Yesterday the price of ethane in E/P mix in Conway dropped again, now down to 14.5 cnts/gal, or $6.09/Bbl. A lot of the ethane barrels that move down the ONEOK Overland Pass NGL pipeline from Opal, WY to Conway, KS get priced out based on Conway ethane numbers. We talked about this situation last Wednesday in Not Gonna Lie.
This is Part V of a series on the Golden Age of Natural Gas Processors. The first four parts reviewed the crude-to-gas ratio at 50X, the impact of increasing NGL production on prices, the uplift value provided by gas processing, and who gets all the money. Today we examine the incredible magnitude of gas processor’s margins – if the processor has access to the right gas streams.
This is Part IV of a multi-part series on the Golden Age of Natural Gas Processors. The first three parts covered the following topics:
- Part I – Crude-to-gas ratio; historical trends; Influence on natural gas processing; frac spreads
- Part II - Impact of increasing NGL production on prices, and how NGL markets are responding to the price changes.
- Part III - Uplift in value provided by natural gas processing at today’s prices – how the math works
Today we look at how much money natural gas plants make, who gets the money and what that means for both producers and processors.
In the previous posts of this series (Part I and Part II) we’ve looked at the relationship between NGLs and crude (weaker), the differences between the price performance of light and heavy NGLs (weaker vs. stronger) the frac spread for a typical plant (huge). Assuming we buy the logic that the crude-to-gas ratio will be this healthy for quite some time, what does that mean for the profitability of natural gas processing – how much value is created when wet natural gas is processed?
This post continues yesterday’s review of the Golden Age of Natural Gas Processors, an analysis of the 50X crude-to-gas ratio on the economics of natural gas processing and the market for natural gas liquids. To fully understand this post, first see The Golden Age of Natural Gas Processors – NGLs in a 50X Crude-to-Gas Ratio World. Today we look at the impact of increasing NGL production on prices, and how NGL markets are responding to the price changes.
A long anticipated market milestone either has happened, is happening, or soon will happen. No I’m not talking about one-handle natural gas prices. That’s old news. The much more amazing number is a 50X crude-to-gas ratio. Whether it has happened yet or not depends on which prices you use to calculate the ratio. More on that below. But regardless of your math, one thing is certain. The value of extracting a hydrocarbon molecule in gaseous form and selling that molecule as a liquid has never been higher. It is a golden age of natural gas processing. It is a business that over the past two years (since March 2010) has experienced a decline in feedstock costs of more than 50% and an increase in its traditional measure of profitability – the frac spread –by +33%, from $9/MMbtu to almost $12/MMbtu.