Monday, March 18, 2013
One of the lesser-known side effects of the US shale gas boom has been a surge in the supply of natural gas liquids (NGLs), which are by-products of natural gas drilling. As shale gas developers have unlocked huge new deposits of so-called wet gas – natural gas mixed with liquids – the supply of NGLs has climbed. In 2012, production of NGLs hit 2.4 million barrels per day, according to the US Energy Information Administration – a rise of 34% compared with 2008.
The sudden abundance of NGLs, which include ethane, propane, butane, isobutane and natural gasoline (see table 1, below), has fundamentally changed the economics of businesses that use them. In April last year, Michigan-based chemicals giant Dow unveiled plans to build a $1.7 billion ethylene plant in Texas, which is expected to be the largest such facility in the US when it begins operating in 2017. The plant became economical thanks to rising levels of cheap ethane and is part of a broader push by Dow to expand its US-based plastics production.
Forecasters predict the surge of inexpensive NGLs will continue. “We’re seeing tremendous drilling into the wet gas plays, and we’re [also] getting associated gas turning up with some of the crude oil plays,” says Kelly Van Hull, senior NGL analyst at Bentek Energy, a Colorado-based market analytics company. “We are seeing very strong production growth.”
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