Global energy markets are acutely focused on North American energy independence and the possibility of exports of light tight oil and natural gas in the form of liquefied natural gas (LNG). Perhaps somewhat under the radar, the co-production of natural gas liquids (NGLs) has also soared, for ethane, propane, butane, isobutene, and pentanes and heavier constituents (C5+). As production has risen, NGL prices have fallen from $80 per barrel (bbl.) in 2003 to roughly $40 per bbl. in first-quarter 2013. Mirroring the earlier natural gas shale gale and resultant price tumble in the North American natural gas market, energy markets are now weighing the risk of multiyear NGL price declines unless demand or exports ramp soon.
Exports of propane and propylene have already trebled since 2008, from 19 million bbl. to 70 million bbl. Exports of normal butane and butylene have nearly doubled over that timeframe as well.
While the U.S. Department of Energy closely tracks these propane and butane exports, another NGL that is being exported under the radar is natural gasoline (C5+). Exporters are sending out natural gasoline is to be used by foreign operators as a refinery feedstock or blendstock, as a refined product, or even for use as a diluent.
NGL pipelines that cross U.S. borders require Presidential permits and national interest determinations by the State Department. But NGL exports from U.S. coasts require fewer politically charged approvals than those required to export LNG. And capital investments needed to establish or expand NGL export facilities are billions less than LNG liquefaction plants. Overall, exporting NGLs is generally simpler than exporting LNG. That’s why rising inland NGL production volumes are rushing to the Mont Belvieu, Texas, hub and nearby marine export terminals.
A trio of partners—DCP Midstream LLC, Spectra Energy Corp. and Phillips 66 Co.—is attempting to have the Southern Hills and Sand Hills pipelines be in full service by midyear 2013 delivering Y-grade gas mix, the raw unfractionated NGL feedstock, into Mont Belvieu’s fractionation and storage complex, which has export access. The pipelines would serve NGL producers in the Mississippi Lime, Cana Woodford, Permian and Eagle Ford plays.
By third-quarter 2013, Targa Resources is upgrading its Mont Belvieu de-ethanizer to produce purity propane. That product will then be piped to Targa’s docks at the Galena Park Marine Facility, where up to four very large gas carriers (VLGCs) can be loaded monthly (400,000 bbl. each). That send-out capacity from the core of the Texas Gulf Coast could double by third-quarter 2014, according to company disclosures.
Enterprise Products Partners LP and Oiltanking Partners LP operate and own the other existing Texas propane export facility. In first-quarter 2013, these partners completed an expansion to handle 7.5 million bbl. per month of liquefied petroleum gas (LPG)—enough for 17 VLGCs per month. Enterprise is considering a further expansion to handle 10 million barrels monthly in early 2015, per recent company disclosures.
Under a joint development agreement announced in first-quarter 2013, Vitol Group and Itochu Corp. will before year-end 2014 open an LPG export facility in Texas at Coastal Cavern Inc.’s Spindletop LPG storage facility. That facility is designed to store, process and export more than 3 million tons of propane and butane per year. A second phase of expansion at an unannounced later date could double capacity.
Sunoco Logistics Partners LP floated an open season on March 21 for the Mariner South Pipeline project to shuttle propane, butane, and potentially other products from Mont Belvieu’s Lone Star fractionator to Sunoco’s Nederland, Texas export terminal. The in-service date is January 2015 at 200,000 bbl. per day or higher capacity.
Crosstex Energy LP may also invest to export propane from its Louisiana fractionators by 2015, per disclosures at its first-quarter 2013 annual analyst conference.
Can the international markets sustain the pending growth in U.S. NGL exports? We note that U.S. shale NGLs already reach markets across Latin America and Europe. And with the 2015 completion of the Panama Canal expansion project, even Asia will be a target, as post-expansion tanker capacities rise and shipping costs and times fall.
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