Post on 28-May-2018
Natural Gas Next 2017: Natural Gas Liquids
Robert Applegate, PhD
Manager, Natural Gas and NGL Analysis
September 26, 2017
Natural Gas Liquids • History of the price of hydrocarbons
– Motivation/ability to target different types of gas – Frac spreads
• Introduction to NGLs – Where do they come from? – What are they each used for? – How do they move?
• PointLogic Energy information suite – Additional products coming soon
• State of NGL markets
Methane (CH4) • The last day and a half have been
dedicated to methane, natural gas, LNG…
History of Hydrocarbons (Why NGLs)
0
5
10
15
20
25
30
$/M
MB
tu
Henry Hub WTI NGL Composite
Shale Revolution
Wet Uplift Oil Uplift
Current Market Parity?
Source: PLE, OPIS, EIA
Composite Barrel
Ethane
Propane
Normal Butane
Isobutane
Natural Gasoline
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
NGL $/MMBtu Ratio to Crude
Purity Ethane % Propane % N Butane % I Butane % N. Gasoline %
History of Hydrocarbons (Why NGLs)
Market Parity Propane and Butane More
Valuable than Oil
Source: PLE, OPIS, EIA
History of Hydrocarbons (Why NGLs)
0
1
2
3
4
5
6
7
8
9
$/M
MB
tu
Mont Belvieu NGL Frac Spread
Heavier NGLs drive frac spread
Source: PLE, OPIS, EIA
Shameless Plug
Daily Pipeline Flow Data (Now)
Phillips 66 NGL pipeline disruption
60 Mb drop day over day
Source: PLE
Daily Pipeline Flow Data (Now)
Hurricane Harvey slowly knocking down NGL
production in the Gulf
90 Mb drop over 4 days
Source: PLE
Balanced NGL Forecast
Source: PLE, IHS Markit
Mb/d
PADD: PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2 PADD 2
Product: Ethane Ethane Ethane Ethane Ethane Ethane Ethane Ethane Ethane Ethane Ethane Ethane Ethane Ethane Ethane Ethane
Supply/Demand: Supply Supply Supply Supply Supply Supply Supply Demand Demand Demand Demand Demand Demand Demand
Supply/Demand Detail: Gas Plants
Refinery Surplus Imports
Movements: PADD 1 to PADD 2
Movements: PADD 3 to PADD 2
Movements: PADD 4 to PADD 2
Movements: PADD 5 to PADD 2
Petchem: Steam Cracker Rejection Exports
Movements: PADD 2 to PADD 1
Movements: PADD 2 to PADD 3
Movements: PADD 2 to PADD 4
Stock Change Supply Demand
10/1/2018 508 0 0 140 11 51 0 81 224 70 2 313 31 -10 710 710
9/1/2018 499 0 0 141 11 46 0 81 228 65 2 277 29 15 697 697
8/1/2018 492 0 0 140 10 46 0 81 220 62 2 297 29 -3 689 689
7/1/2018 485 0 0 135 14 59 0 81 183 67 2 343 36 -19 693 693
6/1/2018 492 0 0 140 14 63 0 81 200 63 2 330 34 -1 709 709
5/1/2018 509 0 0 141 15 57 0 81 220 60 2 321 29 10 722 722
4/1/2018 515 0 0 140 15 53 0 81 255 60 2 298 28 0 723 723
3/1/2018 519 0 0 135 16 56 0 81 233 50 2 321 32 8 727 727
2/1/2018 510 0 0 140 16 56 0 82 208 68 2 314 35 14 723 723
1/1/2018 522 0 0 141 17 44 0 82 287 73 2 270 26 -16 724 724
12/1/2017 485 0 0 140 12 41 0 76 269 66 2 238 24 3 677 677
11/1/2017 470 0 0 135 11 48 0 76 185 74 2 294 29 5 665 665
10/1/2017 460 0 0 140 13 49 0 76 196 69 2 294 29 -3 662 662
Where Do NGLs Come From? (Gas, Refineries, Alliance PADD 2)
Processing Capacity
PADD 1 PADD 2 PADD 3PADD 4 PADD 5
> 94 Bcf/d Processing Capacity
Source: IHS Markit, EIA, Alliance
NGL Corridors Bakken
Rockies
Mont Belvieu
S TX
West Texas
Mid-Con
Marcellus/Utica
Heavier NGLs, unlike natural gas/ethane, generally have easier way out of production areas and are less constrained.
