processing plant

Prices for CME/NYMEX West Texas Intermediate (WTI) have been on a rollercoaster this week – falling under $30/Bbl one minute then jumping back over $32/Bbl the next. Yesterday (February 4, 2016) WTI closed down 56 Cents at $31.72/Bbl. CME Henry Hub natural gas futures fell back under $2/MMBtu to close at $1.972 yesterday. That left the crude-to-gas ratio (WTI divided by Henry Hub) at just over 16 X – a little higher than the 15 X range we’ve been seeing this year. That is nearly half as much again as the 27X average between 2009 and 2014. The futures market implies that low ratios could continue for years – with December 2024 values implying a ratio of 13.3 X. The potential consequences of these low ratios are dramatic for the natural gas liquids (NGL) business as well as the competitiveness of U.S. natural gas in international markets.  Today we describe the implications.

According to the Energy Information Administration (EIA), liquids production from the Utica shale in Ohio (identified as crude oil but more likely all lease condensate) has more than trebled since January 2014 from 19 Mb/d to a projected 64 Mb/d in May 2015. Regional production of plant condensate from natural gas processing has also increased with the build out of gas processing capacity in the Utica and nearby Marcellus plays and could reach 50 Mb/d by the end of 2015. Midstream companies have been busy developing infrastructure to get this condensate to market. Today we look at developing infrastructure and markets for Utica condensate.

The ratio of Mont Belvieu ethane prices to the price of natural gas at the Henry Hub on a BTU equivalent basis has been below 100% since March.   That means ethane is worth more as gas than as liquid ethane, which was bad enough for ethane producers. But two weeks ago the bottom dropped out from under that ratio, and it now wallows below 80%.  At that level, every molecule of ethane being recovered would theoretically be worth far more selling it as gas anywhere in the U.S.   So have ethane production numbers been falling?  Nope.  Ethane production for the past four months reported by EIA has averaged an all-time high.  Ethane extraction economics are upside down but ethane production is increasing.  Today we examine the reasons why ethane is being extracted even when the economics don’t seem to make sense.

US natural gas liquids (NGL) production is growing fast, and surplus volumes are moving to export markets.  NGL production from natural gas processors increased from 1.7 MMb/d in early 2009 to 3.0 MMb/d this year (2014), and it is expected to continue growing to 4.5 MMb/d by 2019. Despite the important role of NGLs, these markets are not well understood, both due to their complexity and the unique aspects of their production, transportation, storage and use.  One of the most misunderstood aspects of NGL markets – the extraction of NGLs from natural gas, is the subject of RBN’s latest Drill-Down Report.  In today’s blog we’ll look at highlights of the report which reviews the basics of natural gas processing, current NGL markets, an outlook for NGL production, the health of NGL processing as measured by the Frac Spread, and a detailed review of RBN’s gas processing economics model.