The Role of Natural Gas Liquids (NGLs) in the American Petrochemical Boom

Tyler Gilligan, Kinder Morgan

U.S. domestic natural gas production experienced an unprecedented increase over the past decade. This was largely due to continual advancements in drilling and producing technologies, such as hydraulic fracturing and horizontal drilling, coupled with access to prolific shale plays. In just 10 years, natural gas production in the U.S. increased from 18.5 trillion cubic feet in 2006, to over 26.4 trillion cubic feet in 2016—an increase of approximately 42 percent.

In recent years, many Americans have experienced the benefits that increased domestic oil and gas production provides, such as lower costs for home heating and automobile gasoline, lower electricity costs, decreased electricity-sector emissions and reduced reliance on foreign countries for energy imports. What we talk about less is the fact that this shale revolution in America has also resulted in an “NGL revolution.”

In addition to methane, natural gas contains hydrocarbons known as natural gas liquids (NGLs), like ethane, propane, butane, isobutane and pentane. Natural gas processing plants and refineries remove (or condense)
NGLs as a liquid from the vaporous natural gas stream.

Figure 1- Natural gas, oil and NGL Production

Given the substantial growth in natural gas production, it’s no surprise that NGL production in the U.S. has boomed—increasing 100 percent in just 10 years from approximately 634 million barrels in 2006 to approximately 1.28 billion barrels in 2016. The increased availability of domestic NGLs is a major boon to the U.S. petrochemical and manufacturing industries, as well as a benefit to U.S. consumers. See Figure 1 for a comparison of the increases in U.S. domestic natural gas, crude oil and NGL production over the past 10 years.

NGLs play an underappreciated and essential role in our lives as feedstocks for thousands of consumer goods. For example, a pair of athletic or running shoes likely contains at least three different NGL-derived petrochemicals. The outsole and midsole of the shoe is probably made from durable polyurethane foam: a derivative of the petrochemical propylene.

The insole cushion that your foot rests on is made of ethylene vinyl acetate (EVA): a derivative of the petrochemical ethylene. The exterior top and sides of the shoe is often nylon: a derivative of the petrochemical benzene. That’s at least three different NGL-derived petrochemicals in just a pair of shoes. NGLs aren’t limited to plastics and clothing though, they are the key ingredient in almost everything in our lives including building

materials, bicycles, plastic bottles, shopping bags, car parts, heating fuels, carpeting, synthetic fabrics, medications, skis, snowboards, hiking boots, backpacks and even baby diapers. So what are NGLs and where do they come from?

What are NGLs?

Natural gas is a mixture of hydrocarbon gases and the ratio of these different components (gases) varies. The vast majority of natural gas, 70-90 percent, is methane. The remaining 10-30 percent is various NGLs, including ethane, propane, butane and pentane. While NGLs are gaseous at underground pressure, the molecules condense at atmospheric pressure and turn into liquids. The composition of natural gas can vary by geographic region, the geological age of the deposit, the depth of the gas and many other factors. Natural gas that contains a lot of NGLs and condensates is referred to as wet gas, while gas that is primarily methane, with little to no liquids in it when extracted, is referred to as dry gas.

When natural gas is extracted during production, it must be processed to separate the pure natural gas (methane) from the various other hydrocarbons and fluids to produce what is known as pipeline-quality dry natural gas.

Once natural gas comes out of the wellhead, any oil and water present in the gas is removed either at the wellhead or at a nearby processing facility. Once the gas is transported to a nearby natural gas processing facility, other non-NGL liquids, such as sulfur, helium and carbon dioxide, are removed and then the NGLs are removed. The process of separating the NGLs from the natural gas stream is a complicated process involving multiple steps. Once NGLs are separated from the natural gas stream, they must then themselves be separated.

Figure 2- Natural gas processing steps

The process of separating various NGLs is called fractionation. Since each molecule (ethane, propane, etc.) has a different boiling point, the hydrocarbon stream goes through multiple fractionators, each with a different temperature. This removes a different NGL at each step, starting with the lightest hydrocarbons and working up to the heaviest. Typically ethane is removed first, followed by propane, butane and isobutane. After these NGLs are removed and the natural gas meets the pipeline quality standards for the pipeline it will be transported on, it is sent to natural gas utilities, power generators and industrial customers. See Figure 2  for a flowchart of the process.

What are NGLS Used For?

Of the approximately 1.28 million barrels of U.S. NGLs produced in 2016, 34 percent was propane, 36 percent ethane and 12 percent pentanes, plus 9 percent normal butane and 9 percent isobutane.

