Cheap Natural Gasoline Getting Cheaper

The surging production of condensate, or ultra-light crude oil, from America’s new shale-oil plays presents an opportunity that’s only just beginning to be recognized by much of the hydrocarbon market.  Historically U.S. condensates have been a tiny sliver of that market, usually blended into crude. Now there is just too much of the stuff, particularly in places that aren’t yet ready to process it in large quantities. In this next installment of Fifty Shades of Condensates we explore the constrained domestic demand for “raw” condensates at U.S. Gulf refineries and petrochemical plants, and the promising international outlets for condensate in Canada and Asia. Bottom line: unless the unlikely happens and the U.S. lifts restrictions on exporting “raw” condensate, producers, traders and other players will either be selling it here at a discount, or spending money to transform it to buy a little optionality. It’s all about spending the least they can to access pockets of demand, and first movers are already enjoying an advantage.

By Al Troner, President Asia Pacific Energy Consulting (APEC)

U.S. production of field (lease) condensates is growing like crazy, especially in the Eagle Ford.  There is way too much of this material for it to be absorbed into traditional crude blending markets.  At the same time the production of plant condensate, a.k.a. natural gasoline, is also increasing along with the yield of all other products from natural gas processing plants.  A glut of condensates has developed and is getting worse. Clearly this is an opportunity for new market development, and the bizdev community is hard at work coming up with concepts, projects and proposals to use all of this material in the U.S. and in export markets.  But there is a problem. Condensate markets in different geographies seem to have little in common with each other.  It’s like walking through the looking glass.  One term can have several meanings.  One meaning can be ascribed to several terms. Today we launch a RBN blog series to make sense of it all.

That crazy little ethane molecule is at it again. Yesterday the price blasted to 67.875 c/gal, a level last seen on January 17, 2012. Petchem cracker margins are low. Production is up, but inventories are down. A big driver of the bedlam is the price of natural gas, trading in the $7-$9/MMBtu range for the past month. But as usual with ethane, there’s a lot more happening below the surface — including high domestic demand, growing export volumes, and significant developments in downstream petrochemical markets — all shaking things up. Looking ahead, uncertainty looms, with more export capacity, ever-changing ethane rejection economics, and uneven production growth. In today’s RBN blog, we’ll leap back into the ethane market to see what’s been going on, and where ethane is headed over the next few years.