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Magical Mystery Tour - Soaring NGL Supplies May Soon Overwhelm Mont Belvieu Fractionation Capacity

The NGL sector is firing on all cylinders. Natural gas liquids production in the Permian, the SCOOP/STACK and other key basins is up, up, up. A number of new, ethane-consuming steam crackers are coming online along the Texas and Louisiana coast, most conveniently close to the NGL storage and fractionation hub in Mont Belvieu, TX. The export market for liquefied petroleum gases — propane and normal butane — is through the roof, averaging more than 1 MMb/d in the first five months of 2018 (almost all of it being shipped out of Gulf Coast ports), and ethane exports are strong too. What’s not to like? Well, NGLs don’t do anyone much good until they are fractionated into “purity products” like ethane, propane, normal butane etc., and the rapid run-up in U.S. NGL production — combined with the reluctance of producers to commit to new fractionation capacity — has the existing fractionation plants in Mont Belvieu running flat-out to keep up. Today, we begin a review of the NGL Capital of the Western World and considers why Mont Belvieu — as big as it is — is getting bigger.

Potential U.S. NGL production — including ethane that is rejected into natural gas — is now approaching 5 MMb/d. That’s double the volume of NGLs being produced six years ago. And with oil and gas production soaring in NGL-rich plays like the Permian’s Delaware Basin and the “wet” Marcellus/Utica, we’re expecting potential NGL output to increase by another 1 MMb/d over the next three years. Figure 1 shows the most recent forecast for potential U.S. NGL production under RBN’s Mid-Curve Scenario, which assumes crude oil and natural gas price trajectories similar to the current forward curves. The colored layers in the graph indicate that most of the gains will come from the Permian (light blue layer), where midstream companies are developing 935 MMb/d in new pipeline capacity from West Texas to Mont Belvieu and another 375 Mb/d to Corpus Christi (see Cowboys and NGLs).

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