ICF: US needs ethane export capacity to sustain shale gas boom
From an Article by Rachael Seeley, Oil & Gas Journal, June 25, 2014
Houston, TX — Greater investment in infrastructure is needed to ensure that rising NGL production in the US can reach international markets. Without it, a glut will form, placing downward pressure on prices and eroding the economics of shale gas drilling.
This was the message conveyed at a breakfast presentation hosted by ICF International Inc. on June 25 in Houston.
The NGL industry in the US is very robust and is expected to stay that way for years to come with a caveat of risk, said Greg Hopper, vice-president, ICF International.
An unprecedented spread between oil and natural gas prices in the US has made NGL more valuable than dry gas, Hopper said. As a result, shale gas drilling in the US and Canada is predominantly focused on liquids-rich areas—notably the Marcellus and Utica shales.
Data from Baker Hughes Inc. show that drilling in dry gas shale plays, like the Barnett and Haynesville, has dropped off sharply in recent years due to weak US gas prices.
Hopper said NGL production is propping up the economics of shale gas production. However, there is uncertainty surrounding how the county’s growing supply of NGL will connect to markets. “The good news is we have lots of supply,” the bad news is right now we need more infrastructure, Hopper said.
The two biggest components of NGL are propane and ethane, Hopper said. An export market is already in place for US propane. US Energy Information Administration data show propane exports doubled in the last 2 years, rising from 151,000 b/d in March 2012 to 333,000 b/d in March 2014.
Conversely, the US lacks the infrastructure to export ethane, and the supply of ethane is increasing faster than US demand.
Peter Fasullo, Envantage Inc., estimates that US ethane extraction capacity increased 69% since 2006 to 1.23 million b/d, and he projects it will reach 2.2 million b/d by 2020. However, in Appalachia, home to the Marcellus shale, 87% of the ethane capable of being recovered was being rejected as of January due to transportation constraints (OGJ, June 2, 2014, p. 82).
Rejected volumes are forced to remain in the pipeline. But, Hopper said, the volume of rejected ethane is approaching the limit that the pipeline system can accept. “The question is what to do with the ethane,” he said.
Export capacity is needed to connect ethane to international markets. Otherwise, Hopper said, supplies will back up into the US market and cause prices to fall, eroding the profitability of shale gas projects. In that event, higher dry gas prices would be needed to sustain high levels of wet gas production.
Clearing liquids out of the US market “will be critical,” he said.
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I remember not so long ago shale plays were all about Americas energy independence. All the signs and commercials showing a drilling rig with a big American flag claiming energy independence and shale drilling patriotism.
Now that there is so much gas, the price is down, these same corporations want to sale this energy to other countries and forget about energy independence for America. The profits is all that matters.
We are loosing more and more farms by the day and our ability to be truly independent along with self sustaining by working with the land, air, and water that we as Americans are blessed with. We need to have vision for future generations instead of making impulsive economic choices in the reckless pursuit of hydrocarbons and profits.