Strong natural gas production, as well as rapidly-rising demand, resulted in record-high production of natural gas plant liquids (NGPL), which reached 4.7 million barrels per day (b/d) in February 2019. Growth in NGPL production, a subset of hydrocarbon gas liquids (HGL), was led by ethane, which also set a new record, which was nearly 130,000 barrels per day (b/d) higher than in the previous month.
Because raw natural gas is processed before it is introduced into the interstate pipeline system, NGPL are recovered at natural gas processing plants and marketed as petroleum liquids, separate from dry natural gas. Although other NGPL are recovered fully from raw natural gas to meet pipeline specifications, ethane may, to some degree, remain in processed natural gas. Propane, normal butane, isobutane, and natural gasoline production is closely tied to volumes of raw natural gas processed at gas processing plants; however, ethane recovery from natural gas is influenced by both the volume and quality of natural gas processed and ethane supply/demand fundamentals.
Between 2010 and mid-2015, industrial capacity to consume ethane as a feedstock remained fairly static. As a result, even as natural gas production and recovery of propane and butanes at natural gas processing plants grew, ethane recovery remained relatively flat. During this period, the ethane share of the NGPL barrel decreased from more than 40% to 33%. Recent growth in the petrochemical industry’s ability to consume more ethane as a feedstock has caused the domestic ethane market to expand, and ethane exports have supported further demand growth. Consequently, ethane production and ethane’s share of the NGPL barrel have increased to meet this rising demand.
EIA estimates domestic demand for ethane expanded by 360,000 b/d in the past two years as a result of new ethylene crackers and expansions of existing facilities. Since the Occidental Chemicals/Mexichem ethylene cracker at Ingleside, Texas, was commissioned in 2017, four new ethylene plants have entered service. Four new crackers and one major expansion are expected to come online in 2019, representing another 260,000 b/d of ethane demand. In addition, ethane exports are expected to increase.
In the Annual Energy Outlook (AEO 2019), EIA projects this growth in NGPL production to continue as a result of increasing U.S. natural gas production and rising NGPL demand. The AEO 2019 projects NGPL production to exceed 6 million b/d in 2030 in the Reference Case—40% higher than the 2018 level—before gradually dropping to 5.75 million b/d at the end of the projection period. As a result of further growth in the petrochemical industry, EIA expects ethane to contribute the most to future NGPL production growth, increasing its share of total NGPL production from 40% in 2018 to 43% of all NGPL produced in 2050. The East region, encompassing the Appalachian Basin, is projected to account for the largest share of U.S. NGPL output―30% of the national total―and for 35% of all ethane produced in the United States in 2050.
