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NGLs Week

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NGLs Week is PetroChem Wire's comprehensive summary of price trends, upstream and downstream costs, operations news and supply/demand forecasts. The report contains everything you'll need to understand what's happening in the NGL markets.

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US NGL growth advances with Texas shale leading charge

HOUSTON, October 24, 2017 (PCW) -- With more than a dozen new olefins plants planned through the middle of the next decade, the question often posed is, will there be sufficient feedstock?

NGLs Week has examined EIA production data from the turning point in the US shale revolution in 2012 --- when unconventional production growth overtook those seen in legacy plays. Production data from Jan 2012 until Jul 2017 (the most recent data) shows that supplies of purity products have risen between 38.5-67.4% with Texas conventional and shale plays proving to be the largest source of supplies.

The production growth for each NGL is as follows: Ethane (40.1%), propane (67.4%), normal butane (65.4%), isobutane (55.1%) and natural gasoline (38.5%). Given that the vast majority of the new crackers coming online now and into the next decade only consume ethane as a feedstock, it is interesting to note the lightest purity product is seeing the second slimmest amount of growth.

There are two reasons for this: disadvantaged ethane frac spreads and insufficient takeaway capacity. Ethane can only be transported via pipeline or, after being cryogenically frozen, via vessel. Excess or unwanted supplies are often rejected, i.e. left in the natural gas stream.

Rejection often occurs because ethane’s value (after taking into account transportation and fractionation fees) relative to natural gas is uneconomic or in the red. In regions farthest away from ample market demand and/or fractionation capacity (such as the Rockies or Appalachia) rejection has been fairly high, which could account for ethane’s lower growth rate.

It is somewhat unsurprising the region that has seen the largest supply growth uptick is Texas, which is home to ample fractionation, storage and pipeline capacity, as well as the largest demand center from a petrochemical and export standpoint.

The Texas Inland region (which would comprise the Eagle Ford, Permian Basin and conventional Texas fields) started off 2012 as the prime supplier of NGLs, but since then, growth has been as follows: ethane (38.8%), propane (54.7%), butane (52.6%) and natural gasoline (11.1%). The Texas Gulf Coast, however, has been the main supplier of isobutane since 2012 with its supply increasing 115.6% from Jan 2012 through Jul 2017. -- Samantha Hartke

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