Thursday, December 01, 2011

Special addendum to “The Great NGL Surge!” assesses anticipated EPA rules and quantifies how the regulations would potentially increase surpluses in natural gas liquids (NGL) markets.

DENVER, CO and DALLAS, TX (December 1, 2011) – The Environmental Protection Agency (EPA) is currently evaluating Tier 3 revisions to U.S. motor gasoline specifications. A joint market study recently released from BENTEK Energy and Turner, Mason & Company (TM&C), The Great NGL Surge!, analyzes the various proposed revisions and their impact on NGL supply and demand. This analysis reports that in order to meet some of the specifications changes, both butane and natural gasoline demand by refiners would be severely affected.

While the specifics of the Tier 3 program have yet to be determined, the report shows that approximately 240 Mb/d of additional NGLs could be forced into the market by 2016. If the impact of these developments were isolated to the refining industry, the implications would be substantial but not severe. However, combined with the expected surpluses in NGL production from natural gas processors, the oversupply of NGLs described in The Great NGL Surge! would be aggravated, resulting in a very volatile pricing environment.

“Piled on top of already tight motor fuels specifications which have been implemented over the past several years, the proposed Tier 3 rules will make the production of gasoline even more difficult. In addition, the blending of butane and natural gasoline into motor gasoline could be severely limited,” noted TM&C Senior Vice President John Auers.

“Not only will these proposed rules impact the refining industry, they also have significant implications for natural gas processing, storage and transportation facilities,” added BENTEK Vice President E. Russell (Rusty) Braziel.

The Great NGL Surge! reports that U.S. NGL production from gas plants is expected to increase more than 40% over the next five years, with volumes reaching at least 3.1 MMb/d by 2016. The rise in NGL supply has the potential to wreak havoc on the NGL market, the study reports. Natural gasoline will increasingly flow into the diluent market for Canadian heavy crude and could experience a dramatic decline in motor gasoline blending if some of the proposed Tier 3 regulations are implemented. Butanes will see wider summer-winter swings in supply, demand and prices. Surplus ethane volumes from the anticipated increases will outpace demand from the U.S. petrochemical industry until new ethylene units are completed. Propane supply is increasing while demand in the home heating sector is down, putting a premium on marine dock space for shipment of incremental supply to offshore markets.

The Great NGL Surge! provides a comprehensive five-year analysis of North American NGL markets and extensive projections of supply, demand, transportation and infrastructure for every NGL product, including butane, propane, ethane, petrochemicals and y-grade. In addition, the study analyzes the impact of refinery developments on NGL demand, including shifting crude oil slates on refinery NGL production. An outline of the potential impact that EPA’s Tier 3 proposed requirements would have on refinery supply and demand is included in the addendum to the study, which will be provided to subscribers at no additional charge.

For more information on The Great NGL Surge!, a joint market study from BENTEK and TM&C, visit (1-888-251-1264) or visit (214-754-0898).