In the five years since the U.S. flipped from a net LPG importer to net LPG exporter, the vast majority of those exports have gone out from Gulf Coast marine terminals. That makes perfect sense. After all, Mont Belvieu, TX is North America’s main fractionation and storage center—most of the natural gas liquids produced in the U.S. are piped there to be fractionated into propane, butane and other “purity products.” But what’s also true is that a growing share of NGLs are produced and fractionated in the Northeast, that increasing export volumes are moving out of Sunoco Logistics Partners’ Marcus Hook, PA marine terminal, and that NGL pipeline capacity from the “wet” Marcellus and Utica production areas to Marcus Hook is about to increase significantly. Today we continue our review of the LPG export data with a look at propane and butane exports from East Coast marine terminals.
Five years ago, the U.S. was a net importer of propane and butanes, those products collectively called LPG, or liquefied petroleum gasses. Back then, demand from residential, commercial, refining and chemical markets slightly exceeded supply for the products. But then came shale, and LPG production from natural gas processing more than doubled, from 0.8 Mb/d to 1.7 Mb/d. Suddenly the U.S. was a net exporter—a very big exporter at that. Last year roughly half of all LPG from U.S. gas processing plants was exported, with the vast majority shipped to overseas markets. All those exports are now having an outsized impact on pipeline flows, inventories and prices. Consequently, it is increasingly important to keep close tabs not only on export volumes but on which export terminals are handling all these volumes, and where the LPG is heading. Today we discuss the current state of the LPG export market and insights on it from RBN’s most recent NGL Voyager Report. Warning, today’s blog includes a subliminal promo for the report.
Anticipating renewed growth in natural gas and natural gas liquids production in the Marcellus and Utica plays, midstream companies active in the region are planning new gas processing plants and fractionators, as well as new NGL takeaway capacity and in-region NGL storage. And Shell Chemicals has made a Final Investment Decision to build a $6 billion, ethane-consuming steam cracker in western Pennsylvania by the early 2020s. In today’s blog, “Unleashed in the (North)East—New Gas Processing and Fractionation Capacity in Marcellus/Utica,” Housley Carr continues our series on on-going efforts by midstreamers and others to keep pace with NGL growth in the epicenter of U.S. gas and NGL production.
Natural gas production in the Marcellus and Utica plays is projected to rise by 30% or more by 2022 under all of RBN’s forecast scenarios, and production of Northeast natural gas liquids is expected to increase even more quickly. Midstream companies are responding to this next phase of gas/NGL growth with plans for still more gas-processing plants, fractionators, NGL storage facilities, and NGL takeaway capacity––pipeline, rail, ship and barge. Also, Shell Chemicals continues to advance plans for an ethane-consuming steam cracker in Beaver County, PA, and another petrochemical company may soon decide to build a cracker in Ohio. Today we begin a new series on the latest push by midstreamers to keep pace with NGL growth in the epicenter of U.S. gas and NGL production.
Every day, about 1.8 million barrels of NGLs, naphtha and other ethylene plant feedstocks are “cracked” to make both ethylene and an array of petrochemical byproducts. And every day, decisions are made for each steam cracker on which feedstock—or mix of them—would provide the plant’s owner with the highest margins. Within each petchem company, these decisions are optimized by staffs of analysts and technicians using sophisticated and complex mathematical models that consider every nuance of a specific ethylene plants’ physical capabilities. Fortunately for us mere mortals, it is possible to approximate these complex feedstock selection calculations for a “typical” flexible cracker using a relatively simple spreadsheet model. Today we continue our series on how the raw materials for ethylene plants are picked with an overview of RBN’s feedstock selection model, a review of feedstock margin trends, and an explanation of how the model also can be used to indicate future NGL and naphtha prices and to assess the prospects for various industry players.
During the spring, summer and fall of 2016, U.S. propane inventories grew much more slowly than they did in the same period in 2014 and 2015, in part due to fast-rising exports. The situation isn’t dire––propane stock levels are relatively high as the winter of 2016-17 really kicks in, largely because last winter was a mild one that left inventories in good shape when the 2016 stock-building period started. But even-higher exports and the possibility of a “real” winter this time around raise the specter of an especially big drop in stored volumes over the next three months. Today we assess what the combination of higher exports and even an average winter could mean for propane inventories.
The normal butane market was anything but normal the past few weeks. All’s back to square one now, but in the last week of 2016 the price for normal butane spiked to more than $1.20/gal from only $0.73/gal in November. The differential between isobutane and normal butane plummeted into record-shattering negative territory. And the margin from cracking normal butane to make ethylene and other products fell off the chart—literally, our PowerPoints had to be reworked to show how much the margin had fallen. What the heck went on there? Today, we discuss the recent upheaval, what may have caused it, and why things snapped back to normal so quickly.
