Natural Gas Intelligence
Another Analyst Cuts Price Outlook; Onshore Liquids Creating Glut

Monday, October 24, 2011

An interior oil and natural gas supply glut, the result of strong output from shales and tight oil and gas plays, is developing because infrastructure can't keep up, and that in turn is pressuring prices, according to energy analysts.

On Wednesday Bentek Energy LLC said it is tracking more than 185 oil and NGL infrastructure projects scheduled to be ready in 2014, which likely will lead to "major changes" in the markets over the coming five years as production grows and infrastructure expands. "The magnitude of these changes is expected to be similar to what occurred in the U.S. natural gas market over the past five years," Bentek noted.

In September Bentek previewed the report, which was produced in partnership with Turner, Mason & Co. (see NGI, Oct. 3). Last month Bentek Vice President Rusty Braziel told NGI that because of the liquids and oil glut, all of the projects on the drawing board would be needed. Through 2014 he said companies were forecast to spend $5.7 billion on new NGL pipelines.

In the final report, Bentek researchers determined that over the coming year "transportation constraints" would continue to pressure prices for West Texas Intermediate (WTI), Rocky Mountain crude and Midcontinent NGLs. In 2013, when some of the pipeline expansions begin to ramp up, supplies then would shift to the Gulf Coast region.

Even though new gas processing plant capacity is expected to "keep pace with growing rich gas production, fractionation capacity could tighten significantly at Mont Belvieu [TX] over the next few years," said Bentek. "In addition, growing ethane supplies are expected to exert pressure on ethane prices until demand from crackers pulls the slack out of the supply."

To access a complete copy of this report, please visit