capacity and 500 Mb/d of NGL pipeline takeaway capacity to support growing Utica and wet Marcellus production.  As a result, NGL production from the Northeast is due to exceed 400 Mb/d by 2015, a six fold surge from EIA’s 63 Mb/d February production number.  In today’s blog, we examine growing Northeast NGLs production.

Natural gas liquids (NGL) production from the Bakken has increased from only 20 Mb/d two years ago to almost 50 Mb/d today.  And that is with nearly one-third of the natural gas in the region being flared and no outlet for ethane.  For years gathering, processing and pipeline constraints have held back production growth.  But that’s all changing.  ONEOK has completed their NGL pipeline and plant expansion project and more outlets are on the way.  Production could rise to more than 300 Mb/d by 2018.  In today’s blog, we examine the Bakken NGL situation.

Today’s blog is something different.  It is a special feature covering a unique aspect of the NGL/LPG industry, known as the LPG Charity Fund.  The organization is an integral part of this community, due both to its good works and its widely attended extracurricular events.  In posting this blog we are not asking for contributions, volunteers or anything else.   Instead, we just think it is important – when you are trying to understand an industry – that you know something about the people involved and how the market really connects.  Today we talk about this important dimension of the NGL/LPG community.

Of the five natural gas liquids (NGLs), isobutane stands apart in its sources and markets.  Isobutane comes from gas processing plants and refineries, but it is also the only NGL intentionally made from another NGL – it’s cousin, normal butane.  It has a variety of exotic uses, such as aerosol propellant for everything from hair spray, to cooking sprays to shaving cream and since the early 90s as a replacement for Freon in refrigerators.  A refinery process called alkylation is the largest market for isobutane, producing a high-octane gasoline blending component called alkylate.     Even though it has robust markets, isobutane supply/demand balances are not immune to the growing volumes of high-BTU, “wet” shale gas and the resulting torrent of NGL production.   And as gas plant isobutane volumes increase, there are changes coming to isobutane balances and the demand for merchant isomerization.  Today we begin our series on isomerization by exploring what it is, why it’s valuable, and how it’s done.

U.S. gas plant production of propane is up 25% since early 2011, far above growing volumes of ethane, held to only an 8% rise by rejection economics.   As propane supplies have surged, prices have come down hard…. But not nearly as hard as would have been the case if it were not for rapidly increasing exports.  And where are all these barrels going?   That’s right.  In a conga line of ships headed to Latin America where the growth in imports from the U.S. into some countries has been off the scale.  Which countries are taking all this propane?  How long can this go on?  How much dock capacity does the U.S. need?  What could derail this development?  Today we begin a blog series to explore these questions.

Even though ethane prices have recovered by about 4 cnts/gal from the lows last week (January 14, 2013) most gas processing plants are still faced with ethane rejection economics. The past two blogs in our Gas Processing Economics series examined the impact of ethane rejection for a specific plant configuration, running a range of Eagle Ford gas streams.  But Eagle Ford gas is quite rich and high in ethane content – certainly not representative of the overall market.  Is it possible to use the RBN Gas Processing model to look at the aggregate market for U.S. gas processing?  That answer is yes, if you don’t mind hacking your way through some EIA statistics and manipulating a few input variables.

Ethane in Mont Belvieu posted at 22.5 cnts/gal on Friday, continuing the NGL’s descent into the abyss that started mid-2012.  The last time we saw ethane at this level was back in 2002.  With natural gas prices hanging in there above $3.00/MMbtu,