The US Energy Information Administration is forecasting that NGPL production could grow by 32 per cent between 2018 and 2050, reaching 5.8 million b/d.  Williams.com photo.

NGPL production increases in Appalachian Basin, Southwest and Permian Basin

By Dana Van Wagener, Warren Wilczewski

This article was published by the US Energy Information Administration on Jan. 31, 2019.

In EIA’s Annual Energy Outlook 2019 (AEO2019) Reference case, natural gas plant liquids (NGPL) production grows by 32 per cent between 2018 and 2050 to 5.8 million barrels per day (b/d).

Most of the increase in production is in the East, specifically the Appalachian Basin, and the Southwest, specifically the Permian Basin. Given projected crude oil and natural gas prices, producers are expected to focus on liquids-rich plays, and NGPL-to-gas ratios are highest in these areas.

In addition, increased petrochemical feedstock demand spurs higher ethane recovery.

U.S. NGPL production in AEO2019 reference case

Source: U.S. Energy Information Administration, Annual Energy Outlook 2019 Note: Regions are natural gas supply regions from the National Energy Modeling System.

NGPLs are light hydrocarbons produced in conjunction with natural gas and recovered at natural gas processing plants. These hydrocarbons include ethane, propane, normal butane, isobutane, and natural gasoline.

Crude oil refining also yields these hydrocarbons, but in 2017, U.S. refining accounted for slightly more than 8 per cent of net production, with nearly 92 per cent produced at natural gas processing plants.

NGPLs are primarily used as feedstocks in the bulk chemical industry. Ethane is used almost exclusively for producing petrochemicals. Approximately 40 per cent of propane is used for petrochemicals and the remainder is used for heating, grain drying, and transportation.

Approximately 67 per cent of butanes and natural gasoline are used for blending with motor gasoline and fuel ethanol, and the remainder is used for petrochemicals and solvents.

U.S. NGPL production and east region NGPL production

Source: U.S. Energy Information Administration, Annual Energy Outlook 2019

 

The shares of NGPL components at the national level in the Reference case are relatively stable during the entire projection period (2018 to 2050), with ethane and propane contributing about 42 per cent and 30 per cent, respectively, to the total volume.

However, these regions have some differences. In the East region, ethane production accounts for about 50 per cent of the total NGPL production by 2050, compared with less than 40 per cent in 2018.

NGPL production is sensitive to changes in market conditions and resource and technology assumptions. AEO2019 includes cases that reflect alternative oil prices and higher or lower resource and technology assumptions.

U.S. NGPL production

Source: U.S. Energy Information Administration, Annual Energy Outlook 2019

In the High Oil Price case, the price of Brent crude oil, in 2018 dollars, is assumed to reach $212 per barrel by 2050, compared with $108 per barrel in the Reference case, and $50 per barrel in the Low Oil Price case.

By 2050, NGPL production reaches 6.3 million b/d in the High Oil Price case, compared with 5.8 million b/d in the Reference case. NGPL production in the Low Oil Price case remains relatively flat, averaging less than 5.1 million b/d from 2019 through 2050.

The Resource and Technology cases produce the widest range of NGPL production and are principally defined by assumptions about the estimated ultimate recovery for shale gas, tight gas, and tight oil wells in the Lower 48 states; undiscovered resources in Alaska; and the offshore Lower 48 states.

In the High and Low Oil and Gas Resource and Technology cases, these recovery rates are 50 per cent higher or 50 per cent lower, respectively, than in the Reference case. Rates of technological improvement that reduce costs and increase productivity in the United States are also 50 per cent higher or 50 per cent lower than in the Reference case.

The higher case also includes additional unidentified tight oil and shale gas resources to reflect the possibility that additional layers or new areas of low-permeability zones will be identified and developed.

In the High Oil and Gas Resource and Technology case, NGPL production reaches a peak of more than 7.7 million b/d by 2045 compared with nearly 4.4 million b/d in 2018. In contrast, in the Low Oil and Gas Resource and Technology, NGPL production declines by 10 per cent between 2018 and 2050, dropping to about 3.9 million b/d by 2050.