Ever-increasing production of natural gas liquids (NGLs) in the U.S. Northeast is highlighting—and exacerbating—what has always been a challenge for the region: a serious lack of nearby NGL storage capacity. In the years before NGL production took off in the “wet” Marcellus and Utica shale plays, this storage shortfall mainly affected propane and butane, with their very seasonal demand; the lack of Northeast NGL storage required a huge wintertime influx of propane and additional butane that had been stockpiled elsewhere. More recently, with Northeast NGL production booming, propane and butane barrels need to be moved out of the region by rail during the non-winter months and be railed back when the weather turns colder and motor gasoline blending limits are higher—killing producer netbacks in the process. Add to that a new (and equally vexing) challenge: dealing with the vast quantities of ethane being produced in the wet Marcellus/Utica. There is currently no in-region demand for ethane and (unlike propane and butane) you can’t just load surplus purity ethane onto rail cars. Today, we begin a series on the need for more NGL storage in the Northeast, and the pros and cons of a specific proposed storage project.
Posts from Kelly Van Hull
Shell Chemicals is taking steps that suggest it finally may be ready to pull the trigger on a long-debated petrochemical complex which would include an ethylene plant (steam cracker) and three polyethylene units in the heart of the “wet” Marcellus/Utica natural gas liquids production region. If the $3+ billion project advances to construction soon, it would significantly impact ethane market dynamics, not just in Ohio/Pennsylvania/West Virginia but along the Gulf Coast too. And if it turns out we’re in for extended stagnation in drilling and production, the Shell cracker also may undermine plans to build additional NGL pipeline capacity out of the Marcellus/Utica—or any other cracker there. Today we discuss the likelihood of Shell proceeding with its Beaver County, PA cracker and the effects the project’s development might have.
The prospects for an ever-expanding boom in propane exports from the U.S. Gulf Coast are dimming, even as export volumes stand at near-record levels and as new export capacity continues to come online. Why? It comes down to supply and demand. With oil and NGL prices at today’s levels, propane production is leveling off, not rising, and U.S. Gulf Coast domestic demand for propane will be increasing—from new propane dehydrogenation (PDH) plants and propane’s use in ethylene steam crackers—at the same time that export volumes out of the East Coast are quadrupling. In today’s blog we consider the possibility that what goes up must come down.
Prices headed up!! That’s something that you haven’t heard much lately. But big changes are just over the horizon for NGLs as new petrochemical plants and export projects come online. These projects will encounter a market environment far different than what was expected when they were being planned. Instead of an oversupplied market driving NGLs lower relative to crude oil and natural gas, the projects will confront a tight market, with NGL prices higher relative to the other hydrocarbons. In today’s blog we explain why what must go up must come down, and vice versa.
Blood, Sweat & Tears 1969 hit, Spinning Wheel tells us: “What Goes Up, Must Come Down”, and U.S. propane stocks are no exception. Having built to a record 106 MMBbl the week of November 20, 2015, (according to the Energy Information Administration – EIA), storage congestion became the topic of the day, but while this record is noteworthy, what is far more significant is the rapid descent propane stocks have taken since late November in spite of the 2015-16 El Nino “winter of no winter”. This is the second non-winter that the U.S. has experienced over the past five years, the last one occurring in 2011-2012. However, there are big differences in today’s market dynamics relative to 5 years ago, namely propane exports to the tune of 850 Mb/d. In today’s blog, we’ll walk through the market dynamics that have resulted in extremely steep propane stock draws since late November 2015.
Just a few years ago, the possibility of overseas ethane exports was almost incomprehensible. Lack of infrastructure, high handling costs, no suitable ships and minimal market demand made ethane exports seem extremely unlikely. But then the shale gas boom transformed the ethane market. Now U.S. ethane production greatly exceeds demand and each day hundreds of thousands of barrels of ethane are being rejected into the natural gas stream. Consequently a few pioneers are hammering through the challenges associated with overseas ethane exports, including the construction of specialized tankage, loading facilities, ships and unloading facilities. And international chemical companies are spending hundreds of millions of dollars to modify olefin crackers to use the cheap feedstock. Now the first of those pioneers has made it to the new ethane frontier. In today's blog we examine the impact of imminent ethane exports from the Energy Transfer/Sunoco Terminal at Marcus Hook, PA.
Ethane has been in the doghouse for years since the shale gas boom kicked in, with production greatly exceeding demand and hundreds of thousands of barrels per day being “rejected” into the natural gas stream – owing to the fact that netbacks for liquid ethane are lower than pipeline natural gas. One way to understand that relationship is to track the price ratio of ethane at Mont Belvieu, TX to natural gas at Henry Hub, compared on a BTU basis. That ratio of ethane-to-gas languished at 95% between Q1 2014 through the summer of this year, and in November 2014 dipped to only 61%. That means that the BTU value of ethane at that point was only 61% of natural gas. Ethane that cheap is an awesome value for steam crackers using the feedstock to produce ethylene and other petrochemicals. But a couple of months ago (September 2015), the price of ethane started to ramp up relative to gas, blasting through 140% in late October. Is that bad news for future ethane prices? What does that portend for ethane once all the new steam crackers being built come online and overseas exports – also coming soon -- ramp up. Today we look at the recent rebound in the ratio of ethane to natural gas and consider whether this is a signal that ethane is out of the doghouse.
