NGL Market: Economics & Process - Amazon S3 · NGL Market: Economics & Process ... Outlook for the Oil & Gas Industry Shale Changes Everything ... • propane • butane • pentane

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eXigent Information Solutions, LLC

NGL Market: Economics & Process

© 1997-2011, eXigent Information Solutions, LLC, All Rights Reserved

Source: RBN Energy; BENTEK

Goals

1. To understand the overall market changes, which have creating new supplies of NGLs

2. To understand what NGLs are and where they come from

3. To review NGL markets in the US

4. To review NGL pricing drivers

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Gas Analysis Information

Chart Volume Information

Producer Settlement Statement

Source: RBN Energy

Outlook for the Oil & Gas Industry Shale Changes Everything

E. Russell BrazielRBN Energy, LLC January 14, 2014

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1. Shale – Sedimentary rock formed by the compression of clay-rich sediment

2. Shale Gas – Natural gas produced from shale formations

3. Until recently it wasn’t commercially feasible to produce gas from shale

4. Technological advances have changed this5. Modern shale gas exploration and production uses

both horizontal drilling and multi-stage hydraulic fracturing to stimulate gas production

6. The Barnett play in Texas was the first shale play

Shale Gas – What Is It?

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Shale Gas in the United States


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Source: RBN Energy; BENTEK

Shale Changes Everything High BTU Content = Rich in NGLs

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Shale Changes Everything Enabled by Horizontal Drilling & Hydraulic Fracturing

1. Increased technology allows us to retrieve gas from “tight” formations

2. Massive increase in production from previously uneconomic fields and plays

3. The drilling process uses a specialized bit that allows for horizontal drilling

4. When oil and gas are trapped in shale rock, fracturing is used to allow liquids to flow

5. All enabled by North American technology advances

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Shale Changes Everything Technology Makes It All Work

1. Drilling technology improvements and efficiencies in shale have emerged

2. Longer horizontal laterals

3. Multiple-stage hydraulic fractures per lateral

4. Small surface footprint for multiple, extended wells

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Shale Gas Well vs Conventional Gas WellConventional Gas Well

• Vertical well drilled into formation

• Formation is permeable which allows gas to flow freely

• Common to see one well per well pad

• The reservoir may have “pressure maintenance” through re-injected gas to sustain production

• Entire reservoir depleted slowly by evenly spaced wells

• Formation Permeability is High

• Well contact area is low

Shale Gas Well

• Directional drilling into formation

• Formation has very low permeability

• Common to see multiple wells per well pad to take advantage of formation underneath the pad

• Hydraulic Fracturing is almost always used to stimulate production. Fractures increase the permeability to allow gas flow

• Only fractured region immediately surrounding each well is depleted

Shale Changes Everything The Impact of Shale Plays

1. Before the shale plays, the USGC was the largest market center for NGLs, being able to receive or deliver global LPGs when the world became long or short.

2. After shale, the US is the world’s dominant NGL producer and has the best infrastructure to handle, distribute & export NGLs

3. This has transformed the US energy position and the companies that produce, process and transport hydrocarbons

4. This has revitalized the US petrochemical and refining industries

5. This has made the US one of the world’s lowest-cost energy producers and a net exporter of hydrocarbon products

6. We can source NGLs not from a few basins, but from multiple shale plays that span the North America

7. This platform provides the US with the world’s strongest ability to enable petrochemical growth along with being a secure and stable supplier of NGLs to the world


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NGL EconomicsShale Drives US Output Close to Historical High

NGL Economics

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NGL Economics

North America - Dominant NGL Producer NGL Economics

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What About OPEC?

Source: Reuters, The Saudi Arabian Oil Conspiracy and What it Might Mean for Your Portfolio, The Motley Fool, Adam Galas, January 18, 2015

Commodity PricesOil Prices Distressed: What is Happening?

Sources: The Outlook for U.S. Crude: Implications for Colorado, Bernadette Johnson, Ponderosa Advisors and EIA

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Global Supply/DemandLower Prices Caused by Global Oversupply


Global Supply/DemandWhat’s Happening Now?