Roads Trains
Escape Routes from Appalachia
2017: +275 Mb/d
2018: +250 Mb/d
Gulf Coast
Canada
Export
ATEX (C2)
Utopia East (C2,C3)
Mariner East 2 -20” and 2X – 16” (C2,C3,C4)
Source: PLE
Centennial reversal
(C3) (C2,C3)
NGL Demand: Petchem Feed Slates
Source: PLE, IHS Markit
1Q 2012 (1,700 Mb/d)
Ethane
Propane
Butanes
NaturalGasoline(Naphtha)
Today (2,000 Mb/d)
Ethane
Propane
Butanes
Natural Gasoline(Naphtha)
4Q 2018 (2,150 Mb/d)
Ethane
Propane
Butanes
Natural Gasoline(Naphtha)
Ethane (C2H6) • Supply
– Second-largest component of natural gas and most abundant NGL
– Must be processed and fractionated
• Demand – Rejection…kinda – Petrochemical (steam
crackers) > ethylene – Exports
Ethane (C2H6)
0
500
1,000
1,500
2,000
2,500
Mb/
d
Ethane Supply from Gas Plants
PADD 1 PADD 2 PADD 3 PADD 4 PADD 5
Source: PLE
Ethane (C2H6)
0
500
1,000
1,500
2,000
2,500
Mb/
d
Ethane Rejection
PADD 1 PADD 2 PADD 3 PADD 4 PADD 5 US Supply from Gas Plants
Source: PLE
Ethane Demand
Petchem: Steam CrackerRejectionExports
1,400 Mb/d
Ethane (C2H6)
500 Mb/d
120 Mb/d
Source: PLE, IHS Markit
Ethane (C2H6)
Ethane (C2H6)
Ethane (C2H6)
PADD 1
PADD 2
PADD 3
PADD 4
PADD 5 18
Mb/
d
60 Mb/d
300 Mb/d
30 Mb/d
Ethane Moves by Boat or Y-Grade/EP/Ethane Pipe
60 M
b/d
Source: EIA
Ethane (C2H6)
Source: C&EN/Shutterstock
Joffre, Alberta
Sarnia, Ontario
Morgan’s Point
Marcus Hook
Grangemouth, Scotland
Rafnes, Norway
Mossmorran, Scotland
Teesside, England
Dunkirk, France
Stenungsund, Sweden
Camaçari, Brazil
Dahej, India
India
Ethane (C2H6)
Source: OPIS
0
10
20
30
40
50
60
70
80
90
100
cent
s/ga
l
Ethane Price
Ethane exports begin
Ethane (C2H6)
0
10
20
30
40
50
60
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
MM
b
U.S. Ethane Stocks
5 year range 5 year avg 2017 2016
Source: EIA
Ethane (C2H6)
-4
-3
-2
-1
0
1
2
3
$/M
MB
tu
Ethane Frac Spread Ethane frac spread
less affected by stock levels.
Source: PLE, OPIS
0
500
1,000
1,500
2,000
2,500
Mb/
d
Ethane Market Forecast
PADD 1 PADD 2 PADD 3 PADD 4 PADD 5 Petchem and Exports
Ethane (C2H6)
Rejection and stock changes
Potential ethane market tightening
Source: PLE, IHS Markit
0
10
20
30
40
50
60
0 200 400 600 800 1000 1200 1400 1600 1800 2000
cent
s/ga
l
Mb/d
Ethane (C2H6)
Texas Inland
Recovered Ethane
Gulf Coast
Midcon New Mexico
Rockies Northeast
Bakken
Source: PLE, OPIS
Who gets rejected last?
Ethane (C2H6)
