natural gas liquids

Global demand for propylene is rising, but lighter crude slates at U.S. refineries and the use of more ethane at U.S. (and overseas) steam crackers has reduced propylene production from these plants. That has led to the development of more “on-purpose” propylene production facilities — especially propane dehydrogenation (PDH) plants — in both the U.S. and Canada. More than 2 million metric tons/year of new PDH capacity has come online in North America since 2010, another 1.6 MMtpa is under development, and propane/propylene economics may well support still more capacity being built by the mid-2020s, maintaining the U.S. and Canada’s position as propylene and propylene-derivative exporters. Today, we begin a series looking at “on-purpose” production of propylene by PDH plants and what the development of these facilities will mean for U.S., Canadian and overseas markets.

It’s impossible to know for certain what will happen next in the international markets for propane, butane and ethane — there are too many variables and vagaries. What is very doable, though, is to gain a better understanding of the broader market forces at play. For example, the U.S. now has a few years under its belt as a major propane exporter, so it’s feasible to assess trends in where that propane is going — or no longer going — and to examine how propane exports to various parts of the world are impacted by everything from a high-stakes trade war to governmental efforts to encourage the use of cleaner cooking fuel. Today, we continue our deep-dive into propane, butane and ethane exports with a look at where propane exports from the U.S. East, West and Gulf coasts are heading, and why.

As Western Canadian natural gas production has been recovering off lows from a few years ago and pushing higher, one of the by-products of this recovery has been steadily rising production of natural gasoline, an NGL “purity product’ also known as plant condensate. Condensate production has been growing so much that Pembina Pipeline Corp. — a leading transporter of natural gasoline in the region — has been undertaking another round of expansions to its Peace Pipeline system to move more of the product to the Alberta oil sands. There, condensate is used as a diluent to allow the transportation of viscous bitumen to far-away markets via pipelines or rail. Today, we take a closer look at Pembina’s effort to expand the Peace Pipeline.

The biggest driver of generally rising LPG exports is the widening gap between how much LPG the U.S. consumes and how much it produces — there’s simply too much of the stuff, and LPG-hungry European and Asian markets beckon. But month-to-month export volumes are often erratic, affected by a wide range of variables. Winter weather in Wisconsin. Steam cracker economics in Germany. Propane dehydrogenation (PDH) plant outages in China. Not to mention lingering fog or a tank-farm fire along the Houston Ship Channel, or the startup of a new NGL pipeline to the Marcus Hook terminal near Philly. Add to all this the export-volume spikes that may come later this year and in 2020 when new dock capacity comes online along the Gulf Coast. Today, we take a look at what drives the monthly ups and downs in exports.

U.S. propane is fanning out across the planet, with export volumes now triple those of any other country.  The global LPG market today is dominated by cargoes shipped from U.S. ports. Buyers from Mexico to South Korea can’t make a move without considering conditions on the Houston Ship Channel or pipeline constraints in Pennsylvania. But an interconnected market is a two-way street. U.S. propane prices are now influenced more by the weather in Europe and Asia than by the weather in Wisconsin or New Hampshire. And it’s not only propane. All NGLs are experiencing growth in U.S. export volumes, with huge implications for infrastructure, capacity constraints and, of course, prices. Today, we preview the deep dive into these issues on the agenda at RBN’s upcoming xPortCon conference.

What a deal! Take as much butane as you want — all for the low, low price of less than 10 cents/gallon (c/gal). That was the situation in Edmonton, AB, last November and the price stayed dirt cheap until a few days ago. Given a decline in demand for butane in crude blending, along with growing NGL production, the NGL processing and storage hub in Western Canada was awash in butane as winter approached. It remains flush with product today — and the price for Alberta butane is still low. How did this happen, and how will it play out over the next few months? Today, we examine the factors that led the Edmonton NGL market to see a price fall to near zero c/gal for the second time this decade.

Rising natural gas liquids production in the Niobrara is increasingly straining existing pipeline capacity out of the region and has spurred midstreamers to propose various combinations of new pipelines, expansions to existing pipelines and pipeline conversions in order to ease constraints. One of the latest entrants is a joint venture of Williams and Targa Resources that would expand Rockies producers’ ability to move mixed NGLs to the Mont Belvieu, TX, hub for fractionation and marketing/export. Williams plans to build a 188-mile pipeline — Bluestem — that would extend from its Rockies-to-Conway, KS, Overland Pass Pipeline to Kingfisher County, OK. For its part, Targa will build a 110-mile extension of its new Grand Prix NGL pipeline from southern Oklahoma north into Kingfisher to connect with Bluestem. As part of the deal, Williams has also contracted substantial volumes on Grand Prix as well as at Targa’s fractionation facility at Mont Belvieu. Today, we discuss Williams and Targa’s plan.

Fractionators at the Mont Belvieu hub operated at or near full capacity through the second half of 2018 as they struggled to deal with a deluge of mixed NGLs from the Permian and other key production areas. This situation — barely enough capacity to keep pace with rising demand for fractionation services — is likely to continue through 2019, even as a number of new fractionators come online. But NGL producers and the midstream sector are on the case: a slew of additional frac capacity has been announced since last fall, all of it slated to begin operation in 2020 or early 2021, and all of it backed by long-term contracts. Today, we discuss ongoing efforts to make the most of existing frac trains and to add new capacity pronto.