Oil Prices Have Fallen Hard

• Condensate Prices Follow Oil Prices

• Changes the Ethane – Naptha Spread

• Could Affect LNG Export (due to the spread between oil and gas prices)

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Natural Gas Liquids - Defined• Natural Gas Liquids (NGLs) are found in “wet gas” or

“rich gas” areas of shale gas producing regions.• NGL’s are hydrocarbons removed (condensed) as a

liquid from a hydrocarbon stream that is typically in a vapor phase (i.e. natural gas)

• These liquids are used in a variety of ways; aspetrochemical feedstocks, as fuel, as a blendingproduct for gasoline.

• Natural gas (dry gas) is mostly methane. TheNatural Gas Liquids can comprise 5% to 50%depending on the formation from which it isextracted.

NGLs – What Are They?

Natural Gas Liquids - CompositionRaw natural gas consists of hydrocarbons:

• methane

• propane

• butane

• pentane

Raw Gas also contains undesired materials: sulfur, H2S, CO2, water, Nitrogen, etc.

Raw gas must be processed, or “purified,” to meet quality standards set by the major pipeline and distribution companies, a.k.a. “Pipeline Quality”.


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The Components of Natural Gas

Natural Gas well

Methane (C1)

Ethane (C2)

Propane (C3)

Butane (C4)

Heavier Fractions: - Pentanes plus (C5+) - Natural Gasoline -Condensate

Non Hydrocarbons e.g. Nitrogen, Helium, Carbon

Dioxide, Hydrogen Sulphide, Water, etc.

LPG NGL

NGL Plants Natural Gas Liquids LPG Plants Liquefied Petroleum Gas

Helium Plants Separation, Purification, Liquefaction NRU Nitrogen Rejection Units

Information Solutions, LLCeXigent

1. NGLs are a byproduct from gas production

2. NGLs are produced as a byproduct of:a. Oil production (via the processing of associated gas)b. Gas production (via the processing of non-associated gas)

3. NGL production tends to change quickly when one or more industry driver changes quickly (e.g. shale oil/gas in the US)

4. Unlike most other markets, NGLs are a supply-driven market in which demand must change to balance production

5. Thus, the NGL market is also affected by changes in demand sectors (for example, less propane cracking due to cheap ethane)


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Natural Gas Liquids - NGLs

1. The five most common NGLs are: ethane, propane, normal butane, isobutane and natural gasoline (pentane +)

2. Each successive NGL has an additional carbon molecule and different chemical properties.

a. C1H4 – Methane

b. C2H6 – Ethane

c. C3H8 – Propane

d. C4H10 – Butane (and Isobutane)

e. C5H12 – Pentane (natural gasoline)

3. “Purity” products – at least 90% of the liquid content is one type of molecule

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Source: Conoco Phillips

NGLs –Markets

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NGL’s Used to Manufacture Many of Our Everyday Products

How NGLs Are Used

Source: Envantage

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And what is the “Midstream” Energy Industry?

Upstream

Petrochemicals

Refining

PropaneRetailing

NGLTransportation

NGLStorage

NGLFractionation

Gathering

Exploration &Production

Processing& Treating

Consumers

GasRetailing

GasDistribution

PowerDistribution

PowerRetailing

Power Generation

Midstream

Transportation

GasStorage

GasTransportation

Begins at the Wellhead

Continues Through Transportation

Ends With Industrial & Consumer Consumption

NGLs – Where do they come from?

A More Detailed ViewInformation Solutions, LLCeXigent

WellGas Plant

Y-Grade Pipelines

NGL StorageTanks

Y-GradeStorageTanks

NGL Product Pipelines Refineries

Chemical Plants

Agricultural/Residential

IndustrialFuels

Fractionator

Production Gas Processing

Transportation

Storage

Liquids Processing

Marketing

“Residue Gas”to

Interstate Pipelines

Distribution

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Gas Gathering and Processing1. Gas Gathering

a. Low pressure pipeline systems

b. Typically connecting large number of wells into pipeline webs that deliver gas processing plants

