The crude oil market garners all the headlines in the COVID/OPEC+ era, and understandably so. But the NGL market is also in turmoil and deserves attention too. Declining volumes of associated gas from crude-focused plays will soon be cutting into NGL supplies. Demand for natural gasoline has been hit hard, along with the crude, motor gasoline and jet fuel markets. But propane prices relative to crude oil have soared to historically high ratios, in part reflecting recent strong international demand for U.S. LPG exports. As for ethane — the lightest NGL, and the most important feedstock for the Gulf Coast petchem sector — it is going through wrenching changes, with major implications for both suppliers and steam crackers. Today, we begin a short series on the major dislocations that crude-market chaos is spurring in NGL production, ethane rejection, feedstock selection by steam crackers, and ethane/LPG exports.
Energy markets are changing faster than at any time in history. It’s hard enough just to keep up with what’s happening today, much less try to anticipate what’s ahead on the other side of COVID. But that’s exactly what we’ll be doing next week at RBN’s Virtual School of Energy. More than one-third of the curriculum is a detailed review of RBN’s hot-off-the-presses forecasts for all the essential elements of U.S. crude oil, natural gas and NGL markets, including our freshly updated outlooks for production, infrastructure utilization, exports/imports and demand. Better yet, we’ll put these forecasts in the context of our fundamental analysis and models, so you can not only understand where it looks like we’re headed today, but gain the skills to adjust your outlook on the fly as circumstances change. Although this blog is an advertorial, stick with us if you would like to know more about how the RBN crystal ball works.
Much as production growth in the Permian required the development of new pipeline capacity to take away crude oil, natural gas and NGLs, increasing activity in the Williston Basin has spurred the need for incremental capacity to move all three of the energy commodities out of western North Dakota and eastern Montana. For NGLs, the recent start-up of ONEOK’s Elk Creek Pipeline has been the answer to producers’ prayers — not just in the Williston Basin (home of the Bakken formation), but also in the Rockies’ Powder River and the Denver-Julesburg (D-J) basins, through which the new, 240-Mb/d pipeline passes on its way to Bushton, KS. Elk Creek’s timing couldn’t have been better: it came online just as a number of new gas processing plants entered commercial service in the Williston Basin, and just in advance of possible Btu restrictions on the all-important Northern Border gas pipeline that may force cutbacks in ethane rejection. Today, we explain why the Elk Creek NGL Pipeline helps resolve a number of challenges Bakken producers have been facing.
Demand for ethane from U.S. steam crackers is rising as recently completed ethane-only crackers ramp up to full production and additional crackers are finished. To keep pace with demand growth, a portion of the ethane now being “rejected” into the natural gas stream and sold for its Btu value will instead need to be left in the mixed-NGLs stream and fractionated into purity-product ethane. This raises two questions. First, in which shale plays will this shift from ethane rejection to ethane production occur? And second, how much will ethane prices need to increase to encourage the shift and make the required incremental volumes of ethane available? Today, we continue a series on ethane-market developments with a look at where the next tranche of ethane supply will come from and how high ethane prices might need to rise.
During the 2010s, the Marcellus/Utica region has experienced an astonishing 16-fold increase in natural gas production, from 2 Bcf/d in early 2010 to more than 32 Bcf/d today. The region’s rapid transformation from minor energy player to superstar came with a lot of infrastructure-related growing pains, many of them tied to the urgent need for more gas pipeline takeaway capacity. Takeaway constraints have largely been addressed — at least for now — but producers’ continuing efforts to develop “wet,” liquids-rich parts of the Marcellus/Utica have resulted in an ongoing requirement for more gas processing and fractionation capacity. Put simply, as wet-gas production ramps up, so must the region’s ability to process that gas and its associated natural gas liquids. Today, we continue a series on existing and planned gas processing and fractionation projects in the Northeast with a look at the growing role played by Williams and its new Canadian partner.
The U.S. ethane market has experienced major ups and downs in the past couple of years. First, there was sharply rising demand from new steam crackers, a fractionation-capacity crunch and soaring ethane prices. Then came an ethane demand slump, plummeting prices and a big jump in inventories. More recently, though, the market seems to have returned to a state of relative equilibrium. Ethane prices have settled in — at least for now — at about 22 cents/gallon (gal), a couple of pennies below where they had been standing rock-steady before all hell broke loose. Ethane demand from existing steam crackers is rising again, and new cracker capacity is coming online. The questions now are, with demand on the upswing, will ethane prices be rising too — and, if so, by how much? And what does that mean for steam cracker economics? Today, we discuss recent developments in the ethane market and explain why there’s good reason to believe that ethane prices won’t be spiking anytime soon.
The “wet,” liquids-rich parts of the Marcellus/Utica region enable producers there to benefit from the sale of both natural gas and NGLs. The catch is that, unlike major production areas in other parts of the U.S., the Northeast has no pipelines to transport unfractionated, mixed NGLs — also known as y-grade — long distances to fractionation centers in Mont Belvieu, TX, or Conway, KS. As a result, midstream companies serving the region have developed a number of interconnected gas processing, NGL pipeline and fractionation networks within the wet Marcellus/Utica to efficiently and reliably deal with the increasing flows of NGLs coming their way. No one has done this on a larger or more impressive scale than MPLX, Marathon Petroleum Corp.’s midstream-focused master limited partnership. Today, we continue our series on recently completed and planned gas processing and fractionation projects in the Northeast with a look at MPLX, the regional leader in this space.
