Anything but normal might be the best way to characterize today’s market for normal butane. Butane production at gas processing plants and fractionators is at or near an all-time high. Butane consumption by steam crackers is maxed out, and so were butane exports until new dock capacity came online this fall. Butane inventories? They’ve risen to record levels too, and this summer, butane prices fell to their lowest mark in more than a decade. Now, with winter-gasoline blending season in high gear and new room for export growth, butane prices at Mont Belvieu are up more than 35% from where they stood a month and a half ago. What does all this mean for the butane market this winter? Today, we discuss recent trends in normal butane production, consumption, exports and stocks.
As we said in God Only Knows, normal butane (C4), with its four carbon atoms per molecule, is a middle-of-the-pack natural gas liquid (NGL) that’s heavier than ethane (C2) and propane (C3), lighter than natural gasoline (C5+), and is a close cousin to isobutane (IC4), an isomer of normal butane that is a bit more esoteric. Most normal butane is supplied by gas processing plants and fractionators, which separate NGLs from the raw gas stream (processing plants) and split the mixed NGLs into “purity products” (ethane, propane, normal butane, isobutane and natural gasoline). The balance of normal butane supplies in the U.S. comes from refineries. There are three primary domestic markets for normal butane: (1) as a motor gasoline blendstock, primarily during the colder months of the year, when federal environmental regulations allow gasoline to have a higher Reid vapor pressure, or RVP; (2) as a feedstock for steam crackers to produce ethylene and other petrochemical products; and (3) as a fuel — normal butane, like propane, is a liquefied petroleum gas (LPG). And don’t forget exports. With normal butane production significantly increasing during the Shale Era, a big slice of what’s being produced is now loaded onto VLGCs and shipped to Asia, Europe and other overseas markets. (VLGCs are Very Large Gas Carriers.)
We’ll start our review of the current state of the normal butane market with a look at production. As with propane and other purity products, butane production growth is being driven by crude oil and “wet” gas production. Gas plant production of butane has doubled over the past eight years, from 270 Mb/d in 2011 to an average of 540 Mb/d in the first eight months of 2019 (see Figure 1).
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