c. Different production areas dictate different gathering systems

2. Gas Processing

1. Industrial process to separate natural gas liquids (NGLs) from methane

2. Traditionally meant to bring “raw streams” from wellheads within the gas quality specifications of takeaway pipelines

3. Current NGL pricing makes NGL extraction key value driver; natural gas almost a by-product of gas processing

4. Fractionation required to further separate NGLs

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Settlement History




Gas ProcessingGas processing removes valuable NGLs from the gas stream

Rich GasNGLs

Residue GasProcessing

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Sales Gas

Feed Gas

Dehydration

Demethanizer

Refrigerant

Deethanizer LPG Column

Gasoline

LPG

Gas ProcessingExtraction of Hydrocarbons


Gas ProcessingeXigent

(Typical NGL Mix)

Ethane (40-45%)

Propane (25-30%)

Isobutane (10%)

Normal Butane (5-10%)

Natural Gasoline (10-15%)

Wet Gas (Wellhead

gas)

Processing Plant

Raw NGL Pipeline

Marketable Gas to Interstate Pipelines

Plant processing takes “raw” gas from wells and removes (NGLs) and other contaminants (water, hydrogen sulfide, etc) to create marketable gas.

Pipeline Quality – for safety pipelines impose restrictions on the composition of gas allowed to enter the line. Gas composition is the BTU content of the gas. Higher BTU content implies there are more liquids in the stream.

Processing economics depend on the price of the liquids removed vs. their equivalent BTU content if left as gas. The difference between the price of the liquids removed vs. their value in gaseous form is called a “frac spread.”

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Information Solutions, LLCeXigent Fractionation

Storage

Fractionation

Raw NGL “Barrel”

Products Pipelines

NGL Pipeline

Fractionator

Ethane – 40-45%

Propane – 25-30%

Isobutane – 10%

Normal butane – 5 - 10%

Pentane Plus – 10 - 15%

– The hydrocarbons are boiled, moving lightest to heaviest (natural gasolines).

– Fractionators are much larger scale than gas processing plants, usually processing the raw mix from multiple processing plants.

– Raw gas / NGL mix pipelines transport the gas / NGL mix from processing plants to fractionators. Finished NGL pipelines and trucks transport the product to market.

– Fractionation turns the “Raw Mix” NGL stream into propane, butane, pentane, hexane, etc..

Fractionation separates ‘Raw Mix’ into discrete purity NGLs


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Fractionation Process – Separating NGLs into Purity Products

1. Fractionation occurs in stages (lightest to heaviest)

2. Heat and pressure applied to separate into products based on boiling points of the different hydrocarbons

3. De-ethanizer – separates ethane from the NGL stream

4. De-propanizer – separates propane

5. De-butanizer – separates butanes, leaving pentanes

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Gathering, Processing and Transportation

Major NGL Pipeline Corridors and Fractionation Centers in the US

Source: CERI

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Settlement History




Natural Gas Liquids – Economics

FRAC SPREAD – Defined as the value of the NGLs extracted less the price of natural gas (per MMBtu) required to make up for the MMBtu extracted

A. If Frac Spreads are positive, the liquids contained in the natural gas are more valuable as NGLs and the Producer/Processor will maximize liquid recovery

B. If Frac Spreads are negative, the liquids contained in the natural gas are less valuable than natural gas and the Producer/Processor will minimize liquid recovery

C. Each NGL component (ethane, propane, butane, natural gasoline) has its own Frac Spread

D. Measure of gross profitability for gas plants


Source: Caiman Energy

Economics of Rich Gas

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Frac Spread – Sum of the Parts is Worth More Than the Whole • Step 1: Calculate the NGL value ($/MMBtu). Multiply component prices by the heat content

and composition of the gas.

Step 2: Divide F by E to get composite NGL price ($/mmbtu): $11.84

Step 3: Subtract natural gas price from composite NGL price: $11.84 – Gas Price = Frac Spread

Step 4: Adjust spread for transportation, operating costs, and plant processing fuel.

