Propane Education and Research Council

U.S. propane production growth in the shale era and the addition of new domestic and export terminal infrastructure has resulted in a radical transformation of the U.S. propane market. But even as the market responds to these positive developments, the memory of shortages and price spikes during the Polar Vortex winter of 2013-14 lingers. The market response since that crisis, and what further actions the industry might take to be better prepared for future market disruptions are the subjects of RBN’s latest Drill Down report reviewed in today’s blog (click here for a preview of the report: Next To You: A Transformation in Propane Markets).

Most of the increase in U.S. propane production in recent years has come from plants processing natural gas to extract natural gas liquids (NGLs). The rich (wet) gas those plants process is either produced with crude as associated gas or from wet gas wells that target NGLs. In either case propane supplies are produced regardless of U.S. demand – and that demand is relatively static although subject to significant weather related seasonal variation. There are two important consequences of this supply/demand imbalance with important implications for the propane market.  First, the U.S. can produce about twice the propane it needs, so the surplus must be exported.  Second, most production growth is next door to the largest propane demand regions in the country. Today we describe the scenarios used to build our model of propane supply and demand used to analyze these developments.