Until just a few years ago, the rise and fall of U.S. propane inventories each year was driven in large part by winter weather: the colder the temperatures in the major propane-consuming areas, the bigger the draw on stocks. Things have gotten much more complicated lately, though, thanks to a combination of rapid NGL production growth, a generally booming propane export market, and the vagaries of petchem margins. Now, to get a handle on propane stocks, you not only need to be able to forecast the weather, you also need to monitor international propane arbs and steam cracker economics — oh, and crude prices too, because they have a significant effect on NGL output and propane supply. Today, we discuss the many factors that impact propane inventories and prices in this sometimes chaotic market.
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.
U.S. crude oil, NGL and gas markets have entered a new era. Exports now dominate the supply/demand equilibrium. These markets simply would not clear at today’s production levels, much less at the flow rates coming over the next few years, if not for access to global markets. This year, the U.S. may export 20-25% of domestic crude production, 15% of natural gas and 40% of NGLs from gas processing, and those percentages will continue to ramp up. What will this massive shift in energy flows mean for U.S. markets, and for that matter, for the rest of the world? The best way to answer that question is to get the major players together under one roof and figure it out. That’s the plan for Energy xPortCon 2019. Warning!: Today’s blog is a blatant advertorial for our upcoming conference.
Well, it finally happened. After several years of assessing the possible development of a large, integrated propane dehydrogenation (PDH) plant and polypropylene (PP) upgrader unit, a joint venture of Canada’s Pembina Pipeline and Kuwait’s Petrochemical Industries Co. (PIC) earlier this week announced a final investment decision (FID) for the multibillion-dollar project in Alberta’s Industrial Heartland. The new PDH/PP complex won’t come online until 2023, but when it does, it will provide yet another new outlet for Western Canadian propane, which has been selling at a significant discount in recent years. Today, we discuss Pembina and PIC’s long-awaited PDH/PP project, Inter Pipeline’s development of a similar project nearby, Western Canadian propane export plans — and what they all mean for propane prices.
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.
Two months ago, NGL prices and market differentials were soaring, in large part due to fractionation capacity constraints on the Gulf Coast at Mont Belvieu. The constraints have not eased, yet the same prices and differentials have come crashing down from those lofty levels. Why has this happened, you ask, and how long will it last? There are a lot of factors contributing, but two of the most significant are seasonal NGL demand shifts and what’s going on with crude oil. Today, we examine the recent swings in NGL prices and market differentials and what may be around the next corner for these markets.
To fire on all cylinders — especially during a period of strong high crude oil prices and rising production — the U.S. energy sector depends on midstream infrastructure networks that can efficiently handle the transportation and processing of every type of hydrocarbon that emerges from the wellhead. It’s no secret that rapid production growth in the Permian has left the red-hot West Texas play short of crude-oil pipeline capacity, and midstream companies there have also struggled to keep pace with natural gas takeaway needs too. What’s less well known is that fractionation capacity at the all-important NGL hub in Mont Belvieu, TX, is nearly maxed out, and that some Permian producers — and others — are now scrambling to find other places to send their incremental NGL barrels for fractionation into purity products. We put this issue front-and-center earlier this week in Hotel Fractionation. Today, we discuss highlights from the first of two planned Drill Down Reports on fractionators and other key assets at the nation’s largest NGL hub, and the potentially broader effects of a fractionation-capacity shortfall.
Y-grade, welcome to the Hotel Fractionation. You can check in any time you like, but you can never leave! OK, so that’s a bit of an overstatement. But there is no doubt that the U.S. NGL market has entered a period of disruption unlike anything seen in recent memory. Mont Belvieu fractionation capacity is, for all intents and purposes, maxed out. Production of purity NGL products is constrained to what can be fractionated, and with ethane demand ramping up alongside new petchem plants coming online, ethane prices are soaring. But that’s only a symptom of the problem. Production of y-grade — that mix of NGLs produced from gas processing plants — continues to increase in the Permian and around the country. Sooo … If you can’t fractionate any more y-grade, what happens to those incremental y-grade barrels being produced? How much can the industry sock away in underground storage caverns? Does it make economic sense to put large volumes of y-grade into storage if it will be years before it can be withdrawn? — i.e., “you can never leave.” And what happens if y-grade storage capacity fills up? Today, we begin a blog series to consider these issues and how they might impact not only NGL markets, but the markets for natural gas and crude oil as well.
Could it get any worse? Possibly, but the last time we saw petchem margins this bad was in the depths of the 2008-09 economic meltdown, and back then the atrocious margin levels resulted in drastic plant curtailments and in some cases permanent shutdowns. But this time around the petchem industry is in the process of bringing on even more capacity! Is the current situation a fluke, or a harbinger of things to come? In today’s blog we examine recent trends in steam cracker margins, by far the largest demand sector for natural gas liquids (NGLs) and consider what these developments may mean for NGL markets in general, and ethane in particular.
2017 saw some tumultuous times for Asian butane. What started the year as a tight market, with butane trading at $120/ton over propane — a 25% premium — flipped to a surplus market in the second quarter, with the products trading about even, then reversed again later in the year. In the middle of it all was India, whose relationship with butane as a cooking fuel suffered a spring break-up before reconciling in the fall. It was a textbook example of how today’s energy markets are buffeted by changes in production trends, government intervention and the growing influence of U.S. exports, which are becoming a much bigger deal in the global butane trade. Today, we continue our discussion of the supply and demand dynamics that shaped Asian butane markets in 2017, and what these trends may mean for 2018.
It was a wild ride for Asian butane in 2017, driven by a range of diverse market factors, including U.S. ethane and LPG exports, a government program in India to encourage switching from firewood to LPG, the OPEC/NOPEC crude oil production cuts and LPG contract pricing set by Saudi Arabia. It was a textbook example of how today’s energy markets are buffeted by changes in production trends, government intervention and the growing influence of exports. Today, we introduce a series on the supply and demand dynamics that shaped Asian butane markets in 2017, and that will drive LPG markets in Asia, Europe and the U.S. in coming years.
Last week Hurricane Harvey roiled the entire energy complex, with NGL markets suffering substantial disruption — curtailed natural gas liquids production from gas processing in the Eagle Ford and other basins, reduced operating rates at Mont Belvieu and other fractionation sites, shuttered LPG and ethane export docks, widespread refinery closures and a virtual shutdown of Gulf Coast petrochemical plants. While little major damage to facilities has been reported and several plants are now restarting, operating conditions continue to be extremely difficult for both the supply and demand sides of the market. Today we continue our look at how high winds and days of torrential rain affected the U.S. energy industry, this time focusing on NGLs.