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EIA Credits Shales, Exports For Liquids Growth

Domestic production of hydrocarbon gas liquids (HGL) -- ethane, propane, butanes and natural gasoline -- is increasing, largely because of shale production. New infrastructure and exports are giving them a place to go.

More than 95% of the projected near-term increase is expected to come from natural gas processing plants as opposed to petroleum refineries, the U.S. Energy Information Administration (EIA) said Tuesday.

EIA projects HGL production to grow from 3.86 million b/d last year to 4.33 million b/d in 2017, according to the agency's Short-Term Energy Outlook.

Between 2008 and 2015, HGL production at gas processing plants (including fractionation facilities) increased as a byproduct of growing gas production from shales. "Projects that increased the capacity to produce, store, transport, export and consume HGLs enabled the supply of HGLs to expand at a faster rate than natural gas production," EIA said. The agency said it expects HGL production growth to continue to outpace natural gas production growth this year and next as more HGL infrastructure projects are completed.

That is particularly true of ethane. The United States just saw its first exports of ethane from Appalachia -- from Sunoco Logistics Partners LP's Marcus Hook Industrial Complex (see Shale DailyMarch 10). That cargo recently arrived in Norway (see related story).

"Ethane production, which was constrained by lack of demand and low prices in recent years, is expected to increase at a faster rate than other HGLs in 2016 and 2017, as expanded petrochemical and export capacity provides new outlets for supply and allows more ethane to be recovered from raw natural gas. Forecast natural gas plant ethane production increases by 300,000 b/d between 2015 and 2017, accounting for two-thirds of total HGL production growth," EIA said.

The United States became a net exporter of natural gasoline in 2008, of butane and propane in 2011, and of ethane in 2014. Annual average net propane exports increased from 10,000 b/d in 2011 to an estimated 500,000 b/d in 2015 as the capacity to export liquefied petroleum gas (LPG), including propane and butanes, increased by almost 1 million b/d.

EIA projects net propane exports to increase to 640,000 b/d in 2016 and to 740,000 b/d in 2017 as exports ramp up at two Gulf Coast terminal projects that began operating in the second half of 2015, and at another project scheduled to come online in the second half of 2016.

A second ethane export facility -- being developed by Enterprise Products Partners LP -- is expected to open later this year at Morgan's Point, TX, on the Houston Ship Channel (see Daily GPIJan. 28July 30, 2015).

The Enterprise facility is expected to have an aggregate loading rate of approximately 10,000 bbl per hour and is supported by long-term contracts, the company said. It is to be integrated with the Enterprise Mont Belvieu natural gas liquids (NGL) fractionation and storage complex.

EIA projects that net ethane exports will increase by 80,000 b/d in 2016 and by 90,000 b/d in 2017 as exports ramp up at these terminals.

In a report titled "The American Propane Armada," released earlier this month, BofA Merrill Lynch Global Research analysts said that since mid-January, domestic propane prices have rebounded 62%, from 29 to 47 cents/gal. By comparison, during the same time frame butane and natural gasoline prices have increased 33% and 26%, respectively. But when NGL prices are weighted as a percentage of West Texas Intermediate crude, the ratio surged over the last nine months (see Daily GPIMarch 11).

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