Until just a few years ago, the rise and fall of U.S. propane inventories each year was driven in large part by winter weather: the colder the temperatures in the major propane-consuming areas, the bigger the draw on stocks. Things have gotten much more complicated lately, though, thanks to a combination of rapid NGL production growth, a generally booming propane export market, and the vagaries of petchem margins. Now, to get a handle on propane stocks, you not only need to be able to forecast the weather, you also need to monitor international propane arbs and steam cracker economics — oh, and crude prices too, because they have a significant effect on NGL output and propane supply. Today, we discuss the many factors that impact propane inventories and prices in this sometimes chaotic market.
What a deal! Take as much butane as you want — all for the low, low price of less than 10 cents/gallon (c/gal). That was the situation in Edmonton, AB, last November and the price stayed dirt cheap until a few days ago. Given a decline in demand for butane in crude blending, along with growing NGL production, the NGL processing and storage hub in Western Canada was awash in butane as winter approached. It remains flush with product today — and the price for Alberta butane is still low. How did this happen, and how will it play out over the next few months? Today, we examine the factors that led the Edmonton NGL market to see a price fall to near zero c/gal for the second time this decade.
Rising natural gas liquids production in the Niobrara is increasingly straining existing pipeline capacity out of the region and has spurred midstreamers to propose various combinations of new pipelines, expansions to existing pipelines and pipeline conversions in order to ease constraints. One of the latest entrants is a joint venture of Williams and Targa Resources that would expand Rockies producers’ ability to move mixed NGLs to the Mont Belvieu, TX, hub for fractionation and marketing/export. Williams plans to build a 188-mile pipeline — Bluestem — that would extend from its Rockies-to-Conway, KS, Overland Pass Pipeline to Kingfisher County, OK. For its part, Targa will build a 110-mile extension of its new Grand Prix NGL pipeline from southern Oklahoma north into Kingfisher to connect with Bluestem. As part of the deal, Williams has also contracted substantial volumes on Grand Prix as well as at Targa’s fractionation facility at Mont Belvieu. Today, we discuss Williams and Targa’s plan.
There’s never a dull moment in the ethane market. Four new steam crackers and an expansion at an existing plant are slated to begin operating along the Gulf Coast in 2019, and a recently restarted Louisiana cracker will continue to ramp up to full capacity — together adding about 250 Mb/d of ethane demand by year’s end. You’d think there would be plenty of ethane out there for them. After all, U.S. NGL production has been on the rise, driven in part by new Permian gas processing plants and new NGL pipeline capacity to the coast. But fractionation constraints at the Mont Belvieu hub are likely to linger through 2019, raising questions about how much ethane will actually be produced and how much will need to be rejected into pipeline gas. Today, we consider the challenges facing the ethane market this year as demand increases and fracs run flat out to keep pace.
Fractionators at the Mont Belvieu hub operated at or near full capacity through the second half of 2018 as they struggled to deal with a deluge of mixed NGLs from the Permian and other key production areas. This situation — barely enough capacity to keep pace with rising demand for fractionation services — is likely to continue through 2019, even as a number of new fractionators come online. But NGL producers and the midstream sector are on the case: a slew of additional frac capacity has been announced since last fall, all of it slated to begin operation in 2020 or early 2021, and all of it backed by long-term contracts. Today, we discuss ongoing efforts to make the most of existing frac trains and to add new capacity pronto.
Energy Transfer’s Mariner East pipeline system was supposed to help resolve a growing problem for producers in the “wet” Marcellus and Utica plays — namely, the need to transport increasing volumes of LPG out of the Northeast, especially during the warmer months, when in-region demand for LPG is low. The pipeline system also was meant to spur LPG and ethane exports out of Energy Transfer’s Marcus Hook marine terminal near Philadelphia. So how are things going? Well, the now five-year-old, 70-Mb/d Mariner East 1 pipeline, designed to transport ethane and propane, has been offline ever since a sinkhole exposed a part of the pipe late last month. The 275-Mb/d Mariner East 2 pipe is finally in operation and enabling a lot more LPG to move to Marcus Hook, but for now it can only run at about 60% of its capacity. And last Friday, a key Pennsylvania regulator suspended its review of outstanding water permit applications for the remaining piece of ME-2 and the parallel 250-Mb/d ME-2 Expansion project, and threw into doubt how long it might take to finish the Mariner East system and ramp it up to full capacity. Today, we begin a series on recent Mariner East developments and explain how, despite the mixed bag of Mariner East news in recent weeks, the situation is not as bad as it may seem.
Well, it finally happened. After several years of assessing the possible development of a large, integrated propane dehydrogenation (PDH) plant and polypropylene (PP) upgrader unit, a joint venture of Canada’s Pembina Pipeline and Kuwait’s Petrochemical Industries Co. (PIC) earlier this week announced a final investment decision (FID) for the multibillion-dollar project in Alberta’s Industrial Heartland. The new PDH/PP complex won’t come online until 2023, but when it does, it will provide yet another new outlet for Western Canadian propane, which has been selling at a significant discount in recent years. Today, we discuss Pembina and PIC’s long-awaited PDH/PP project, Inter Pipeline’s development of a similar project nearby, Western Canadian propane export plans — and what they all mean for propane prices.
