A Natural Gas Liquids Briefing

Posted: April 7, 2013

The Brookings Institution Energy Security Initiative issued a concise overview of what natural gas liquids are, their importance, and future considerations.

Natural gas liquids (NGLs) production has increased in the US as the unconventional oil and gas revolution has occurred in the past decade.  These hydrocarbons will play a major role in the country’s ambitions for energy ‘self-sufficiency’.

NGL production in October 2012 reached 2.5 million barrels per day (mmbd), accounting for about 20% of the global market.   The NGLs are those gases other than methane found in natural gas.  They are separated out from the methane ‘dry gas’ at processing facilities, and then sent to fractionation plants to separate the mix into separate NGLs (ethane, butane, propane, iso-butane, and natural  gasoline).  The NGLs are used by different industry consumers.   Over half is used in the petrochemical sector, which manufacture plastics and other products.  Almost 20% of the NGL consumption is used in space heating/fuel uses and motor gasoline/blend stocks each.  Approximately 1% and 6% are used in ethanol denaturing and fuel exports respectively.  With the increase in NGL s, the petrochemical producers are enjoying the benefits of cheaper available feedstock , a significant competitive advantage to other foreign producers which use more expensive oil-based products as feedstock. 

NGL production will have a major role in the competitive edge of US manufacturers and petrochemical producers.  While these NGL sectors are very responsive to market signals, infrastructure bottlenecks and permitting have made it hard to keep up with the increased NGL supply.  It is estimated that the NGL pipeline capacity will nearly double from 2012 to 2018.  Right-of-way issues and landowner rights can potentially slow down pipeline construction.  Permitting can take years due to varying regulations of townships and counties.  Net exporting of NGLs is occurring due to the excess domestic supply  while waiting for the growth of the petrochemical sector and infrastructure.  While exports have increased, there is also a constraint due to suitably equipped terminals.

The full report “Natural Gas Liquids” by Charles Ebinger and Govinda Avasarala of the Brookings Institution can be viewed here.