NGLs vs. LPGs – Clash of the Titans

Yesterday I attended and was a speaker at the Platts 6th Annual Rockies Oil & Gas conference at the Grand Hyatt Denver.  There were about 350 registered attendees, by far the largest of these conferences.  I’ve been a speaker at the event for the past four years.  Good friend and master of ceremonies Stuart Nance (his first day on the job as VP of Bill Barrett Corp.) noted that in previous years the conference was titled Gas and Oil Conference.  Now the order is reversed.  That tells you a lot about the speaker topics and audience interest.  I spoke at 2:15 and was the first to utter the word “gas”.  And I only had 3 slides on the topic.

On Monday I spoke at the Canadian Energy Research Institute’s (CERI) Crude Oil Conference in Calgary, Alberta.  Presentation title: The Looming Imbalance - Supply/Demand Implications of the Shale Oil Revolution.  Like most oil conferences these days, it was very well attended and included some high profile Canadian energy luminaries like Joe Oliver, Canada’s Minister of Natural Resources.  As you might expect, this was a crowd very friendly to oil producers in general, and to oil sands production specifically.  Have no doubt that Canada is going to increase production from oil sands by at least 1 MMb/d over the next 5 years whether the barrels come to the U.S, or not.  It is a “national imperative”.

For the past two days I’ve attended the 5th Annual Platts Midstream Development Conference at the JW Marriott in Houston.  After a while you start to get a little tired of phrases like ‘astronomical growth’, ‘unprecedented opportunities’, and ‘game changing technology’.  There was a steady stream of midstream investment projects in every sector of the oil, gas and NGL markets in the U.S.  And there were few disagreements about the trajectory of production or the need for new infrastructure to get the production to market.  That is, except for one issue.  And that issue was ethane.  As documented here on several occasions (most recently this week in Monitor Monitor and  Rock Bottom), ethane production has increased dramatically over the past year and today ethane prices in both Conway and Mont Belvieu are depressed (yesterday 43.4cnts/gal for MB purity and 12.4cnts/gal for Conway E-P).  But the real question is the next five to six years. Will petrochemical producers add enough ethane capacity each year to absorb the expected growth in ethane production, or will producers outrun the petchems and drive prices to fuel value for an extended period of time?