Eagle Ford Shale NGLs, along with other liquids producing plays, are helping make the U.S. competitive in the worldwide petrochemical market. “That’s a drastic change from just 10 years ago when companies thought there would never be another petrochemical facility built in America”, says Wood Mackenzie’s Senior NGL Analyst Larry Schwartz.
Eagle Ford NGL Production Growing to 300,000+ b/d
We recently sat down with Schwartz to get additional insight into the growing natural gas liquids (NGL) market in South Texas. In short, he expects the Eagle Ford will go from producing ZERO barrels of NGLs a few years ago to more than 300,000 barrels per day (b/d) by 2020. For reference, the EIA tracks processed volumes of NGL production (at the plant level) and as of the 4th quarter of 2011 the entire market is a little more than 2.2 million b/d. If total production held flat, the Eagle Ford would easily account for more than 10% of the total U.S. NGL market in 2020.
New Petrochemical Plants on the Horizon
Over the past decade, modern technology has kept the industry attractive, but the major companies in the chemical industry have been moving closer to supply in the Middle East. That’s all set to change now. Combine the most developed infrastructure in the world with Eagle Ford sized supply and it’s easy to see why the U.S. is again the talk of the NGL world.
Add volumes of NGLs from oil plays in West Texas and North Dakota to the developing wet-gas plays like the Marcellus Shale and you see why chemical companies are moving to expand and plan the once never thought of “New Build” plants. It’s not speculators stepping in to take advantage of this opportunity either. It’s energy stalwarts Dow Chemical, ChevronPhillips (a petrochemical JV between Chevron and Conoco), and Formosa (FTC). The companies are exploring potential plants in the Gulf Coast area and Schwartz attributed the main reason for excitement to “the U.S. has more storage, more pipelines, and more integration between facilities than anywhere else in the world.”
ChevronPhillips is farthest along in breaking ground on its Gulf Coast Petrochemicals Project. The proposed plant is being designed as a 1.5 million metric tons/year (3.3 billion pounds/year) ethane cracker. That’s large enough to consume up to 95,000 b/d of ethane.
U.S. Joining Ranks of the Largest NGL Exporters in the World
Not only will the U.S. benefit from new petrochemical facilities, but we actually have a hydrocarbon supply that is in great demand in the rest of the world. I didn’t know this little fact before, but we’re already exporting to areas with fewer resources. While there is only capacity to export 180,000 b/d currently, that number could easily grow to over 350,000 b/d if Targa and Enterprise complete expansions at their Gulf Coast export facilities. Much of the current exports end up in Latin American where there is less infrastructure and NW Europe where LPGs can be substituted for Naptha in the summer months.
While the Eagle Ford is important, it is only one piece of the export puzzle. The potential for exports will go up considerably if Enterprise Product Partners completes a proposed 1,200+ mile ethane pipeline from the Marcellus and Utica Shale region of the northeast down to Mont Belvieu. Add the Marcellus volumes to those from oil producing regions and we should see NGL supply growth for several years to come.
With gas prices in the sub-$3/mcf range as of early 2012, NGLs are a welcomed commodity. As long as the value of the product is linked to high value oil, operators will continue to exploit opportunities in the natural gas liquids market
Thank you again to Larry Schwartz, Senior NGL Analyst at Wood Mackenzie, who helped me put Eagle Ford NGLs in perspective. Wood Mackenzie recently released a more involved supply study on the Eagle Ford and I’m sure you can find more information at their website WoodMacResearch.com