Natural gas production in the U.S. Northeast has been increasing steadily through the 2010s and now averages about 32 Bcf/d — 12% higher than last August and nearly double where it stood five years ago — despite the lowest regional spot gas prices since early 2016. This run-up in production volumes wouldn’t have been possible without the new gas-processing and fractionation capacity that MPLX and other midstream companies have been bringing online at a steady pace in the “wet” or NGLs-rich parts of the Marcellus and Utica shales. Today, we begin a short blog series on recently completed and planned gas-processing and fractionation projects in the nation’s largest gas-producing region, and the gas production growth they will help enable.
With U.S. NGL production hitting a record high of just over 4.0 MMb/d in the fourth quarter of 2017 and ethane production also reaching record volumes at 1.6 MMb/d, the price for ethane has remained stuck at about 25 c/gal — where it’s been for the past two years, even though prices for other NGLs are up over the same period. The combination of roaring high-ethane-content Permian and SCOOP/STACK NGL volumes, coupled with steam cracker outages and construction delays due to Hurricane Harvey, have landed us here. So where do we expect the ethane market to go now as incremental cracker and export demand ramp up in 2018 and 2019? Today, we continue a series on our updated NGL market forecast, highlighting the NGL product whose market is going through the most changes: ethane.
In recent weeks, both crude oil and natural gas production have breached all-time records. So it should come as no surprise the same thing happened to NGLs — production blasted to over 4.0 MMb/d in the fourth quarter of 2017, and by our estimates will move considerably higher this year. This is a particularly big deal for the ethane market, which has spent the last eight years waiting patiently for a wave of new Gulf Coast ethane-only petrochemical plants — a.k.a. “steam crackers” — to come online in 2018. Well, here we are in 2018 and new demand from the crackers is finally kicking in. The good news for petchems is that all of the incremental NGL production means the supply of ethane available to the market is growing too, right on cue. What do these developments mean for future NGL production, demand and prices? Today, we begin a new blog series discussing our updated NGL market forecasts, starting with that NGL product whose market is going through the most changes: ethane.
Available ethane in the Marcellus/Utica is expected to increase 70% by 2022 to 800 Mb/d, from about 470 Mb/d this year. That should be good news for the slew of ethane-only steam crackers coming online in that time frame, primarily along the Gulf Coast. But unfortunately, there is limited ethane pipeline takeaway capacity out of the region and today more than half of the potential ethane supply is being rejected into the natural gas pipeline stream. Without additional takeaway capacity, that rejected volume is expected to grow and few additional ethane barrels will make their way to the Gulf Coast. The question is, will transportation economics support additional pipeline development to where the demand is growing the most? Today, we will explore how the changing ethane market is likely to impact the Marcellus/Utica producing region.
As new ethane-only steam crackers come online and ethane exports accelerate, ethane demand is ramping up from 1.3 MMb/d today to somewhere between 2.1 and 2.3 MMb/d in 2022. The good news is that a lot of new ethane supply is becoming available — from high-Btu Permian associated gas, more gas from other oil-focused plays, and of course rapidly growing Marcellus/Utica production. Depending on what happens to oil and gas prices, somewhere between 2.5 and 3.2 MMb/d of “potential” ethane could be available by 2022 to meet that demand. So, no problem, right? Not so fast. Some of this potential ethane will be very expensive to get to market, and some won’t be able to get to market at all due to pipeline capacity constraints. How these market dynamics play out raises the possibility of wide swings in ethane prices. Today we will explore how this may play out.
Natural gas liquids production in the Permian Basin has doubled in the past four years, and may well double again by 2022. That rapid growth — driven by the pursuit of Permian crude oil and the resulting production of large volumes of NGL-rich associated gas — threatens to overwhelm the region’s existing gas processing and NGL-pipeline infrastructure. This is a big deal, because if there’s not enough gas processing and NGL takeaway capacity out of the Permian, exploration and production companies (E&Ps) in the U.S.’s hottest shale play would be forced to slow the pace of their development. Today we discuss highlights from our new Drill Down Report on Permian NGL production growth and the need for more NGL-related infrastructure.
In the Energy Information Administration’s (EIA) latest ethane production stats — for the month of May — gas plant production of ethane exceeded 1.4 MMb/d for the first time. In the same month, ethane exports also hit a record at 191 Mb/d, and ethane demand for petrochemical production — you guessed it — hit still another all-time high, topping 1.2 MMb/d. All this is just the beginning. These numbers and the throughput of any midstream infrastructure transporting or fractionating ethane will continue to increase over the next two years as new, ethane-only crackers come online, ethane rejection dwindles and overseas exports of ethane ramp up. By 2020, U.S. ethane demand is expected to reach 2 MMb/d — up by two-thirds from where it stands now. Today we continue our series on rising ethane demand, how the new demand will be met and what it all means for ethane prices.
The last couple of years have been a wild ride for the U.S. ethane market, but look out ahead. It’s going to get crazy. The onslaught of new, ethane-only crackers is upon us at the same time overseas exports are expected to ramp up. At first glance, it might appear there is enough ethane to meet all that demand, coming from molecules that today are being rejected — that is, sold as natural gas rather than liquid ethane. But the big question — will it be enough? Because not all that rejected ethane has access to pipeline capacity needed to get it to market, at least not right now. In today's blog, we begin a new series on rising ethane demand, how the new demand will be met, and what it all means for ethane prices.