Like A Box of Chocolates – The Condensate Dilemma

When Forrest Gump famously said, “Life is Like a Box of Chocolates – you never know what you are going to get”, he might as well have been talking about condensates. The shale revolution has doubled US condensate production since 2011 and we expect those numbers to continue to increase. And like chocolates, condensates come in many varieties. Not just field condensate production from oil and gas wells in basins like the Eagle Ford, but its cousins natural gasoline from natural gas liquids (NGL) processing plants and light naphtha from petroleum refineries. These growing volumes of light hydrocarbons are joined at the hip by their “C5” chemistry and finding a home for them all is proving disruptive to traditional supply/demand patterns.

This is Part 1 of a two part series looking at the gap between surging condensate supplies and market demand. In this episode we start with a few definitions and then detail growing US condensate production. In Part 2 we tackle the demand side of the equation. Much of the material in this blog is adapted from a presentation Rusty made to the 3rd Annual Platts NGL Conference in Houston at the end of September (2013).

If you are new to condensates then before we get going we should point out a number of previous RBN Energy posts on this topic that you might want to check out in conjunction with this one. At the end of last year we provided some early definitions and looked at regulatory issues around condensates in our “Fifty Shades of Condensate” series including “Which One Did You Mean?”, “What Should be Done With Condensates?” and “Where is All This Condensate Going?” Earlier this year Al Troner of APPEC consulting contributed a couple of blogs on the market for condensates outside the US including some comprehensive definitions (see Through The Looking Glass). And there have been others on specific topics that (as usual) we will provide links to as we go along.

Condensate Selection

First to make sure that we are all on the same page we provide basic definitions and describe each of the three branches of the family of hydrocarbons known collectively as condensates.

In the U.S. when we use the word condensate we are usually talking about field condensates (also called lease condensates), generally produced near the wellhead by running natural gas through a stabilizer or similar piece of equipment. Field condensates – the first branch of our condensate family - run the quality gamut, from super light crude, black in color all the way to a clear liquid basically the color of crème soda. In US markets because of Energy Information Administration (EIA) convention, field condensates are classified as crude oil. The second branch of the family is plant condensates, which also go by the name natural gasoline and pentanes plus. We think of these as a natural gas liquid (NGL), because they are produced from a natural gas processing plant – along with ethane, propane and butanes (see How Rich is Rich – Part 2 for a primer on NGL Processing). And the final branch of the condensate family is light naphtha, which is a refined product - output from crude refining.

What all these products have in common is chemistry.  A significant percentage of each of these products is made up of a hydrocarbon with  5 carbon molecules - generally abbreviated to C5 or pentane – both normal pentane and isopentane.  They are not 100 percent pentane, but they contain a lot of pentane, and that’s what makes them part of the condensate family. Next we’ll look at a little more closely at where supplies for each branch of the condensate family come from.

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