Friday, December 21, 2012
US operators have relied on production of natural gas liquids such as ethane and propane to buoy their bottom line during the extended period of low natural gas prices but, as with gas prices, NGL prices are plunging under the weight of burgeoning shale production.. Ethane is trading at below 22 cents per gallon at the Mont Belvieu hub in Texas - its lowest level in a decade - and prices at Conway, Arkansas, the mid-continent regional hub for NGLs, are trading at 16 cents.
Both prices are below the level at which it is more profitable to leave ethane in the gas stream, rather than separate it out and sell it independently.
Over the past five years, ethane prices have averaged 37% of those of crude but they are currently at 11% of its value. Propane prices have dropped from an average of 64% of crude to 35%, according to figures from Bentek Energy.
Ethane can either be used as a heating fuel when it is in the gas stream or as feedstock for ethylene..
Propane is also an ethylene feedstock and can be used as a liquid fuel for residential heating but propane pricing has held up better because it can be processed into other products that can be sold at higher value.
Ethane prices have been further hit by processing facility downtime and overall low gas prices.
Currently there is an estimated 200,000 barrels per day of ethane left in the gas stream, compared to overall production of about 1 million barrels per day but there is a limit to how much ethane can be left in and still have the gas meet the Btu content mandated by pipelines, Bentek NGL consultant Kelly Van Hull said.
"They had a situation in the north-east where they actually had to shut in production because the operator was trying to blend in production that was too rich," Van Hull said.
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