A B C

=[A*B]

D =[D*A]

Assumed

Mix

Conversion

Factor

(MMBtu/Gal)

Weighted

Average

NGL Price

($/gal)

Composite

($/gal)

Ethane 45% 0.0664 0.0299 $0.490 $0.221

Propane 30% 0.0916 0.0275 $1.248 $0.374

Iso butane 5% 0.0997 0.0100 $1.480 $0.074

Normal

butane

10% 0.1037 0.0052 $1.475 $0.148

Natural

Gasoline

10% 0.1178 0.0118 $1.815 $0.182

Total NGL E 0.0843 F $0.998

Economics of NGLs–Example of Frac Spread

– Frac spread is the difference between the value of the processed NGLs and the value of the equivalent BTUs of gas sold as residue.

– Frac spreads are negatively correlated with gas prices (gas goes up, fracs go down) and positively correlated with NGL prices (NGLs go up, fracs go up).

– Frac spreads are volatile and usually seasonal – narrowing with higher gas prices during the winter.

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Settlement History




NGL Shrink From Processing:

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NGL Pricing – Introduction

1. NGL Pricing is complex, and not transparent2. NGL prices fall between the price of natural gas (the

price floor) and crude oil (the price ceiling)3. Usually, NGL prices are higher than natural gas prices

to account for processing, and similar to prices of crude oil substitutes (naphtha, heating oil, etc.)

4. The value of each NGL is established within its own end-use market, based on the value of end-use products as well as substitutes

5. Each NGL has unique pricing dynamics driven by North American market forces

6. Pricing signals drive infrastructure investments to increase demand and address bottlenecks

7. NGLs are expensive to handle, store, and transport compared to refined products

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1. North American NGLs are priced in reference to Mt. Belvieu, Texas, which is a major trading hub and pricing center

2. The U.S. Gulf Coast is a strategic location which has:

a. The major refinery capacity in North Americab. Major petrochemical plant infrastructurec. Transportation infrastructured. Access to worldwide markets

3. NGL pricing is largely affected by petrochemical and other end-users demand

4. Other NGL market hubs includea. Conway, Kansas (serves midwest market)b. Marcellus and Utica (eastern market)c. Sarnia, Ontario (serves northeast market)d. Edmonton

NGL Pricing, Infrastructure & Trading Hubs

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1. Mt. Belvieu, Texasa. Largest processing & storageb. US Northeast transportation

infrastructurec. Large petrochemical demandd. Water access (import/export)

2. Conway, Kansasa. Significant processing &

storageb. US Midwest transportation

infrastructurec. Connected to Mt. Belvieu

3. Sarnia & Marcellusa. Serve similar markets as

Belvieu

4. Edmontona. Serve similar markets as

Conway

NGL Pricing - 4 major NGL trading hubs

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NGL Pricing - OverviewTwo very important laws of price forecasting:

1. Price forecasts are almost always WRONG2. Futures prices are NO INDICATION of future prices

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NGL Pricing – Price DynamicsNGLs are mainly supply driven not demand driven

1. Processing plants built to serve gas producers, not end-users

2. NGL surpluses can occur until markets react

3. Market expansion can take time

4. Transportation bottlenecks develop due to long lead times

5. Handling NGL market swings can be very difficult where adequate storage capacity is lacking

6. The development of the energy value chain and its timing can influence NGL supply & demand

Chemicals is the largest U.S. industrial consumer of energy resources

1. Includes coal, natural gas, petroleum, hydrothermal,

Source: EIA data 2014, AEO 2015

98

28% TransportaLon

2014

19% Commercial

100

28%

22%

32% Industrial

22% ResidenL al

31%

19%

2005

97

2010

22%

18%

32%

28%

Total U.S. energy consumption1

Quadrillion BTU

12% Refining

8%

Other

70%

Bulk chemicals ‐‐feedstock

Bulk chemicals ‐‐energy10%

Breakdown of 2014 US industrialenergy consumption %

NGL Pricing: Price Dynamics

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NGLs became the dominant petrochemicalfeedstock…

