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| Fig. 1: The Harrison Fractionating Plant, Scio, Ohio. (Source: Wikimedia Commons) |
Natural gas liquids (NGLs) are a set of petroleum and natural gas production by-products used for assorted industrial, commercial, and residential purposes. NGLs specifically include Ethane, Propane, Butane, Isobutane, and Natural Gasoline. Of these, propane and ethane are traditionally the most widely produced. [1] Propane is the most publicly recognized NGL, given its use in commercial and residential heating and cooking appliances. Notably, propane demand and production both fluctuate significantly with winter temperatures and consumer heating requirements. For example, the winter of 2014 was particularly cold in the northeast yielding a spike in propane demand and concerning shortages. [2-4] Other NGLs serve important functions, more detached from consumer's awareness, such as in plastics manufacturing, as petrochemical feedstock, or as a diluent for thick and difficult to move crude oil.
Two other relevant terms are Hydrocarbon Gas Liquids (HGLs) and Liquid Propane Gases (LPGs). HGLs is larger umbrella term which- though often used interchangeably with "NGLs"- specifically refers to all NGLs, as well as a set of olefins such as ethylene. On the other hand, LPG refers to a smaller subset of NGLs, namely Propane, Butane, and Isobutane. [1]
NGLs begin as a byproduct of natural gas and crude oil production referred to as "Y-Grade", which is then piped to fractionation plants, such as the Ohio plant pictured in Fig. 1. Fractionation plants then separate out the component Natural Gas Liquids purity products. [1] NGL prices and production generally track quite closely with those of crude oil and natural gas, as they are a byproduct of those production processes. In particular, NGLs production increased significantly starting in 2008 as a result of the boom in shale natural gas production, driven by hydraulic fracturing and horizontal drilling technologies. [1] Market hubs for NGLs are Conway, KS and Mt. Belvieu TX. The U.S. exports NGLs out of several ports in TX, as well as out of the Northeast and Northwest, to Europe, Asia, and South America. Demand from and export to Asia- Japan, India, and China in particular- is expected to increase through 2020. [1]
Natural Gas Liquids are a lesser known, but interesting and valuable component of oil and gas production and market.
© Brad Hakes. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "Hydrocarbon Gas Liquids (HGL): Recent Market Trends and Issues," U.S. Energy Information Administration, November 2014.
[2] T. Vegajan, "Americans Scramble for Propane Amid High Prices and Bitter Cold," New York Times, 22 Jan 14.
[3] A. Blinder and C. Krauss, "Too Much Winter, and Not Nearly Enough Propane," New York Times, 7 Feb 14.
[4] C. Krauss, "Brutal Winter, and Painful Rises in Heat Costs," New York Times, 12 Mar 14.