Source: PLE, OPIS
-6
-5
-4
-3
-2
-1
0
1
2
$/M
MB
tu
Local Ethane Frac Spreads
Gulf Coast Rockies (PADD4) New Mexico
N. La., Ark Texas Inland Okla., Kans., Mo.
Minn., Wis., N. Dak., S. Dak. Ind., Ill. and Ky. Appalachian No. 1
Propane (C2H6) • Supply
– Second-largest component of NGLs
– Must be processed and fractionated
– Refineries – Imports (LPG)
• Demand – Petrochemical (steam crackers,
PDH) > ethylene, propylene – Res/com …heating, crop drying,
grilling – Exports (LPG)
Propane (C3H8)
Source: PLE
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mb/
d
Propane Supply from Gas Plants
PADD 1 PADD 2 PADD 3 PADD 4 PADD 5
Propane (C3H8)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
MB
/d
Total Propane Supply
US Propane Supply Gas Plants Refinery Surplus Imports
Source: PLE, EIA
Propane (C3H8)
0
500
1,000
1,500
2,000
2,500
MB
/d
Propane Demand
Petchem: Steam Cracker Exports Res/Comm Supply
Source: PLE, IHS Markit, EIA
Propane (C3H8)
Propane (C3H8)
PADD 1
PADD 2
PADD 3
PADD 4
PADD 5 40
Mb/
d
85 Mb/d
200 Mb/d
45 Mb/d
Propane Moves by Rail, Boat, Y-Grade/EP Pipe or Truck
10 M
b/d
20 Mb/d
Source: EIA
50 Mb/d
5 Mb/d
5 Mb/d 30 Mb/d
Propane (C3H8)
0
20
40
60
80
100
120
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
MM
b
U.S. Propane Stocks
5 year range 5 year avg 2017 2016
Source: EIA
Propane (C3H8)
0
500
1,000
1,500
2,000
2,500
MB
/d
Propane Market Forecast
Petchem: Steam Cracker Exports Res/Comm US Propane Supply
Source: PLE, IHS Markit
Butane(s) (C4H10) • Supply
– Must be processed and fractionated
– Refineries – Imports (LPG)
• Demand – Petrochemical (steam
crackers) – Exports (LPG) – Refineries and gasoline
blending in U.S., Canada
My dad says
butane’s a bastard
gas
Butane(s) (C4H10)
0
200
400
600
800
1,000
1,200
Mb/
d
Butane Supply
US Supply Gas Plants Refinery Surplus Imports
Source: PLE, EIA
Butane(s) (C4H10)
0
200
400
600
800
1,000
1,200
Mb/
d
Butane Demand
Petchem Exports Refinery Net Inputs Supply
Source: PLE, IHS Markit, EIA
Butane(s) (C4H10)
PADD 1
PADD 2
PADD 3
PADD 4
PADD 5 35
Mb/
d
55 Mb/d
70 Mb/d
25 Mb/d
Butane Moves by Rail, Boat, Y-Grade/EP Pipe or Truck
15 M
b/d
2 Mb/d
15 Mb/d
15 Mb/d
Source: EIA
10 Mb/d
1.5
Mb/
d 5 Mb/d
Butane(s) (C4H10)
01020304050607080
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
MM
b
U.S. Butane Stocks
5 year range 5 year avg 2017 2016
Source: EIA
Butane(s) (C4H10)
0
200
400
600
800
1,000
1,200
Mb/
d
Butane Market Forecast
Petchem Exports Refinery Net Inputs Supply
Source: PLE, IHS Markit
Pentanes+ (C5+H?) • Supply
– Must be processed and fractionated
– Refineries – Imports
• Demand – Petrochemical (steam crackers) – Exports (splitter/stabilizer by
ship…condensate) – Exports (diluent) to thin Canadian
heavies – Refineries
Pentanes+ (C5+H?)
0
100
200
300
400
500
600
Mb/
d
Pentanes+ Supply
US Natural Gasoline Supply Gas Plants Imports
Source: PLE, EIA
Pentanes+ (C5+H?)
0
100
200
300
400
500
600
700
Mb/
d
Pentanes+ Demand
Petchem: Steam Cracker Refinery Net Inputs Renewable Fuels Exports US Natural Gasoline Supply
Source: PLE, IHS Markit, EIA
Pentanes+ (C5+H?)
0
5
10
15
20
25
30
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
MM
b
U.S. Pentanes+ Stocks
5 year range 5 year avg 2017 2016
Source: EIA
Pentanes+ (C5+H?)
PADD 1
PADD 2
PADD 3
PADD 4
PADD 5 17
0 M
b/d
20 Mb/d
40 Mb/d
10 Mb/d
Pentanes+ Moves by Rail, Boat, Y-Grade Pipe, or Truck
170
Mb/
d
1 Mb/d
10 Mb/d
Source: EIA
Pentanes+ (C5+H?)
0
100
200
300
400
500
600
700
Mb/
d
Pentanes+ Market Forecast
Petchem: Steam Cracker Refinery Net Inputs Renewable Fuels Exports US Natural Gasoline Supply
Source: PLE, IHS Markit
NGLs: Key Takeaways NGLs are a good bet for increasing profits even when oil and gas are inexpensive.
Each NGL has a different market(s), but they interact with one another.
Ethane
Still a lot of supply/rejection waiting for demand.
Exporting has not been the savior it was hoped it would be.
Market could be tighter Fall 2018 due to petchem demand.
Rejection will decrease slowly at first, where it’s closest to demand and cheapest to get it there.
Propane
Stocks are down and exports are up.
The market is relatively balanced, until there is a crazy winter or crop season.
Butanes
Reliant on LPG exports.
Reliant on gasoline demand.
Pentanes+
Heavily reliant on what happens in Canada.
Exports could grow.
Contact Us Today! Rob Applegate, PhD Manager of Natural Gas and NGL Analysis 303.736.3653 rapplegate@pointlogicenergy.com Customer Support Phone: 855.650.4500 ext. 1 support@pointlogicenergy.com Sales Phone: 855.650.4500 ext. 2 sales@pointlogicenergy.com
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