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

58%55%

53%

49%48%48%

46%47%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

86%

62%

86%

50%

82%

68%

85%

41%

Feedstock quantityMMtons/year

Feedstock quantityMMtons/year

U.S. petrochemicals feedstock North American olefins feedstock

Historical Forecast Historical Forecast86%

41%

Source: Nexant, IHS WPC 2015

Heavy Feed LPG Methane Others Propane/Butane NGL

Naphtha Ethane NGL Naphtha Ethane

… due to its competitive advantageover oil, naphtha

Ethane, US

Natural Gas, US

Oil, Brent

Naphtha, ARA

Butane, US

Propane, US

Price$/MMBTU

Historical

Source: IHS energy price forecasts

Forecast

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NGL Supply & Demand Flowchart

Source: IHS

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NGL Pricing - Dynamics1. Cheap gas and high crude prices were the major drivers

fora. The economics to drill rich shale playsb. Robust increase in crude, gas and NGLsc. The “low cost” position for the U.S. petrochemical industry to expandd. The arbitrage to export hydrocarbon products

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Source: Envantage

NGL Pricing - Dynamics

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NGL Pricing - Dynamics1. 457 mm bbls of NGL salt dome storage on US Gulf Coast

a. Mt. Belvieu salt storage capacity is ~210mm bbls, but there are limitationsb. Louisiana is estimated to have 139mm bbls of NGL salt storage

2. Marginal increases in salt dome capacity based on announcements

a. Increase to 477 mm bbls between now and 2020b. US Gulf Coast salt storage must handle an additional 1.4mm bpd of NGLs

coming to the Gulf Coast needed to fill new fractionation capacity

3. No major storage projects in mid-continent

4. Limited quality salt formations in Marcellus/Utica – cost of logistics is VERY HIGH

5. The implications – more stress to efficiently absorb incremental NGLs

6. Expect Gulf Coast NGL storage rates to increase

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NGL Pricing – Outlook1. With USGC fractionation capacity expanding, how will additional

NGL products be distributed?a. Ethane – Mariner West/East, ATEX and USGC ethane systems

will be distributing ethane to the petrochemical marketb. LPG export terminals – act as a form of distribution for propane

and butanes

2. In the Marcellus/Utica region – product distribution more challenging for C3+ liquids

a. Propane and butane distribution becomes problematic during the summer months since storage is limited

b. Reversal of Cochin line will help C5+ takeaway in region. Utopia Pipeline to connect to Cochin at Chicago thence to Edmonton

3. Eventually, new infrastructure to handle NGLs will be full, but it will take a regional re-distribution of NGLs to fill this infrastructure

4. Mt. Belvieu becomes more prominent as a major market center

5. Lack of adequate storage increase: changes of NGL imbalances and price volatility

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NGL Pricing – Future• Marcellus/Utica faces challenges to handle seasonal

demand swings for propane and butanes – y grade line to Gulf Coast is needed

• Greatest current threats to NGL infrastructure: oversupply, fueling the collapse of crude prices, and stagnant natural gas prices

• Before the shale plays, the Gulf Coast was the largest market center for NGLs, being able to receive or deliver global LPGs when the world became long or short

• After the shale plays, the U.S. position as a major NGL producer is stronger, along with the infrastructure to handle, distribute and export NGLs, aided by the completion of the expanded Panama Canal in 2015

• The U.S. petrochemical industry has huge growth potential based on its stable supply of NGLs

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NGL Pricing – Outlook1. Demand growth from Gulf Coast petrochemicals and

exports; Significant new pipelines to Gulf2. Mt. Belvieu becomes even more dominant trading hub3. Surplus supplies of propane and butane move

offshore; ethane derivatives move offshore4. NGLs fall more under the influence of global LPG and

petrochemical markets5. Northeast NGL markets become a traffic jam; Large

surpluses of all NGL products6. Local Northeast prices fall well below Mt. Belvieu

prices for all NGLs7. Ethane rejection will persist through 2017-19 until new

crackers are completed8. More distant locations from Mt. Belvieu will experience

highest levels of rejection9. Condensate / Natural gasoline market production will

exceed demand from diluent and refinery markets10. Condensate prices will decline relative to crude oil,

making diluent blending economics more attractive

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NGL Pricing – Ethane (C2)

• Extraction economics: NGLs could be left in the gas and sold in the gas stream instead of extracting; base value is the energy content, at relevant gas market price

• Business Model: extraction is like a manufacturing operation:– Raw material = gas– Finished product = NGL component

• Extraction Margin or “Frac Spread” = NGL sales price– Less energy value of NGL components in gas– Less liquids extraction expense– Less liquid product transport and frac cost

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What is purity ethane?

