Natural Gas Liquids
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Published: August 2010
Worldwide production of natural gas liquids (NGLs) remained essentially flat from 2008 to 2009. Production of NGLs in the United States and Canada will continue to slow (and possibly decline), whereas production in other parts of the world such as Africa, Asia, Russia and the Middle East will grow consistently.
Natural gas liquids are defined as ethane, liquefied petroleum gas (LPG) and pentanes. Ethane is any contained ethylene (usually associated with liquefied refinery gas). LPG is defined as propane, n-butane and isobutane, including butane mixtures and propane-butane mixtures. In some area markets a small amount of unsaturated product may be included. NGLs are usually those liquids collected from the natural gas stream at ambient temperature and pressure, as well as any hydrocarbons, except methane, that are collected from natural gas fields. LPGs are isolated from natural gas processing plants and petroleum refineries.
The following pie chart shows apparent world consumption of NGLs:
The largest consuming regions for NGLs are North America and Asia, accounting for close to 60% of total world consumption in 2009. On a worldwide level, the three major uses for natural gas liquids are in residential and commercial heating and cooking, raw materials for chemicals/petrochemicals, and motor gasoline.
Total world production of natural gas liquids increased by 22% between 2000 and 2009. Most of this growth was attributed to increased production of NGLs from gas processing operations in the Middle East and the North Sea region, as well as increased production of refinery LPGs in the United States. North America and the Middle East continue as the largest producers of NGLs by a considerable margin, although North America's actual contribution to global production has fallen from 72% in 1970 to 31% in 2009.
In 2009, processing of natural gas accounted for almost 70% of natural gas liquids production in the world; the remaining 30% was produced in petroleum refinery operations. However, the various individual regions have different ratios of production by source.
The spot price, reflecting the value for NGLs, is heavily influenced by petrochemical feedstock economics and refining economics, both of which depend on crude oil pricing and natural gas pricing. If crude oil prices increase, the value of NGLs as petrochemical feedstocks in competition with increasing naphtha prices should increase.
World production of NGLs by gas processors increased at an average annual rate of 0.7% during 2004–2009. North America continues to be the primary gas processing region. In 2009, North America was responsible for 51% of the world's gas processing capacity and 36% of the world's NGL production from gas processing.
The Middle East is the second-largest regional producer of NGLs from gas processing operations, accounting for 30% globally in 2009. Saudi Arabia accounts for approximately 60% of the region's production and NGL output. Saudi Arabia's high production rate in late 1990 and 1991 was a direct result of its increased crude oil production to compensate for Kuwaiti production lost during the Gulf War. Since that time, the country has maintained the higher crude production rate, near quota level, which has significantly increased NGL output from associated gas.
In Asia, China and India have continued to expand LPG refinery supply to meet growing domestic demand. Both countries are the largest producers of LPGs within this region, producing 47% and 17%, respectively, of total LPG production in Asia. Asia is also the largest LPG-consuming region in the world, with LPG demand increasing at an estimated average annual growth rate of 6–8%.
The Middle East continues to be the dominant regional exporter in international LPG trade, with Saudi Arabia in the No. 1 position. Gas processing capacity in this region is expected to increase through 2014 as a result of new LPG projects and increased domestic demand. Major regional contributing countries in future LPG growth will be Saudi Arabia, the United Arab Emirates, Kuwait and Iran. The main increase in LPG production will come from the gas processing industry. In 2009, roughly 80% of the supply of Middle Eastern LPGs was derived from the processing of associated gas, with the remainder derived from refinery production. If crude oil production is stable in the region, LPG production increases will result from nonassociated gas and refineries.
NGL/LPG market issues such as decreased exports from the Middle East, rising Asian demand, and shifting world oil, LPG and NGL prices are some of the major factors leading to tightness in some regional markets. The NGL/LPG industries will continue to combat these challenges by expanding production at new and existing facilities, deregulating markets, and making NGL/LPG more attractive to use (for example, through cheaper prices).
Globally, about half of the LPG consumed in 2009 was for residential and commercial heating and cooking purposes, while a little over 25% was for the chemical/petrochemical sector. In the next five years (2009–2014), global LPG demand will increase at an average annual rate of 2.5%. More than ever there will be a continued need for LPG in the domestic sector for heating and cooking—globally the largest end use for LPG.
The forecast average growth rate for world NGL demand is 3% per year to 2014. In regions such as Western Europe, the United States and Japan, NGL demand will grow much slower than in developing regions of the world. Asia (largely China), India and the Middle East have the highest demand growth for NGLs, ranging between 4% and 6% annually to 2014. Factors for this growth include LPG demand for commercial and residential fuels in Asia, while demand increases in the Middle East will lie in the petrochemical sector.