Energy Transfer’s Mariner East pipeline system was supposed to help resolve a growing problem for producers in the “wet” Marcellus and Utica plays — namely, the need to transport increasing volumes of LPG out of the Northeast, especially during the warmer months, when in-region demand for LPG is low. The pipeline system also was meant to spur LPG and ethane exports out of Energy Transfer’s Marcus Hook marine terminal near Philadelphia. So how are things going? Well, the now five-year-old, 70-Mb/d Mariner East 1 pipeline, designed to transport ethane and propane, has been offline ever since a sinkhole exposed a part of the pipe late last month. The 275-Mb/d Mariner East 2 pipe is finally in operation and enabling a lot more LPG to move to Marcus Hook, but for now it can only run at about 60% of its capacity. And last Friday, a key Pennsylvania regulator suspended its review of outstanding water permit applications for the remaining piece of ME-2 and the parallel 250-Mb/d ME-2 Expansion project, and threw into doubt how long it might take to finish the Mariner East system and ramp it up to full capacity. Today, we begin a series on recent Mariner East developments and explain how, despite the mixed bag of Mariner East news in recent weeks, the situation is not as bad as it may seem.

The U.S. started exporting ethane by ship less than three years ago, first out of Energy Transfer’s Marcus Hook terminal near Philadelphia and then from Enterprise Products Partners’ Morgan’s Point facility along the Houston Ship Channel. Good news for NGL producers, right? Well yes, sort of. Because while waterborne export volumes rose through 2016, 2017 and the first seven months of last year, they’ve been flat-to-declining ever since, with further ethane-export growth hampered primarily by a lack of international demand. That demand may soon be ratcheting up — mostly in China, but also in Europe — but it won’t happen overnight. Today, we discuss ethane export trends, the Morgan’s Point and Marcus Hook marine facilities, and plans for new ethane export capacity tied directly to new overseas ethane crackers.

LPG export terminals along the Gulf Coast account for more than nine of every 10 barrels of propane and normal butane that are shipped from the U.S. to foreign buyers. That makes perfect sense, given the terminals’ proximity to major NGL production areas like the Permian, the Eagle Ford and SCOOP/STACK, and to the world-class fractionation hub in Mont Belvieu, TX. But, increasingly, LPG terminals on the East and West coasts, are growing in significance. On the Atlantic side, Marcus Hook, near Philadelphia, is enabling more and more volumes of Marcellus/Utica-sourced propane and butane to reach overseas markets. And, as we discuss in today’s blog, West Coast exports are on the rise as well, with Petrogas’s Ferndale terminal in Washington state providing a straight shot across the Pacific to Asia for propane and butane fractionated in Western Canada, plus a good bit more LPG export capacity under development in British Columbia.

U.S. production of natural gas liquids is projected to increase by 17% this year, and by another 10% in 2020, according to RBN’s forecast. These gains will result in similar increases in the output of propane and normal butane — two NGL purity products generally referred to as LPG — and, with U.S. demand for LPG expected to stay relatively flat, most of the incremental volumes will be sent to export terminals for shipment to foreign buyers. The question is, will the nine U.S. marine terminals that are equipped to send out LPG have enough capacity to handle the much-higher flows? Today, we continue our series with a review of four smaller export terminals along the Gulf and East coasts.

LPG exports out of Gulf Coast marine terminals averaged 1 MMb/d in 2018, a gain of 12% from 2017 and 35% from 2016. And, with U.S. NGL production rising steadily, 2019 is looking to be another banner year for LPG shipments to overseas buyers. The increasing volume of propane and normal butane — the NGL purity products generally referenced as LPG — is filling up the existing export capacity of the Gulf Coast’s six LPG terminals and spurring the development of a number of expansion projects. Today, we continue our blog series on propane and butane export facilities along the Gulf, West and East coasts, and what’s driving the build-out of these assets.

Way back in 2012, the U.S. flipped from being a net LPG importer to a net exporter. Since then, exports by ship have skyrocketed, up from 0.3 MMb/d in 2013 to more than 1.1 MMb/d at year-end 2018, an astronomical compound annual growth rate (CAGR) of 30%. The vast majority of waterborne exports was out of a handful of LPG terminals along the Gulf Coast. These facilities — plus Ferndale in the Pacific Northwest and Marcus Hook near Philadelphia — so far have managed to handle the increasing flow of LPG, but with U.S. NGL production still rising, it looks like new export capacity is needed — and is on the way. All the while, imports of LPG, almost all from Canada, have remained relatively flat, averaging only 130 Mb/d in the 2013-18 period. Today, we begin a series on existing and planned LPG export capacity along the Gulf, West and East coasts — and what’s driving the build-out of these assets.

Production of natural gas liquids in the Rockies has increased by half since the end of 2012, with the bulk of the output — and those gains — coming from the greater Niobrara play in Colorado and Wyoming. As a result, a number of NGL pipelines out of the Rockies are now running full or close to it, and midstream companies are planning a mix of new pipelines, pipeline expansions and pipeline conversions with the aim of easing takeaway constraints by the latter half of 2019. But, with crude oil prices tanking and crude-focused producers reevaluating their drilling and completion plans, could the Niobrara be headed for an NGL takeaway over-build? In today’s blog, we continue our series with a look at existing and planned NGL pipes out of the Denver-Julesburg (D-J) and Powder River basins.