While oversupply and pricing issues continue to be problematic, it is premature to write off natural gas liquids (NGL) with the prospect that increased U.S. natural gas exports would help bolster NGL trade, an equity research team at Wells Fargo Securities LLC said after meeting with two Houston-based NGL companies.

The analyst team, led by Michael Blum, noted that six potential NGL projects emerged in March, and expected high levelsof ethane rejection may be overstated because of too much emphasis on oversupply and price issues, according to Enterprise Products Partners LP (EDP) and Targa Resources Partners LP.

Blum’s “NGL Snapshot” cited the fact that exports are likely to be a leverage upward for NGLs as one of the “themes” the Wells Fargo team took from meetings March 20 with EDP and Targa management.

“For NGLs, management teams see LPG [liquid petroleum gas] exports (propane and butane) as the balancing factor,” Blum’s analysis said. “In addition, EPD and [Targa] have received inquiries regarding the feasibility of exporting ethane.”

In addition, the report pointed out that as U.S. crude oil production continues to grow, the United States is “fast becoming a global exporter of refined products.”

Contrary to previous projections of ethane rejection in the range of 150,000-250,000 b/d, EPD and Targa said there is no widespread rejection on their respective systems. They expect ethane to remain in oversupply, but also could experience some “modest price improvements.”

“As propane prices improve due to increased export capacity coming online, this should lift the ceiling price for ethane, potentially causing some increase in price.”

Wells Fargo listed six new NGL-related projects that have emerged in the past month and analysts handicapped their potential feasibility.

The Williams and Boardwalk proposed 200,000-400,000 b/d Marcellus/Utica NGL Bluegrass pipeline project is given a chance of getting enough commitments to start construction, although current Northeast-to-Louisiana ethane trade looks problematic.

EDP’s 270-mile Mont Belvieu-to-Louisiana ethane pipeline header system may have a “slight cost advantage” over competing proposals because of its existing assets in the area. Analysts also noted EDP’s potential diluent pipeline to transport natural gas from Mont Belvieu to Chicago for eventual delivery to Western Canada; Wells Fargo’s assessment was noncommittal on the project’s prospects.

An open season has been announced for the potential Mariner South LPG export project, but the competition is stiff, with at least four proposals for LPG export projects on the Gulf of Mexico (GOM) coast. Also, Vitol secured commitments for the Coastal Caverns LPG export project, which could be the first LPG export project completed ahead of a wave of projects in 2015.

In addition, analysts cited Williams’ plans to a propane dehydrogenation facility (see NGI, March 25). Wells Fargo analysis cautioned that it could be facing high transportation costs for moving product from Western Canada to the GOM.

As for NGL pricing, average prices in January and February were 97 cents/gal. and 98 cents/gallon, respectively. Based on current Wells Fargo number crunching, the average prices over the full years 2013 and 2014 may be about 94 cents/gallon, moving down steadily to about 89 cents/gallon in 2017.

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