• A product that is 95% or more pure ethane.

• Different than blends, such as ethane/propane (E/P) mix (80% ethane) and Y‐ grade (max 65% ethane)

• Blends are easier to ship in a product pipeline or vessel.

• Ethane's low boiling point (‐128°F) makes shipping it inpure liquid form more complex (and more expensive) inthat it must be done at higher pressures or kept cool

• Meeting these requirements involves infrastructurespecialization, particularly for storage tanks and vessels

NGL Pricing – Ethane C2

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1. Hydrocarbon with 2 carbon atoms and 6 hydrogen atoms

2. Uses of Ethane

– Put in Sales Gas• Called “Ethane Rejection”• Ethane is a gas• Used in residential and

industrial applications

– Sold as an NGL• Called “Ethane Recovery”• Ethane sold as liquid• Used as feedstock to

chemical and synthetic material fabrication


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130% Increase in Ethane Production over Past 30 Years


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Source: RBN Energy

NGL Outlook

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Why Did Ethane Prices Drop Precipitously in 2011?

1. Oversupply of ethane

2. Ethane used as raw material in many plastics & synthetic materials

a. Must first be “cracked” and converted to Ethylene

3. Domestic ethane crackers operating at capacity

4. Domestic crackers mainly located in the Gulf Coast– Difficult transportation logistics from Marcellus and Bakken areas

5. Expect depressed ethane prices until additional cracking capacity comes on-line


Producer Master




130% Increase in Ethane Production over Past 30 Years


Source: RBN Energy

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1. Ethane may be poised to be the dominant feedstock for the petrochemical industry

2. If there is not a market available ethane is ‘rejected’ (not necessarily a bad thing)

3. Ethane rejection–-where ethane is left within the natural gas stream without breaching gas pipeline specification limits

4. The ethane market has two primary release valves: the domestic petrochemical industry and ethane rejection at gas-processing plants

5. Expect ethane prices to remain depressed for the next few years, until the petrochemical industry brings planned expansions and world-scale ethane crackers onstream

6. Fractionation Spread – compares the price of ethane with the price of natural gas

7. The spot price of natural gas sets a floor for ethane prices


Producer Master





1. Pricing is based on crude oil. They are competing products

2. Propane historically has been approximately 50% of WTI at Mt. Belvieu:

a. Propane demand is expected to drop as heating demand declines in response to homes switching to natural gas.

b. Export is needed to balance the market

3. Propylene supply would be adjusted by building additional propane dehydrogenation (PDH) units

NGL Pricing – Propane (C3)

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Propane Exports Essential to a Balanced Market

a. Production from natural gas plants is increasing significantly; refinery production is flat

b. Propane in olefin cracking will be flat, but there will be increases in propane dehydrogenation

c. Propane demand in the heating market is declining

d. The balance of propane supplies – up to 700M b/d will be exported

e. Propane will fall more under the influence of global LPG markets

NGL Pricing – Propane (C3)

Producer Master




1. Pricing is also based on crude oil. Butanes used for gasoline blending

2. Butane historically has been approximately 70-85% of WTI at Mt. Belvieu. However, recently it has declined to 50%:

a. This is due to excess supply, not enough North American demandb. Excess has gone to Gulf Coast, driving price down

3. Production from Gas Plants is increasing significantly, refinery balances are flat

4. Surplus volumes of normal butane will be exported5. Surplus volumes of isobutene will be absorbed by refineries6. Butane will begin to track with global LPG markets

NGL Pricing – Butane (IC3 & NC3)

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1. The demand for isobutane is governed by the motor gasoline market and import/export dynamics.