The Shale Revolution has had a profound impact on U.S. NGL markets by vastly increasing production and by lowering NGL prices relative to the prices of crude oil and natural gas. That has been good news for the nation’s steam crackers, the petrochemical plants that have enjoyed low NGL feedstock prices since 2012. But NGL markets are in for some big changes as new U.S. steam crackers coming online over the next two years will be competing for supply with export markets, raising the specter of higher NGL prices—a good thing for NGL producers, but not so for petrochemical companies. How this plays out will be determined by the feedstock supply decisions petrochemical producers make as NGL prices respond to rapidly increasing demand. Today we begin a series on how steam cracker operators determine day-by-day which feedstocks are the most economic, and on the factors driving the value of ethylene feedstock prices.
U.S. propane inventories rose by an impressive 55 million barrels (MMbbl) during the spring/summer/fall of 2014, and the mild winter of 2014-15 left propane stocks at well-above-normal levels the following spring. Another impactful inventory build—53 MMbbl—occurred during 2015’s March-to-November stock-building season, leaving propane stocks at a record 104 MMbbl as the freakishly mild winter of 2015-16 started. But propane inventories grew much more slowly through the spring/summer/fall of 2016, due in part to rising exports, and—while stocks are high as this winter begins—even-higher exports and the possibility of real winter weather raise the specter of an especially big drop in stored volumes. In today’s blog we begin a series on the significance of propane inventory levels with a look at why propane stocks rose so much in the 2014 and 2015 stock-building seasons.
The frac spread—the difference between the value of a typical basket of NGLs and the price of natural gas, in $/MMBtu—has averaged a paltry $2.28 for the past two years, by far the longest period of depressed NGL values since the start of the Shale Revolution. That’s bad news for natural gas processing economics, which are most favorable when NGL prices are strong and natural gas prices are weak. But things are about to get a lot better. Today we consider the currently low frac spread, what it means for natural gas producers and processors, and why a big turnaround may be in the offing.
Production of natural gas liquids in the Northeast has been rising sharply for several years now, challenging the ability of NGL producers and midstream companies to deal with it all. Lately, though, drilling in “wet” gas parts of the Marcellus and Utica shale plays has slowed, mostly because prices for NGLs have sagged due to lower crude prices and the high cost of takeaway capacity, thereby reducing the incentive to drill for the wet gas responsible for NGL production growth. However, it is quite possible that total NGL production growth could continue for some period of time as more ethane is extracted from wet gas instead of being “rejected”. Meanwhile, new NGL pipeline capacity out of the Marcellus/Utica has been coming online, providing a relief valve of sorts. Today we begin a blog series on recent developments regarding Northeast NGL production, takeaway capacity and pricing.
The ratio of NGL-to-crude oil prices looks like it will be rebounding, and over the next two or three years could rise to levels not seen since the Shale Revolution brought down NGL prices at the end of 2012, a signal that all of the new NGL-consuming petrochemical cracker projects now under construction may not be as lucrative as their developers had once hoped. Several factors are driving the ratio’s rise: increasing U.S. demand for NGLs; more exports; stubbornly low crude oil prices and a lower trajectory of NGL production growth. Today, we examine the historical relationship between NGL and crude oil prices and the reasons why that ratio may be headed back above 50%.
We are rapidly approaching September 15, when summer blend motor gasoline changes over to winter blend, allowing the increased use of high vapor pressure normal butane in the blending. However, the spread between Reformulated Blendstock for Oxygenate Blending (RBOB, the benchmark unleaded gasoline) and normal butane was down to 85 cents/gal as of the end of August, reducing the incentive to blend as much butane into motor gasoline as possible to its lowest level in recent years. Sure, 85 cents/gal is still 85 cents. But what impact might that smaller RBOB/normal butane spread and other market factors have on butane exports? Today we examine the state of the gasoline blending and normal butane markets, and the effect that current dynamics –– a gasoline glut and strong butane prices among them –– may have.
NOVA Chemicals’ 1.8-billion-pound/year ethylene plant in Sarnia, ON already is one of the largest consumers of Marcellus/Utica-sourced ethane, and plans are in the works to significantly increase the steam cracker’s ethane consumption. In 2018, NOVA will complete a project that will enable the cracker to be fed 100% ethane; the petrochemical company also is mulling a cracker expansion –– again with ethane as the feedstock –– and a new polyethylene plant next door. All these plans are driven in large part by the availability of low-cost ethane piped from the U.S. Northeast. Today, we continue our review of southwestern Ontario’s NGL, petchem and refining infrastructure with a look at the big effects of NOVA’s plans.
The availability of vast amounts of ethane from the nearby “wet” Marcellus and Utica plays is spurring a petrochemical rejuvenation in Sarnia, ON. Two years ago NOVA Chemicals stopped using naphtha as a feedstock at its 1.8 billion pound/year ethylene plant in Sarnia’s Chemical Valley and now relies on a combination of ethane, propane and butane. Next year the company is planning to complete the plant’s conversion to 100% ethane and is considering the possibility of building a big polyethylene plant nearby. Today, we continue our comprehensive review of southwestern Ontario’s NGL, petchem and refining infrastructure, including Sarnia’s NGL fractionation, storage and end-use markets.