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Assessing the Value of NGLs in Natural Gas

IP.com Disclosure Number: IPCOM000217178D
Publication Date: 2012-May-04
Document File: 32 page(s) / 2M

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Page 01 of 32

ASSESSING THE VALUE OF NGLs IN NATURAL GAS

CARTER TANNEHILL LINDA ECHTERHOFF

The M. W. Kellogg Company Houston, Tex8s

ABS TRACT

Purvin & Gertz, Inc., unaer a contract with The M. W. Kellogg Company sponsored by Gas Research Institute, evaluated tne ecoliomic effect of by-products extracted during natural gas processing operations. The by-products evaluated included natural gas liquids (NGLs), helium, sulfur, carbon dioxide and nitrogen. The sources of supply and final consumption, pricing histories, impact of logistical considerations, and a general assessment of the economics were completed for each by-product. NGLs are by far the most significant of these by-products, representing a value of about $9 billion, compared to helium at $160 million and sulfur at $154 million in 1991.

This paper investigates the production and consumption of the most significant by-product NGLs from 1987 through 1992. Demand for NGLs is categorized for the same period for:

Residential and Commercial IndustriaI
Engine Fuel
Chemicals
Utility Gas
Refinery
Farm
Other

Logistics are evaluated with a summary of the pipelines, underground storage and fractionators presented. Pricing is discussed with the two major market centers of Mont Belvieu, Texas and Conway, Kansas, detailed.

Processing economics are discussed, and forecasts through the year 2000 are made for the major processing regions.

INTRODUCTI0N

Approximately 65% of all U.S. natural gas production is processed beyond simple dehydration prior to consumption in end-use markets. Natural gas is processed to remove natural gas liquids (NGLs) and nonhydrocarbon impurities such as C02,sulfur containing compounds and nitrogen.

KAREN TRIMBLE

Gas Rese8rch Institute

Purwn 8 Gertz, Inc.

Dallas, Tex8s

ChlC8gO. Illinois


Page 02 of 32

The degree or intensity of processing required depends upon the composition of the natural gas and the specifications set by gas pipelines and end-users. This required level of processing can be thought of as a production cost for the primary product -

                                        natural gas. Inthis context, the value of the NGL and nonhydrocarbon compounds extracted from the natural gas stream can be viewed as by-product credits against the cost of processing. NGLs are far and away the most significant product extracted from natural gas, having a value estimated at over $9 billion in 1991.

In many cases, gas ISprocessed more intensively than would be required to meet transportation and end-use specifications. Also, many gas streams suitable for marketing "as produced" are processed to remove NGLs. These "elective" forms of gas processing occur when the value of the NGL extracted from the gas stream is greater than the cost of extraction. Inelective processing applications, the extracted NGLs are considered the primary product of gas processing.

Whether considered primary products or by-products, the NGLs extracted from natural gas contribute significantly to the economics of bringing natural gas to market. This p...