The U.S. started exporting ethane by ship less than three years ago, first out of Energy Transfer’s Marcus Hook terminal near Philadelphia and then from Enterprise Products Partners’ Morgan’s Point facility along the Houston Ship Channel. Good news for NGL producers, right? Well yes, sort of. Because while waterborne export volumes rose through 2016, 2017 and the first seven months of last year, they’ve been flat-to-declining ever since, with further ethane-export growth hampered primarily by a lack of international demand. That demand may soon be ratcheting up — mostly in China, but also in Europe — but it won’t happen overnight. Today, we discuss ethane export trends, the Morgan’s Point and Marcus Hook marine facilities, and plans for new ethane export capacity tied directly to new overseas ethane crackers.
LPG export terminals along the Gulf Coast account for more than nine of every 10 barrels of propane and normal butane that are shipped from the U.S. to foreign buyers. That makes perfect sense, given the terminals’ proximity to major NGL production areas like the Permian, the Eagle Ford and SCOOP/STACK, and to the world-class fractionation hub in Mont Belvieu, TX. But, increasingly, LPG terminals on the East and West coasts, are growing in significance. On the Atlantic side, Marcus Hook, near Philadelphia, is enabling more and more volumes of Marcellus/Utica-sourced propane and butane to reach overseas markets. And, as we discuss in today’s blog, West Coast exports are on the rise as well, with Petrogas’s Ferndale terminal in Washington state providing a straight shot across the Pacific to Asia for propane and butane fractionated in Western Canada, plus a good bit more LPG export capacity under development in British Columbia.
U.S. production of natural gas liquids is projected to increase by 17% this year, and by another 10% in 2020, according to RBN’s forecast. These gains will result in similar increases in the output of propane and normal butane — two NGL purity products generally referred to as LPG — and, with U.S. demand for LPG expected to stay relatively flat, most of the incremental volumes will be sent to export terminals for shipment to foreign buyers. The question is, will the nine U.S. marine terminals that are equipped to send out LPG have enough capacity to handle the much-higher flows? Today, we continue our series with a review of four smaller export terminals along the Gulf and East coasts.
Way back in 2012, the U.S. flipped from being a net LPG importer to a net exporter. Since then, exports by ship have skyrocketed, up from 0.3 MMb/d in 2013 to more than 1.1 MMb/d at year-end 2018, an astronomical compound annual growth rate (CAGR) of 30%. The vast majority of waterborne exports was out of a handful of LPG terminals along the Gulf Coast. These facilities — plus Ferndale in the Pacific Northwest and Marcus Hook near Philadelphia — so far have managed to handle the increasing flow of LPG, but with U.S. NGL production still rising, it looks like new export capacity is needed — and is on the way. All the while, imports of LPG, almost all from Canada, have remained relatively flat, averaging only 130 Mb/d in the 2013-18 period. Today, we begin a series on existing and planned LPG export capacity along the Gulf, West and East coasts — and what’s driving the build-out of these assets.
Production of natural gas liquids in the Rockies has increased by half since the end of 2012, with the bulk of the output — and those gains — coming from the greater Niobrara play in Colorado and Wyoming. As a result, a number of NGL pipelines out of the Rockies are now running full or close to it, and midstream companies are planning a mix of new pipelines, pipeline expansions and pipeline conversions with the aim of easing takeaway constraints by the latter half of 2019. But, with crude oil prices tanking and crude-focused producers reevaluating their drilling and completion plans, could the Niobrara be headed for an NGL takeaway over-build? In today’s blog, we continue our series with a look at existing and planned NGL pipes out of the Denver-Julesburg (D-J) and Powder River basins.
Crude oil takeaway constraints out of the Permian are a fresh reminder that, in the Shale Era, production gains can far outpace the ability of the midstream sector to build new pipelines. Similarly, an increasing share of the rising volumes of crude flowing through the Cushing, OK, hub wants to move to the Gulf Coast, but the existing Cushing-to-coast pipeline systems are full and midstreamers are scrambling to add more capacity. Pipeline constraints aren’t limited to crude, of course. In the Niobrara’s Denver-Julesburg Basin, rapid gains in NGL production threaten to overwhelm the pipelines carrying mixed NGLs to fractionation hubs. What can be done? In at least some cases — including all of those mentioned above — there are opportunities to convert NGL pipelines to crude service, or vice versa. Today, we look at efforts under way to repurpose existing pipes to add needed takeaway capacity pronto.
Two months ago, NGL prices and market differentials were soaring, in large part due to fractionation capacity constraints on the Gulf Coast at Mont Belvieu. The constraints have not eased, yet the same prices and differentials have come crashing down from those lofty levels. Why has this happened, you ask, and how long will it last? There are a lot of factors contributing, but two of the most significant are seasonal NGL demand shifts and what’s going on with crude oil. Today, we examine the recent swings in NGL prices and market differentials and what may be around the next corner for these markets.
To fire on all cylinders — especially during a period of strong high crude oil prices and rising production — the U.S. energy sector depends on midstream infrastructure networks that can efficiently handle the transportation and processing of every type of hydrocarbon that emerges from the wellhead. It’s no secret that rapid production growth in the Permian has left the red-hot West Texas play short of crude-oil pipeline capacity, and midstream companies there have also struggled to keep pace with natural gas takeaway needs too. What’s less well known is that fractionation capacity at the all-important NGL hub in Mont Belvieu, TX, is nearly maxed out, and that some Permian producers — and others — are now scrambling to find other places to send their incremental NGL barrels for fractionation into purity products. We put this issue front-and-center earlier this week in Hotel Fractionation. Today, we discuss highlights from the first of two planned Drill Down Reports on fractionators and other key assets at the nation’s largest NGL hub, and the potentially broader effects of a fractionation-capacity shortfall.