US gas plant natural gas liquids (NGL) production is expected to increase more than 40% over the next five years, as per a joint market study from BENTEK Energy and Turner, Mason & Company (TM&C). The increase will total approximately 950,000 b/d, with volumes reaching at least 3.1 MMb/d by 2016. At the same time, crude production from the U.S. and Canada will grow by more than 2.8 MMb/d, further impacting NGL supplies as crude quality changes and new refinery upgrading capacity comes online. Current levels of NGL infrastructure are inadequate to handle the surge in NGL production and significant new investment is needed to relieve bottlenecks. The study finds that as a result of excess NGL supply, transportation constraints and demand limitations, the North American NGL and crude oil markets will experience wide and volatile regional price differentials during the next few years. “The shale revolution is having a dramatic effect on the NGL market in North America, and that in turn is driving changes in all aspects of the market, ranging from production, processing, fractionation and transportation to the petrochemical industry,” noted BENTEK Vice President E. Russell (Rusty) Braziel. “At the same time NGL production from gas processing is surging, the U.S. refining industry is in the middle of a significant capital program to accommodate a changing crude slate, which will present still more challenges and opportunities to the NGL market,” added TM&C Senior Vice President John Auers. “Traditional supply/demand relationships for each NGL product are being transformed by these developments.”
The rise in NGL supply has the potential to wreak havoc on the NGL market, the study reports. 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. Butanes will see wider summer-winter swings in supply, demand and prices. Additionally, natural gasoline will increasingly flow into the diluent market for Canadian heavy crude and could experience a dramatic decline in motor gasoline blending if certain Environmental Protection Agency (EPA) vapor pressure and octane regulations are implemented.