Upstream Online
Producers Face Impact of Declining NGL Prices

Friday, May 04, 2012

Downward trend for natural gas liquids could leave companies that have invested heavily in liquids-rich plays exposed

"Processing, NGL pipe and fractionation expansions will cost over $30 billion," Olsen said. "Paying for pipes and (fractionation plants) absorbs up to 20% of producer margin from new NGL production." NGL production has actually dropped slightly over the first quarter this year from a high of around 2.4 million barrels per day set in January but it is still up 15% (about 300,000 bpd) year-on-year, according to consultancy Bentek Energy.

"Pipeline constraints in the Midcontinent have led to extremely low ethane prices and ethane rejection in the Midcontinent and Rockies regions," Bentek said in a market report.

The dip is expected to be temporary as new midstream facilities come on and Bentek forecasts production growth of 360,000 bpd by the end of 2013, while Olsen estimates that production will grow 50% by 2016.

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