processing

Crude oil, natural gas and NGL production roared back in 2023. All three energy commodity groups hit record volumes, which means one thing: more infrastructure is needed. That means gathering systems, pipelines, processing plants, refinery units, fractionators, storage facilities and, above all, export dock capacity. That’s because most of the incremental production is headed overseas — U.S. energy exports are on the rise! If 2023’s dominant story line was production growth, exports and (especially) the need for new infrastructure, you can bet our blogs on those topics garnered more than their share of interest from RBN’s subscribers. Today we dive into our Top 10 blogs to uncover the hottest topics in 2023 energy markets. 

General Partners Phillips 66 and Spectra Energy control midstream Master Limited Partnership (MLP) DCP Midstream Partners (DPM). The partnership owns midstream transportation and processing assets along the natural gas and natural gas liquids (NGL) supply chain. Similar to many MLPs its Limited Partner unit price has declined by more than 50% in the past year. Despite exposure to difficult market conditions in the Eagle Ford and East Texas, a strong performance from the NGL logistics segment is expected to propel a 20% gain in net income between 2015 and 2017. Today we review our latest spotlight analysis report on DPM.

Last week’s clarification from the Bureau of Industry and Security (BIS) about the process required to export lease condensate may make exports easier on paper but it won’t stimulate export demand. The BIS move is timely because available exports of this light hydrocarbon material could increase significantly, depending on what happens to crude prices. However current low price levels and questions about future overseas demand could diminish the significance of the BIS process improvements. Today we describe the BIS clarifications and whether they are likely to make a difference.

It remains to be seen to what extent the recent crash in oil prices--and the sympathetic decline in prices for natural gas liquids (NGLs) - will lead to major drilling and production pull-backs in some U.S. shale plays. What seems clear, though, is that the higher-grade, liquids-rich areas at the heart of the Eagle Ford and Permian Basin will continue to experience at least modest levels of drilling activity and still-strong production for some time to come.   That should provide considerable relief to the midstream companies that have been investing heavily in NGL infrastructure in the Eagle Ford and Permian the past few years. Today, we continue our company-by-company look at existing and planned natural gas processing plants, fractionators and NGL pipelines in two of the most productive plays in the U.S.

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.

Three years ago the predicted onslaught of Marcellus NGL production kicked off a horse race to build new ethane pipelines out of the region.  At one time, at least seven different projects were being promoted. Since then most of the projects have dropped by the wayside, yielding to Mariner West (MarkWest/Sunoco) and ATEX (Enterprise).  Do those two projects provide enough capacity?  Perhaps too much?  What about possible competition from a new Marcellus/Utica NGL pipeline project that hit the radar screen last week?  Could that be a signal that a lot more liquids are on the way?  

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.

Last Friday the price for ethane in E-P mix in Conway dropped to 4.5 cnts/gal for a period of time.  According to OPIS, the price averaged 7.25 cnts/gal for the day.  Those numbers are all-time low prices for the product, and rock bottom by anyone’s definition.  As we discussed here in Monday’s post titled Monitor-Monitor on the Wall, Who’s the Cheapest Hydrocarbon of All, these are prices at the Conway Hub.  Most NGLs coming into Conway incur a transportation fee to get there and a fractionation fee to convert mixed NGLs into salable products.  That deduct can be between 6 and 12 cents per gallon.  Let’s say the deduct is 10 cnts/gal. Subtract that from 7.5 and by my math that’s negative 2.5 cnts/gal.  It’s hard to make money selling at negative prices.  Fortunately producers and natural gas processors are still making good money churning out propane, butanes and natural gasoline.

This is Part IV of a multi-part series on the Golden Age of Natural Gas Processors.  The first three parts covered the following topics:

Today we look at how much money natural gas plants make, who gets the money and what that means for both producers and processors. 

A long anticipated market milestone either has happened, is happening, or soon will happen. No I’m not talking about one-handle natural gas prices.  That’s old news.  The much more amazing number is a 50X crude-to-gas ratio. Whether it has happened yet or not depends on which prices you use to calculate the ratio.  More on that below.  But regardless of your math, one thing is certain.  The value of extracting a hydrocarbon molecule in gaseous form and selling that molecule as a liquid has never been higher.  It is a golden age of natural gas processing.  It is a business that over the past two years (since March 2010) has experienced a decline in feedstock costs of more than 50% and an increase in its traditional measure of profitability – the frac spread –by +33%, from $9/MMbtu to almost $12/MMbtu.