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Get Ready - Growth in NGL Production and Exports Drives Continued Build-Out of NGL Networks

Since the start of the Shale Revolution 15 years ago, U.S. NGL production has increased by an extraordinary 260% to more than 6.5 MMb/d. And it’s not just NGL production that’s up sharply. So are exports of NGL purity products, especially LPG (propane and normal butane) and ethane. All that growth — and the growth that’s still to come — wouldn’t be possible without a seemingly non-stop expansion of NGL-related infrastructure. Everything from gas processing plants and NGL pipelines to salt-dome storage, fractionators and export docks. And much of that infrastructure is in the hands of just a few large midstream companies that over the years have developed “well-to-water” NGL networks that enable their owners to collect multiple fees along the NGL value chain. In today’s RBN blog, we discuss highlights from our new Drill Down Report on NGL networks. 

To get what’s going on with U.S. production of the mixed stream of natural gas liquids collectively known as NGLs (ethane, propane, normal butane, isobutane and pentanes+), it’s important to understand the relationship between NGLs and the production of crude oil and natural gas — after all, they all come from the same holes in the ground in hydrocarbon-rich areas like the Permian, Bakken, and Eagle Ford. Because of their common origin, RBN refers to the three commodity streams (crude, gas and NGLs) as the “drillbit hydrocarbons.”

These days, about 80% of drilling in the U.S. is primarily directed at crude oil production, which makes sense because (generally speaking) crude is the most valuable of the drillbit hydrocarbons on a per-Btu basis. Crude doesn't emerge from shale plays on its own, of course — instead, it comes up with associated gas, a gurgling combination of methane (natural gas), mixed NGLs and various impurities. The composition of this oil/natgas/NGLs stew varies widely, not only between shale basins but within each basin and from well to well — and even within each well over time.

For a variety of technical reasons, production from oil-focused wells — and entire basins — tends to get gassier over time, with an increasing gas-to-oil ratio (known as the GOR and calculated as Mcf of gas per barrel of oil). Also, additional associated gas tends to be captured as gathering and processing infrastructure is built out and restrictions on flaring tighten. And in many basins, including the all-important Permian, the associated gas is saturated with NGLs — the NGL content in associated gas is often measured in gallons per Mcf of gas, or GPM. The recovered GPM across the U.S. has been rising steadily since 2008, from 1.3 GPM back then to more than 2.3 GPM today. A rising GOR coupled with a rising GPM means that now, on average, for every barrel of crude oil produced in the U.S., 9.4 Mcf of gross gas is produced and 22 gallons of mixed NGLs (9.4 x 2.3 = 22) — or about half a barrel of NGLs (22/42). 

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