Targa

Exactly the same product. Exactly the same day. In storage very nearby. Yet their prices diverged by 17 cents per gallon — a spread equivalent to $7 per barrel. That’s a very substantial difference for prices that typically are almost indistinguishable, differing by an average of only 0.3% in recent years. The disparity roiled the financial underpinnings of exports for over a month and busted numerous inventory hedges. Is this some rare commodity? Hardly. It’s Mont Belvieu propane, the Rock of Gibraltar benchmark propane price in the U.S., and to a great extent around the world. But during October there was a crack in that rock a mile wide. 

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.

Mexico has become an important market for U.S. natural gas exports, and it is now opening up as a market for U.S.-sourced crude oil exchanges. There’s also potential for more exports of liquefied petroleum gas, particularly now that national oil company Pemex’s monopoly as LPG-import middleman is about to end and Mexico is planning to deregulate retail LPG prices. Today we continue our analysis of Mexico’s LPG market with a look at how the vast majority of U.S. propane and butane is transported to Mexican consumers.

Ever-increasing production of natural gas liquids is driving another round of fractionation capacity expansions in Mont Belvieu, TX, which is—and will remain—the hub of US fractionation activity.  But Mont Belvieu fractionators are not without competition. Huge increases in fractionator capacity are also coming on-line in Appalachia to handle the rising volumes of natural gas liquids (NGLs) coming out of the Marcellus and Utica.  Mont Belvieu may be king of fractionation, but others want a share of the kingdom.  Today we update the ongoing NGL production boom and plans to add fractionation capacity in Mont Belvieu and NGL-related export capability nearby.

U.S. gas plant production of propane is up 25% since early 2011, far above growing volumes of ethane, held to only an 8% rise by rejection economics.   As propane supplies have surged, prices have come down hard…. But not nearly as hard as would have been the case if it were not for rapidly increasing exports.  And where are all these barrels going?   That’s right.  In a conga line of ships headed to Latin America where the growth in imports from the U.S. into some countries has been off the scale.  Which countries are taking all this propane?  How long can this go on?  How much dock capacity does the U.S. need?  What could derail this development?  Today we begin a blog series to explore these questions.