RBN Energy

Like everything else in 2020, the propane market has been exceedingly difficult to navigate. So far this year, we’ve seen Mont Belvieu propane prices down to 24 cents/gallon (c/gal) and up to 57 cents. Exports continue to increase, but stocks seem to be reasonably healthy, partly thanks to November so far being one of the warmest on record. Propane production was projected to dip in the fourth quarter but has held up pretty well. During the spring there was considerable concern about the possibility of a tight supply-demand situation this winter, but so far, market conditions seem relatively benign. Does that mean we are in the clear for winter 2020-21? Unfortunately, there may be a few gotchas still out there. As always, a lot depends on the weather. But there are other factors at work that could surprise us because some of the statistics we’ve relied on in the past to gauge what’s ahead are not what they used to be. In today’s blog, we begin a series looking at those factors.

Over the past 10 years, there’s been a 14-fold increase in U.S. LPG exports: from 132 Mb/d, on average, in 2010 to 1.85 MMb/d so far in 2020. That extraordinary growth in export volumes couldn’t have happened without the development of a lot of new, costly infrastructure — everything from gas processing plants, NGL pipelines, and fractionators to LPG storage capacity, marine terminals, and ocean-going gas carriers. And that build-out continues, not only along the Gulf Coast but on the shores of the Delaware River near Philadelphia. Energy Transfer has been working to expand the throughput of its Marcus Hook terminal on the Pennsylvania side of the river, and Delaware River Partners, an affiliate of Fortress Transportation & Infrastructure, will soon be transloading LPG from rail tank cars onto ships across the Delaware in New Jersey. Today, we discuss Delaware River Partners’ Gibbstown Logistics Center.

For the past few years, demand for U.S.-sourced ethane has been on the rise as petrochemical companies in the U.S. and abroad developed new, ethane-only steam crackers and retrofitted existing crackers to allow more ethane to be used as feedstock. U.S. NGL production was increasing too, of course, alongside growth in crude oil-focused plays like the Permian and “wet” gas plays like the Marcellus/Utica. But recently, drilling-and-completion activity has slowed to a crawl and NGL production has been leveling off, which means that less of the ethane that comes out of the ground with oil and gas will be “rejected” into natural gas and more will be separated out at fractionation plants. Today, we conclude a series on ethane exports with a look at U.S. NGL production, ethane supply and demand, ethane exports, and ethane prices.

Taken together, the ethane-related infrastructure projects developed in the U.S. over the past several years serve as a reliable feedstock-delivery network for a number of steam crackers in Europe, Asia, and Latin America. NGL pipelines transport y-grade to fractionation hubs, fractionators split the mixed NGLs into ethane and other “purity” products, ethane pipelines move the feedstock to export terminals fitted with the special storage and loading facilities that ethane requires, and a class of cryogenic ships — Very Large Ethane Carriers, or VLECs — sails ethane to mostly long-term customers in distant lands. The end results of all this development are virtual ethane pipelines between, say, the Marcellus/Utica and Scotland, or the Permian and India. Today, we continue our series on ethane exports with a look at the two existing export terminals, the ethane volumes they have been handling, and where all that ethane has been headed.

The run-up in U.S. production of natural gas liquids over the past 10 years spurred the development of a whole lot of infrastructure. More pipelines to transport mixed NGLs from production areas to NGL storage and fractionation hubs, especially Mont Belvieu, TX. More fractionators to split y-grade into ethane, propane, and other “purity” products. And, specifically for ethane — the lightest, quirkiest, and most plentiful NGL — a number of ethane-only steam crackers were built along the Gulf Coast to take advantage of the new supply abundance, as were ethane-only pipelines, export terminals, and a whole new class of cryogenic ships — Very Large Ethane Carriers, or VLECs — to move the product to markets in Europe and Asia. Today, we begin a new series on the unique nature of overseas ethane exports, including why most incremental export volumes are tied to long-term supply deals with a handful of global ethylene plants designed — or reconfigured — to “crack” ethane.

Understanding whether propane production is up or down over the past few months is a bit more difficult than you might think, depending on which set of EIA numbers you choose to look at. The U.S. Energy Information Administration provides monthly numbers on the last day of the month lagged by about two months, and weekly numbers on Wednesdays, lagged by only five days. Both time series are closely watched by the propane market to assess the availability of supply for retail customers, petrochemical feedstock demand, and exports. Usually, these two sets of numbers move in tandem. But not always. The monthly numbers show production down by about 70 Mb/d from April to June, which is what you would expect given what was happening with crude and gas production at that point in time. Yet EIA weekly production numbers showed production increasing by about 90 Mb/d for the same period. So which way is propane production really trending? If you want to understand what’s going on, and you don’t mind delving into some deeply wonky NGL analytics, hang on for today’s blog.

Yet again, the Texas-Louisiana coast is bracing for a hurricane that has the potential to be really bad, not just for the people and homes in the storm’s path, but for the region’s all-important energy sector. Hurricane Laura will be crossing a swath of the Gulf of Mexico dotted with oil and gas production platforms, and is headed for an area chockablock with tank farms, refineries, and steam crackers, as well as export terminals of every stripe: crude oil, refined products, ethane, LPG, and LNG. There’s a good chance there’ll be a lot of disruption to many energy-related activities for at least the balance of this week — and maybe longer — but one of the biggest hits could come to Mont Belvieu, TX, the center of NGL storage and fractionation. Today, we discuss how the storm might affect not only storage at the U.S.’s largest NGL hub, but gas-processing activity hundreds of miles inland.