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Kick Out the Jams - The U.S. NGL Production, Fractionation and Export Juggernaut Rolls On

Way back in 2018-19, U.S. NGL production was rising fast, new ethane-only steam crackers were coming online along the Gulf Coast, and new fractionation capacity wasn’t being added quickly enough — the capacity shortfall sent the NGL market into near-panic. Fast forward to now: NGL production is still rising but domestic demand is flat, resulting in an NGL-exports surge and a race to develop new export capacity. And fractionation capacity in Mont Belvieu and elsewhere? The market learned its lesson five years ago and, to avert another capacity crunch, midstream companies have been adding new fractionators at an almost frenetic pace. In today’s RBN blog, we discuss the ongoing fractionation-capacity buildout — and the need to quickly expand NGL export terminals. 

Having sufficient infrastructure in place is, of course, a critical need in each and every U.S. hydrocarbon market. There’s no way around it — you need the processing plants, the pipelines, the storage, and (especially in the Shale Era) the export docks to deal with the massive volumes of crude oil, natural gas and NGLs being produced. And don’t forget to build in a cushion, not just to deal with the daily and weekly ups and downs in supply and demand, but also to anticipate production growth.

NGLs, a favorite topic for many of us at RBN, are a case in point. As we said in last fall’s Drill Down Report on NGL networks, U.S. production of y-grade (mixed NGLs) has more than tripled over the past 15 years, and now tops 7 MMb/d — a much faster growth rate than crude oil or natural gas. There are many reasons for the steady rise in NGL output, including the fact that crude-focused wells in the Permian — by far the leading and fastest-growing production area — produce vast quantities of liquids-rich associated gas and that there is strong demand for NGL “purity products” like ethane, propane and butanes at Gulf Coast petrochemical plants and in overseas markets. Burgeoning NGL production has required an extended, far-reaching buildout of new infrastructure.

It should come as little surprise that all the new fractionators under construction today are located in Mont Belvieu. In our seven-part Magical Mystery Tour blog series a few years back, we explained that the NGL storage and fractionation hub in Mont Belvieu — about 30 miles east of Houston in Chambers County, TX — has been the epicenter of the North American NGL market for decades, largely because of the giant salt dome formation under the city’s Barbers Hill that allowed for the buildout of more than 250 MMbbl (yes, you read that right!) of underground NGL storage capacity. As shown in Figure 1 below, 443 Mb/d of new fractionators came online at Mont Belvieu in 2023, another 685 Mb/d will begin commercial operation there over the next 18 months or so, and 100 Mb/d of fractionation capacity that has been offline will be returning to service this spring. That will increase Mont Belvieu’s total capacity to more than 4.4 MMb/d by the second half of 2025 — a 35% gain since January 2023 and a doubling of fractionation capacity there since 2018.

Mont Belvieu Fractionation Capacity Additions, 2023-25

Figure 1. Mont Belvieu Fractionation Capacity Additions, 2023-25. Source: RBN 

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