10
The Ins and Outs of
NGLs
Kristen Holmquist
Director NGL Analytics
303-309-4097
What Are NGLs?
• Natural Gas Liquids or NGLs are paraffinic hydrocarbons
produced as a by-product of natural gas and oil
production.
Ethane (Plastics)
Propane (Heating)
Normal Butane (Gasoline Blending)
Isobutane (Gasoline Blending)
Pentanes (Gasoline Blending)
Image Source: Wikipedia
How Are NGLs Produced?
Oil
Wet Natural Gas
Gas Processing Raw Mix NGLs
Fractionation
Natural Gas
Purity Products
Refinery Exports
Heating Petrochemicals
Petrochemicals Are Components Of
Many Common Consumer Goods
C C
H H
H H Ethylene
Ethylene or ethylene by-products are major
components of these products
Ethylene
Naptha from Crude
Heavy oil from refineries
Natural Gasoline from N. Gas
Ethane from Natural Gas
Ethylene can be produced from many sources
U.S. Olefins Are Resurgent As U.S. Ethane
Falls Relative To Alternatives
0
100
200
300
400
500
600
700
800
900
1000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$/to
n
Ethane Prices versus the Alternatives’ Prices
Mid East Ethane
U.S. Ethane
U.S Natural Gasoline
Japan Naptha
NW Europe Naptha
$600 /ton Differential
Oil Derived
Source: Ponderosa Advisors/Platts
Drilling Today is Focused on Oil Rich Shale Plays
Permian 442 Rigs (22%)
Eagle Ford 249 Rigs (13%)
Anadarko 230 Rigs (12%)
Williston (Bakken) 198 Rigs (10%)
Marcellus/Utica 132 Rigs (7%)
Dry Gas Declines Are Offset By Associated
Gas Production
0
10
20
30
40
50
60
70
80
90
100
20
25
30
35
40
45
Assoc Gas Dry Gas Total Prod
Total Prod (Bcfd) Gas Prod By Type (Bcfd)
Dry Gas Definition: Production Areas With GPM<1.15
Source: Ponderosa Advisors, HPDI, FERC
When Comparing the Value of the Markets;
Natural Gas Liquids Are Still Small
$38 Billion
Natural Gas Liquids Production Volume = 2.4 MMb/d
$223 Billion
Crude Oil
Production Volume = 6.5 MMb/d
$75 Billion
Natural Gas
Production Volume = 12.2 MM BOE/d
Source: EIA, OPIS
2012 Average
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Cru
de
Oil,
MM
b/d
Crude Oil Production Forecast
Crude Oil Production
10
11
12
13
14
15
16
Na
tura
l Gas
Pro
du
ctio
n, M
M B
OE/
d
Natural Gas Production Forecast
Natural Gas Production
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
NG
L P
rod
uct
ion
, MM
b/d
NGL Production Forecast
U.S. NGL Production
NGL Production Will Continue to Increase with
Higher Crude and Gas Production
Conclusions
• NGLs are a by-product of both crude oil and natural gas
production
• The market for NGLs is small compared to the oil and
gas market, but it has huge implications for the
competitiveness of U.S. manufacturing
• NGL production is expected to grow by more than 60%
between 2013 and 2020 driven by crude oil production
increases
• The major risk factor to this outlook is a slow down in the
development of U.S. crude and natural gas production.
