Natural Gas Next 2017: Natural Gas Liquids - OPIS · Natural Gas Next 2017: Natural Gas Liquids...

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…

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwipqIim4frVAhUB7oMKHXHiDZAQjRwIBw&url=http://kut.org/post/voters-cast-ballots-first-ever-push-ban-fracking-texas&psig=AFQjCNFMomcmg_oK1VWk8HuskVkPDRpWnA&ust=1504038248196371

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 %


Market Parity Propane and Butane More

Valuable than Oil



0

1

2

3

4

5

6

7

8

9

$/M

MB

tu

Mont Belvieu NGL Frac Spread

Heavier NGLs drive frac spread


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




Petchem: Steam Cracker Rejection Exports




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

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi1rcKd9ZDWAhXM1IMKHaSbC0gQjRwIBw&url=https://en.wikipedia.org/wiki/Petroleum_refining_in_the_United_States&psig=AFQjCNFP25Oy1kPTFsU_hDLdPeEeFCZ9_w&ust=1504799462125517

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

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjm47jvxe3SAhVGqlQKHRn8DpEQjRwIBw&url=http://www.aogr.com/web-exclusives/exclusive-story/rail-gives-oil-shippers-new-capacity-flexibility&bvm=bv.150475504,d.cGw&psig=AFQjCNHqYfQ_D0Bd3x6JTSZX3ToEORH_Ww&ust=1490390079093366

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


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

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwin7o6JtrHWAhWJsFQKHV0dBTQQjRwIBw&url=http://marcellusdrilling.com/2016/11/u-s-ethane-including-marcellusutica-now-supplies-4-continents/&psig=AFQjCNH-sTxve4Bclq4bfE72yZ48DFq3Cg&ust=1505916438689435

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiE5cCutrHWAhXKrFQKHZMUD9sQjRwIBw&url=https://commons.wikimedia.org/wiki/File:Ethane-A-3D-balls.png&psig=AFQjCNH-sTxve4Bclq4bfE72yZ48DFq3Cg&ust=1505916438689435

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


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


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


– Refineries – Imports (LPG)

• Demand – Petrochemical (steam crackers,

PDH) > ethylene, propylene – Res/com …heating, crop drying,

grilling – Exports (LPG)

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj0jrmy07HWAhUpj1QKHaXrDZEQjRwIBw&url=http://www.progresstank.com/products/propane-trucks/&psig=AFQjCNHF0lnYFpgsDvd_T-TGfz0TdpFmxQ&ust=1505924313287585

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwix2ZaY07HWAhXGx1QKHRuNC2EQjRwIBw&url=http://www.lakesgasco.com/propane-101/lakes-gas-blog/161-rail-transportation-of-propane.html&psig=AFQjCNHz3tWBIhAITckuuPuRL2RJCencCw&ust=1505924251909024

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwipvojMtrHWAhVKl1QKHRqAC9sQjRwIBw&url=https://socratic.org/questions/why-is-the-propane-that-used-as-a-fuel-in-a-bbq-gas-at-room-temperature-but-2-pr&psig=AFQjCNEfwgMJTkKOjKhnlrcYV7jI3HaG8Q&ust=1505916559888837

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiE7-XxtrHWAhWisVQKHdHVDAYQjRwIBw&url=http://kingofthehill.wikia.com/wiki/Strickland_Propane&psig=AFQjCNEfwgMJTkKOjKhnlrcYV7jI3HaG8Q&ust=1505916559888837

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


MM

b

U.S. Propane Stocks


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


Butane(s) (C4H10) • Supply


– 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

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwix2ZaY07HWAhXGx1QKHRuNC2EQjRwIBw&url=http://www.lakesgasco.com/propane-101/lakes-gas-blog/161-rail-transportation-of-propane.html&psig=AFQjCNHz3tWBIhAITckuuPuRL2RJCencCw&ust=1505924251909024

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjTzOnR07HWAhVoxFQKHWnzCi8QjRwIBw&url=http://www.taylorbutane.com/about.asp&psig=AFQjCNGyevj7WgfevTqbN9CIN9T09Wp4hg&ust=1505924379523744

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiJkMiut7HWAhWCrFQKHYCwC28QjRwIBw&url=https://www.walgreens.com/store/c/ronson-multi-fill-ultra-butane-fuel/ID%3Dprod6013248-product&psig=AFQjCNEbFYkPGcA6j99azcTCYRowNOYQtA&ust=1505916726902063

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiboNuPt7HWAhUmxFQKHUSdB2EQjRwIBw&url=https://zh-min-nan.wikipedia.org/wiki/Butane&psig=AFQjCNEbFYkPGcA6j99azcTCYRowNOYQtA&ust=1505916726902063

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjFqcydt7HWAhXBwVQKHY63CnYQjRwIBw&url=https://en.wikipedia.org/wiki/Isobutane&psig=AFQjCNGvjC67h6suidhcpLrhKgtbUSeWbA&ust=1505916755427003

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiuz4beuLHWAhVqwVQKHRfuCLwQjRwIBw&url=https://www.youtube.com/watch?v%3DfoWcjWz7pxU&psig=AFQjCNFbhtdRj4h5W5e5GbEPBmwdlo58mw&ust=1505917159491616

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


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


MM

b

U.S. Butane Stocks


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


Pentanes+ (C5+H?) • Supply


– Refineries – Imports

• Demand – Petrochemical (steam crackers) – Exports (splitter/stabilizer by

ship…condensate) – Exports (diluent) to thin Canadian

heavies – Refineries

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwio_enTubHWAhVBrlQKHfZkCT8QjRwIBw&url=http://www.newworldencyclopedia.org/entry/Naphtha&psig=AFQjCNFDUoGNdDtEbg5qqNM423dn-qyIbw&ust=1505917396456664

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjsrIyUurHWAhVGs1QKHUCJBq8QjRwIBw&url=http://eaglepetrochem.com/en/products/323&psig=AFQjCNGkdA5e1hjYeFNfLXwXjF30vELE1A&ust=1505917480338029

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwies_yourHWAhUmxFQKHUSdB2EQjRwIBw&url=https://commons.wikimedia.org/wiki/File:Pentane-3D-balls.png&psig=AFQjCNHt4OEcJ0_HTnDZcasinaDbVb97Kw&ust=1505917580791415

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiUjLzaurHWAhXEz1QKHebJCvsQjRwIBw&url=https://sites.google.com/site/howoctanechangedtheworld/home/structural-diagram&psig=AFQjCNGLYYY8-EsVNUh-y2Vq82jKmsq-jA&ust=1505917680683211

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


Pentanes+ (C5+H?)

0

5

10

15

20

25

30


MM

b

U.S. Pentanes+ Stocks


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


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 [email protected] Customer Support Phone: 855.650.4500 ext. 1 [email protected] Sales Phone: 855.650.4500 ext. 2 [email protected]

Gaithersburg HQ: 9737 Washingtonian Blvd.

Houston, TX Office: 1401 Enclave Parkway

Golden, CO

Denver, CO Office: 321 Inverness Dr. South

Denver, CO

mailto:[email protected]



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