Blinded by the Lights: Finding Markets for U.S. Field and Plant Condensate

Blinded by the Lights: Finding Markets for U.S. Field and Plant CondensateThe boom in U.S. crude production over the past three years has been mostly light crude. An increasing portion of this crude output is more correctly termed condensate – a very light liquid hydrocarbon with gravity typically over 50 degrees API. Production of this field condensate in the U.S. has increased from about 450 Mb/d in 2009 to 1.2 MMb/d in 2014 and could increase to 1.8 MMb/d over the next 5 years depending on a number of factors, the most important of which is the price of crude oil. Similarly, the production of plant condensate, also called natural gasoline or pentane plus, has also increased, although on a smaller scale up by 160 Mb/d to 430 Mb/d between 2009 and the third quarter of 2014. Plant condensate output could increase to 600 Mb/d over the next 5 years.

This report describes the extraction and production of both field and plant condensate. We provide actual and forecast production data as well as an explanation of their markets expected levels of demand over the next five years. We explain why both products are likely headed for a surplus in the U.S. domestic market and discuss possible export markets that could soak up that surplus. Finally we cover potential competition between field and plant condensate in export markets as well as the possibility that those export markets could fail to materialize.

Report highlights include:

  • The U.S. is now producing a surplus of light liquid hydrocarbons.
  • These include field condensate produced at the wellhead and plant condensate or natural gasoline produced from rich gas.
  • Demand for these liquids is declining at their traditional demand centers - refineries and petrochemical crackers.
  • Demand for natural gasoline has been growing in Canada as a diluent to blend with heavy crude but current estimates of requirements may be reduced by recent market developments, including the recent collapse in crude oil prices.
  • Refinery infrastructure investment to process more light hydrocarbon liquids as well as plans for stand-alone condensate splitters will increase domestic demand for field condensate.
  • Evolving interpretation of the export regulations governing processed field condensate have increased export potential to meet Asian demand for feedstocks.
  • Exports of light NGLs such as ethane and propane will compete for the same petrochemical feedstock markets.
  • If surplus supplies of light hydrocarbons are not absorbed by overseas markets then U.S. prices for these products will be under further downward pressure.

Blinded by the Lights is the 12th in RBN Energy’s Drill Down report series, a suite of twelve reports from RBN during 2014 covering many of the key issues expected to impact the markets for crude oil, natural gas and natural gas liquids.

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