GPM

With ethane prices remaining below 30 c/gal, making it only slightly more valuable than natural gas at Henry Hub on a Btu equivalence, most natural gas processors/producers can earn a greater profit when ethane is sold with natural gas (rejected) than when it is extracted and sold with the NGLs. How much more money you may be wondering? The answer is — it depends. Are there downstream pipeline contracts and sunk costs impacting the decision making? Are the contracted volumes on an ethane-only pipeline or a raw mix pipeline? How far away is the producing basin from the Gulf Coast market? How do all these factors come together to determine whether ethane is produced or rejected and the value created? Today, we continue our discussion of the MQQV gas processing model — this time focusing on the Value principle. This is our final blog focusing on the MQQV model and, with it, we are making it available to all Backstage Pass holders should you want to run scenarios of your own.

Prices for heavy NGLs (propane, butanes, natural gasoline) have been rising fast since the middle of 2017, but the same cannot be said for the price of ethane. For most natural gas processors/producers, low ethane prices mean that ethane continues to be worth more when sold with natural gas (rejected) than when it is extracted and sold with the other liquids. But as NGL production continues to grow, hitting a record-high 3,968 Mb/d in October 2017, and new steam crackers are just starting to come online, there is a limit to how much ethane can be left in the residue gas stream without violating dry gas pipeline Btu specifications. How do processing plant designs, gas pipeline specs and economics play into a gas processor’s decision regarding whether to extract or reject ethane? Today, we continue our discussion of RBN’s MQQV gas processing model — this time focusing on the Quantity and Quality principles.

NGL prices have been rising fast since the middle of this year, but the same cannot be said for the price of natural gas. So how does this market scenario play out for gas processors who make their money extracting NGLs from gas? It plays out pretty darn good. In Part 1 of this series, we looked at how the relationship between the price of NGLs versus natural gas can be assessed by the Frac Spread, and concluded that things are definitely looking up for gas processing economics. But we also concluded that the Frac Spread misses the impact of a few key factors, including the BTU value and composition of the inlet gas stream. So today we’ll see what it takes to incorporate those factors into our assessment and, in the process, do a deep dive into the math of gas processing to examine the relationship between volumetric capacity, gallons of NGLs per 1,000 cubic feet of natural gas (GPMs) and moles. Today, we continue our latest expedition into the wilds of gas processing.

Natural gas processing plants are being built or expanded at a feverish pace.  At least 90 projects are in the works around the U.S., expected to add more than 15 Bcf/d of capacity according to the latest Bentek NGL Facilities Databank numbers.  How do the economics of these investments work? We know that it is a lot more complicated than a simple frac spread.  But does that mean the calculations must be exclusively the purview of engineers armed with gas plant optimization models?  Heck no.  Anybody, even an MBA with a spreadsheet, a few standard factors and a gas analysis can figure out how a gas processing plant makes money.  So to prove that point today we’ll dive one more time into natural gas processing economics to understand how the composition of an inlet gas stream is converted to outlet streams of natural gas liquids and residue gas.

NGL production in the Marcellus is growing by leaps and bounds.  There is only one play projected to grow faster – Utica.  And Utica sits just a few thousand feet below the Marcellus.  Combined NGL production from the two plays is projected to range between 450 – 600 Mb/d depending on who’s forecast you like best.  But as fast as these volumes are coming on, natural gas processing capacity and fractionation capacity are being expanded even faster.  Are the midstreamers getting ahead of the producers with 22 gas plant projects and 11 new fractionators or expansions in the works?  Or do these midstreamers know something that is not baked into the various industry production forecasts? Let’s see what the most recent projections are telling us.

NGL prices have been weak this year, but the same has been true for the price of natural gas.  So how does this market scenario play out for gas processors who make their money extracting NGLs from gas?  Last week we looked at what could be gleaned from the Frac Spread, and concluded that it missed a couple of key variables like the liquids content and the BTU value of the inlet gas.  So today we’ll see what it takes to incorporate those factors into our analysis and in the process dive deep into the math of gas processing to learn about things like cubic feet, GPM and moles.

This is how midstreamers at the Platts conference talk about the Eagle Ford?  Sounds more like a description of my wife’s Havanese after a bath than a description than one of the most prolific NGL plays on the continent.  But these weren’t really complaints.  It was just midstreamers pointing out some of the challenges of life in the Eagle Ford NGL business, circa 2012.  And of course, these are certainly white collar problems.  This is another blog based on presentations at the Platts Midstream conference.  Today we’ll look at each of the three issues from the title and pick a couple of examples of solutions and strategies being used by players in the South Texas area.

This is Part V of a series on the Golden Age of Natural Gas Processors.  The first four parts reviewed the crude-to-gas ratio at 50X, the impact of increasing NGL production on prices, the uplift value provided by gas processing, and who gets all the money.  Today we examine the incredible magnitude of gas processor’s margins – if the processor has access to the right gas streams.