Sail Away – Propane Exports Exceed 400 Mb/d for the First Time

We’ve been talking a lot over the past year about the need for increasing exports to balance the U.S propane market as growth in production from gas processing plants outruns domestic demand.  U.S. propane production from gas processing has increased by over 100 Mb/d since January 2013, and there’s lots more to come.  For the first time U.S. propane exports exceeded 400 Mb/d in October 2013 thanks to growing U.S supply and infrastructure developments including dock expansions by Enterprise and Targa.  But just after exports ramped up, the propane market was hit by a couple of wild cards – a late and very heavy crop drying season and a series of record cold temperature events. In today’s blog, we continue our series covering the record setting 2014 NGL markets.

Before we jump into the export analysis let’s first spend a minute looking at the U.S propane market.  Figure #1 below depicts the rapid growth in U.S. propane production from gas processing plants that occurred from January 2013 to October 2013, the latest reported data by the U.S. Energy Information Administration (EIA).

This is huge growth in a very short time. For further discussion on U.S. NGLs production growth from gas processing see Too Wrong For Too Long – The NGL Surge We Didn’t Expect and Big Surge Comes to Whoville – Northeast NGLs to Increase Six Fold.  Keep in mind while reading both of these blogs that RBN’s forecast of NGL production has increased again since both were written. The numbers keep getting bigger.

Propane is also produced at refineries, averaging 276 Mb/d in 2012 and about 280 Mb/d in 2013 (EIA numbers).  That is not much of a change, and refinery production of propane is expected to remain relatively flat.  So it is production from gas processing that will be driving the growth in exports and hence what we will be concentrating on in this blog series.

A few general notes on domestic demand before moving on to exports.  If you have been following either the RBN blogosphere, the propane market or both you have heard a tremendous amount about the seasonality of propane demand over the past several months.  In general propane demand increases in the fall and winter due to crop drying and colder temperatures, but this year Midwest propane suppliers were hit particularly hard by a late and heavy crop drying season followed directly by much colder temperatures. For an in-depth look at these demand anomalies and the impact on domestic markets see A Perfect Storm – Polar Vortex Turns Propane and other NGL Markets Upside Down.  For more on propane demand and crop drying see Farmer Dries Corn and I Do Care; Propane Corn Drying, Shortages and the Cochin Reversal – Part 2 .  While seasonality in propane demand is normal, this winter has been anything but normal.  The 2013 crop drying season and the 2013-14 Polar Vortex weather pattern are both extremes.