The Ins and Outs of NGLs Kristen Holmq mquist Di Director NGL An Analytics kholmq mquist@p @ponderosa-advisors.com 303 303-309 309-4097 4097
What Are NGLs? • Natural Gas Liquids or NGLs are paraffinic hydrocarbons produced as a by-product of natural gas and oil production. Propane Ethane (Heating) (Plastics) Pentanes Normal Butane Isobutane (Gasoline Blending) (Gasoline Blending) (Gasoline Blending) Image Source: Wikipedia
How Are NGLs Produced? Natural Gas Oil Wet Natural Gas Gas Processing Raw Mix NGLs Exports Refinery Purity Products Heating Petrochemicals Fractionation
Petrochemicals Are Components Of Many Common Consumer Goods H H Naptha from Crude Heavy oil from refineries Ethylene C C Natural Gasoline from N. Gas H H Ethane from Natural Gas Ethylene Ethylene or ethylene by- products are major Ethylene can be produced components of these products from many sources
U.S. Olefins Are Resurgent As U.S. Ethane Falls Relative To Alternatives Ethane Prices versus the Alternatives’ Prices 1000 NW Europe 900 Naptha Oil Derived U.S Natural 800 Gasoline 700 $600 /ton $/ton 600 Differential Japan Naptha 500 U.S. Ethane 400 300 200 Mid East Ethane 100 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Ponderosa Advisors/Platts
Drilling Today is Focused on Oil Rich Shale Plays Williston (Bakken) 198 Rigs (10%) Marcellus/Utica Anadarko 132 Rigs (7%) 230 Rigs (12%) Permian 442 Rigs (22%) Eagle Ford 249 Rigs (13%)
Dry Gas Declines Are Offset By Associated Gas Production Total Prod (Bcfd ) Gas Prod By Type (Bcfd) 45 100 Assoc Gas Dry Gas Total Prod 90 40 80 70 35 60 50 30 40 30 25 20 10 20 0 Dry Gas Definition: Production Areas With GPM<1.15 Source: Ponderosa Advisors, HPDI, FERC
When Comparing the Value of the Markets; Natural Gas Liquids Are Still Small 2012 Average $38 $223 Billion $75 Billion Billion Natural Gas Liquids Natural Gas Production Volume = 2.4 MMb/d Production Volume = 12.2 MM BOE/d Crude Oil Production Volume = 6.5 MMb/d Source: EIA, OPIS
NGL Production Will Continue to Increase with Higher Crude and Gas Production Natural Gas Production Forecast Crude Oil Production Forecast NGL Production Forecast 16.0 5.0 16 Natural Gas Production, MM BOE/d NGL Production, MMb/d 4.5 14.0 15 Crude Oil, MMb/d 4.0 12.0 14 3.5 10.0 13 3.0 8.0 12 2.5 6.0 11 2.0 1.5 4.0 10 Natural Gas Production Crude Oil Production U.S. NGL Production
Conclusions • NGLs are a by-product of both crude oil and natural gas production • The market for NGLs is small compared to the oil and gas market, but it has huge implications for the competitiveness of U.S. manufacturing • NGL production is expected to grow by more than 60% between 2013 and 2020 driven by crude oil production increases • The major risk factor to this outlook is a slow down in the development of U.S. crude and natural gas production.
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