2. North American could be supply-long on butane as it gets pushed out of the motor gasoline pool due to increased ethanol blending and flat to declining motor gas demand.

3. Ninety-five percent is consumed for alkylation, a process for the manufacture of a high octane motor gasoline component.

4. Normal Butane is isomerized to isobutane when needed to economically alkylate excess refinery olefins and produce a valued gasoline blending component.

NGL Pricing – IsoButane (IC4)

Producer Master





• Historically prices based on crude oil pricing• NGL contracts revised to use WTI as base pricing

– Involves Market premiums or discounts applied to WTI– Differences in quality addressed through equalization (specific

condensate price based on density, butane and sulfur content)– Sum of all adjustments is “differential factor”– If one condensate stream is comingled with another, differential

factors are averaged to create a “weighted average differential factor” (WADF) for the comingled product

– WADF has come to mean any adjustment to reference quality

• Natural gasoline demand growth due to oil sand sector’s need for diluent

• Used in gasoline blending, ethylene production, solvent production

NGL Pricing – Condensate (C5+)

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Producer Master





1. NGL value improves gas exploration economics – capital is prioritized to rich vs. lean gas

2. Massive shale gas revolution in the U.S. portends risk of a low gas price for an extended period (years?)

3. 5 - 6 new world scale steam crackers will start up between 2017 and 2019 to help absorb some of the surplus ethane and support prices

4. Exports relieving imbalances for propane and natural gasoline markets and supporting prices

5. Exports will ultimately relieve imbalances in butane market

NGL PricingWhy NGLs are Important

Information Solutions, LLCeXigent Marketing

• NGL marketers match sellers (E&P and Midstream companies) with buyers (petrochemical plants, industrial use, farmers, propane companies, etc.)

• Services include NGL transportation, storage and risk management services.

• NGL marketing is primarily a physical business.

Refinery

Storage

Fractionator Chemical Plant

Industrial & Other End-Users

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Marketing Life CycleMarketing Operations

(real-time & short-term in duration)

Processing/ Treating

GATHERING TRANSPORTATION

GAS CONTROL

• 24/7 Control• Production Optimization• Constant Communication

MARKETING

•Daily Sales•Contract Negotiation• Monthly/Seasonal Planning

GAS SCHEDULING

• Coordinate sales w/ buyers• Manage buyer relationships• Manage & Optimize . Imbalances

ACCT. & RISK CTRL• Ensure accurate & timely . payment for all products• Monitor Corporate Policies & Procedures

Producer Master





Summary 1. North America has a dramatic increase in production

from previously uneconomic shale formations2. This has been enabled by technology advances in

Horizontal Drilling & Hydraulic Fracturing3. These shale plays have made the US the world’s

dominant NGL producer 4. This has created a global liquids (oil and NGLs)

oversupply and caused a massive drop in prices5. NGLs are used in our everyday products, and the US

has the best infrastructure to process & export NGLs6. Frac spread (the NGLs value less the cost of gas and

processing) is the margin for midstream companies7. Each NGL has unique pricing dynamics driven by

North American market forces8. The US petrochemical industry will experience

significant growth based on its stable supply of NGLs9. The US will become the dominant exporter of NGLs

throughout the world

5/17/2016

38

Producer Master




Exigent Information SolutionsA. For over 20 years, developer and implementer of oil &

gas gathering and processing software, which manages all aspects of tracking, valuating, and settling oil & gas revenue from the wellhead through sales.

B. Provides consulting services to the oil and gas industry in industry best practices for managing all aspects of the oil and gas measurement and revenue value chain.

C. This includes field data capture, gas gathering and processing, oil gathering, gas contracts, gas balancing, revenue management and gas marketing.

Jim Tallant

Exigent Information Solutions

8310 S Valley Highway, Suite 300

Englewood, CO 80112

Email [email protected]

720-506-5505

Documents

NGL Market: Economics & Process - Amazon S3 · NGL Market: Economics & Process ... Outlook for the Oil & Gas Industry Shale Changes Everything ... • propane • butane • pentane