Last Thursday (May 16, 2013) the Ohio Department of Natural Resources offered a rare glimpse into 2012 production in the Utica shale. In a long awaited report, the State said that 87 wells drilled by 11 companies produced about 1750 b/d of oil and 35 MMcf/d of gas. Those numbers disappointed investors hoping for evidence of another Bakken or Eagle Ford. But the State data does not tell the whole story. There should be a surge in production now that infrastructure is coming online. And significant condensate production will present new challenges for midstreamers. Today we take a closer look at Utica production.
Daily Energy Blog
Monday, 5/13/2013
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.
Sunday, 4/28/2013
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.
Thursday, 3/21/2013
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.
Wednesday, 3/13/2013
The isobutane market has a traditional self-correcting mechanism whenever the market gets oversupplied - the iso vs. normal spread declines, the merchant isomerization units shut down, and the market moves back into balance. But there is a potential problem ahead for this orderly, self-correcting marketplace – shale. As high-BTU, “wet” shale gas production continues to push NGL volumes from gas plants ever higher, the supply of isobutane will be increasing proportionally. The math is simple. The more gas plant production of isobutane, the less merchant isomerization will be needed. Or is that really true? Could increasing demand for alkylate combined with increasing availability of propylene from dehydrogenation absorb enough isobutane to keep the merchant isomerization units running at high utilization rates? Today in our series on isobutane and isomerization we’ll look at the major isomerization centers, the major players, increasing export patterns and likely scenarios for the disposition of surplus isobutane supplies.
Sunday, 3/10/2013
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.
Wednesday, 2/06/2013
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.
Wednesday, 1/23/2013
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.
Tuesday, 1/22/2013
Over the past week (Jan 13-20, 2013) the ethane-to-gas ratio has recovered slightly from 0.99 to 1.05, mostly due to a 3 cnt/gal increase in the price of purity ethane at Mont Belvieu (OPIS 24.5 cnts/gal). [See today’s Spotcheck “Ethane to Henry Hub Gas Ratio” graph. Click here if you have trouble accessing Spotcheck.] But that does not change the fact that the ethane market is still deep in ethane rejection territory. What does it mean for gas processing economics? And how do different gas streams impact NGL recoveries, ethane rejection and tailgate gas volumes. That’s what we’ll examine today.
Sunday, 1/06/2013
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, there is no doubt about it. We are deep into ethane rejection economics. Not just for the Conway market like we had last summer. But wide spread, across the board, knock-out-the-ethane style rejection, unlike anything we’ve seen in the last five years. In fact, this is something new. Impending widespread rejection in the world of shale… a world of ultra-rich gas, deep ethane cuts, and constrained infrastructure. Today we’ll drill down deep into the numbers. It’s enough to make you crazy.
Thursday, 12/20/2012
The values of the crude-to-gas ratio and the Frac spread have fallen fifty percent from their highs this year. Frac spreads represent the difference between the value of natural gas and natural gas liquids (NGLs), which are heavily influenced by the price of crude. Thus the Frac spread is in effect tied to the gas-to crude ratio. Current forward curves suggest that the crude-to-gas ratio will fall another 50 percent over the next few years. Today we ask whether the Frac spread will continue it’s fall next year and beyond.
Wednesday, 12/12/2012
No, this is not the Whoville located south of Mt. Crumpit within the mountainous high range of Pontoos. And there is no Grinch in this Houville, at least during the 2012 Christmas season. Instead, this Houville is the center of an emerging Marcellus/Utica based NGL hub soon to take its place among the largest in North America.
Tuesday, 11/13/2012
With all the new NGLs coming on, there has been periodic hand wringing about fractionator capacity. The good news is that there is a lot of capacity being built. So much so that it appears that the fractionators will be able to keep up with the producers and inbound pipes, at least most of the time. Notice however, that even though new NGL production from shale gas is growing most rapidly in the Northeast over 60 percent of the new capacity will be at Mont Belvieu or the Texas Gulf Coast region. Today we examine why Mont Belvieu remains the center of the NGL universe.
Wednesday, 11/07/2012
There is a close, symbiotic relationship between brine and natural gas liquids. Most NGL storage is in huge underground caverns washed out of salt formations thousands of feet below the surface. That washing or ‘leaching’ process makes lots of brine. When the storage caverns or wells go into service, the NGLs replace the brine. But when NGLs are removed from the wells, brine must displace the NGL barrels. Nowhere is this relationship between brine and NGLs more entwined with the history of the facilities than at Bumstead and Adamana, two storage facilities in Arizona. Today we continue our series looking at the unique niche these two operations fill in the NGL marketplace and where they may be headed in the future.
Monday, 11/05/2012
We’ve talked a lot here about NGL storage in Mont Belvieu and Conway. Those are the big underground storage caverns washed out of salt formations thousands of feet below the surface. But those are not the only places where NGLs are stored in underground salt caverns. Two important facilities, especially for West Coast NGL markets are located in the seemingly unlikely locations of Bumstead, AZ and Adamana, AZ. Today and in a later follow up we’ll look at why these facilities are in Arizona, how they got there, and the unique niche they fill in the NGL marketplace.