Falling crude oil prices and other factors have crushed margins in the steam cracker/olefin unit segment of the petrochemical industry. Margins per pound of ethylene have declined from more than 60 c/lb in October 2014 to less than 20 c/lb today (November 2015) for NGL feedstocks, including ethane. We expect some petrochemical companies might be feeling a chill in the air. That’s because five new Gulf Coast world scale steam crackers and a couple of smaller units are under construction or being developed to add still another 20 billion/lbs of capacity by the end of 2018. In today’s blog, we assess NGL feedstock margin declines.
Last week we covered what seemed like an onslaught of U.S. ethane export developments – Enterprise’s plans to build an ethane export facility on the Gulf Coast, INEOS’s agreement to take a portion of that facility’s capacity, INEOS’s expansion of its order for more ethane ships, and still more ethane ships ordered by Navigator Gas. What does all of this mean for the U.S. ethane market? Could 240 Mb/d of ethane export capacity due to begin operations in Q3 2016 shift the future of the entire U.S. ethane market? In today’s blog we assess the impact of large scale exports on the market for U.S. ethane.
Propane has received a lot of airtime in recent months given the Polar Vortex and heavy crop drying demand anomalies coinciding with growing propane export volumes. Now it’s time to show normal butane a little love as normal butane exports almost tripled from this time last year. In January 2013, 22 Mb/d of butane was exported; that number was 63 Mb/d in January 2014, as reported by the EIA. All indications are that butane export volumes will be experiencing an astronomical growth rate over the next five years, reaching 300 Mb/d by 2019. What are the factors driving this rate of growth, and what are the implications for refiners and petrochemical companies? In today’s blog, we assess the rapid growth in normal butane exports.
We’ve done several blogs over the past months about the impact of the back-to-back crop drying and Polar Vortex anomalies on natural gas liquids (NGL) prices in general and propane prices in particular. Today we are going to take a walk further downstream and look at how increasing propane exports, the weather related anomalies and subsequent price spikes shifted the petrochemical feedstock slate. From mid-year 2013 to early 2014, huge volumes of propane were backed out of the petrochemical sector, replaced for the most part by ethane. These swings have important implications for the future consumption of NGL feedstocks by petchems. In today’s blog, we assess petrochemical feedstock switching in the 2013-14 timeframe, and beyond.
We’ve been talking a lot over the past year about the need for increasing exports to balance the U.S propane market as growth in production from gas processing plants outruns domestic demand. U.S. propane production from gas processing has increased by over 100 Mb/d since January 2013, and there’s lots more to come. For the first time U.S. propane exports exceeded 400 Mb/d in October 2013 thanks to growing U.S supply and infrastructure developments including dock expansions by Enterprise and Targa. But just after exports ramped up, the propane market was hit by a couple of wild cards – a late and very heavy crop drying season and a series of record cold temperature events. In today’s blog, we continue our series covering the record setting 2014 NGL markets.
Two weeks ago we posted part 1 of a series looking to answer the question – ‘Are we likely to run into storage issues with NGLs in PADD 1 while we are waiting for infrastructure and demand side projects such as export terminals and petrochemical facilities to be built out?’ We assessed growing supply and demand mismatches, how production will move between regions, and set the stage for today’s blog where we will examine the need for and availability of NGL storage capacity in PADD 1. In today’s blog, we will finish painting the PADD 1 NGL storage picture.
Last week we started a blog series looking to answer the question - Are we likely to run into storage issues with NGLs while we are waiting for infrastructure and demand side projects such as export terminals and petrochemical facilities to be built out? Today we are going to take a deeper look at PADD 1 NGL market dynamics where gas plant production of NGLs is expected to grow from 63 Mb/d as reported by the EIA for February 2013, to over 585 Mb/d in 2018. We’ll assess growing supply and demand mismatches and how production will move between regions. Today we will lay the foundation for our PADD 1 NGLs storage picture.
We’ve been talking about growing natural gas liquid (NGL) production in recent weeks from the Williston Basin, the Eagle Ford, the Northeast and other geographies. We have also previously discussed the mismatch between NGL production growth and incremental domestic demand, but we have yet to answer the question: are we likely to run into storage issues with NGLs while we are waiting for infrastructure and demand side projects such as export terminals and petrochemical facilities to be built out? Today we start a series of blogs examining regional storage capacity and the mismatch between expected U.S. NGLs supply - an incremental 1.5 MMb/d between 2012 and 2018, and demand growth. In today’s blog, we set the stage for the series and take a broad look at NGL Storage.