Natural gas and motor gasoline never had much to do with each other, but new environmental rules and the natural gas liquids (NGL) abundance from shale plays could make for a bit more of a connection, Bentek Energy LLC and Turner, Mason & Co. (TMC) have found.
The Environmental Protection Agency is considering revisions to its Tier 3 motor gasoline specifications, which could affect NGL supply and demand, according to Bentek and TMC. Specifically, efforts by refiners to meet new specifications would affect markets for butane and natural gasoline, they said.
“The blending of butane and natural gasoline into motor gasoline could be severely limited, said a report by the research firms.
While the specifics of the Tier 3 program have yet to be determined, the report shows that approximately 240,000 b/d of additional NGLs could be forced into the market by 2016. If the impact of these developments were isolated to the refining industry, the implications would be substantial but not severe. However, combined with the expected surpluses in NGL production from natural gas processors, the oversupply of NGLs described in the firms’ report, “The Great NGL Surge!” (see NGI, Nov. 21; Oct. 3) would be aggravated, resulting in a very volatile pricing environment, Bentek and TMC said.
“Not only will these proposed rules impact the refining industry, they also have significant implications for natural gas processing, storage and transportation facilities,” said Bentek Vice President Rusty Braziel.
U.S. NGL production from gas plants is expected to increase more than 40% over the next five years, with volumes reaching at least 3.1 million b/d by 2016, according to the report.
“Natural gasoline will increasingly flow into the diluent market for Canadian heavy crude and could experience a dramatic decline in motor gasoline blending if some of the proposed Tier 3 regulations are implemented,” according to the report. “Butanes will see wider summer-winter swings in supply, demand and prices. Surplus ethane volumes from the anticipated increases will outpace demand from the U.S. petrochemical industry until new ethylene units are completed. Propane supply is increasing while demand in the home heating sector is down, putting a premium on marine dock space for shipment of incremental supply to offshore markets.”
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