Figure 4- NGLs and primary uses

NGLs are used for a variety of purposes in almost all sectors of the U.S. economy. Ethane is used almost exclusively in the production of ethylene, which is then turned into plastics. Propane is mostly used for heating and as a petrochemical feedstock. Butane and isobutane are typically blended into petroleum products to create various fuels. See Figure 4 for the various types of NGLs and how they are most commonly utilized by sector.

The largest customer for NGLs, particularly ethane, is the chemical industry. Ethane is valuable because the industry uses it to create ethylene, which is the raw ingredient in most types of plastics.

The complex process of converting ethane into ethylene is called cracking. Ethane cracker facilities heat the gas to approximately 1,500 degrees Fahrenheit to change the chemical composition of the ethane molecules resulting predominantly in ethylene. The ethylene is then cooled rapidly so it can be transported via pipelines in its liquid state.” Other chemicals can then be added to create entirely new compounds that are made into many of the consumer products we use every day.

In addition to ethylene, other chemicals derived from NGLs include propylene, benzene, methanol and butadiene. Although we may not recognize their names immediately, these products are building blocks in consumer items and applications most of us use daily.

Propylene and its derivatives are often found in the form polypropylene which is used for injection-molded plastics for everything from bottle caps to automotive plastics, toys and electronics parts. Polypropylene is also used for disposable plastic shopping bags, carpeting, luggage and backpacks. Propylene is a component in polyurethane foam, fiberglass composites and disposable diapers.

Benzene and its derivatives are combined with ethylene to make styrene and polystyrene plastics, and are also used to create phenol. Phenol is used in pharmaceuticals such as aspirin, detergents and pesticides. Benzene is also used to produce cyclohexane, which is a precursor to nylon, one of the most common synthetic fabrics used for textiles, parachutes, nylon stockings, toothbrush bristles, carpeting, rugs and umbrellas.

Methanol and its derivatives, also known as wood alcohol, are used to make gasoline additives, formaldehyde and urea for plywood, insulation and particle board, as well as to make acetic acid for latex paints, adhesives and acrylic signs.

Butadiene and its derivatives are used to make artificial rubbers for tires, hoses, conveyor belts and shoes.

NGLs and LPG Exports

Some NGLs, namely butane and propane, have even more applications because they can be liquefied into what is referred to as “liquefied petroleum gas” (LPG) and stored in a tank for transportation. LPGs are considered a subset of NGLs. While LPG is mostly used in the U.S. for outdoor grilling and for home heating in areas without access to piped natural gas, it is heavily used in many other countries to power vehicles and as a home cooking fuel.

The U.S. has increasingly become an exporter of LPG—exporting over 367 million barrels of LPGs in 2016, a drastic increase from the 54 million barrels of LPGs exported five years earlier in 2011. Currently, China is the largest LPG importer followed by India and Japan. The U.S. exported LPG to over 60 different countries in 2016 alone.

Additionally, many developing countries are developing their LPG infrastructure so their citizens can switch to the more efficient LPGs from dirtier biomass (firewood, animal dung, etc.) that is widely used. The World Health Organization (WHO) estimates 3 billion people globally cook and heat their homes using biomass and over 4 million people globally die annually from premature deaths caused by indoor pollution resulting from biomass. This presents a major opportunity for American LPGs to provide a safer alternative for home heating and cooking around the world.

How NGLs Grow the Economy

U.S. petrochemical manufacturers are now benefiting from an increased supply of low-cost NGLs. This gives these producers a large competitive advantage versus manufacturers in other countries that do not have an abundant supply of NGLs. The American Fuel & Petrochemical Manufacturers association estimates that feedstocks account for 60 to 70 percent of the total cost to manufacture petrochemicals. Even a small drop in the cost of these feedstocks is a major benefit to U.S. manufacturers. Since natural gas prices in the U.S. fell by 75 percent between 2005 and 2013, while remaining flat or rising in most of the rest of the world, U.S. chemical manufacturers that use natural gas as a feedstock or energy source have seen a major competitive advantage compared to other parts of the world.

The increased availability of low-cost energy and NGLs has encouraged U.S. petrochemical manufacturers to expand their businesses. The American Chemistry Council reported that capital spending on new facilities and upgrades to existing facilities in the chemical industry increased 12 percent in 2014 and 18 percent in 2015. It also reports that as of March 2017, 294 chemical manufacturing projects cumulatively valued at $179 billion in capital investment had been proposed, were under construction, or were recently completed in the U.S. as a result of the shale gas boom.

Furthermore, foreign companies that are attracted to America’s large supply of NGLs are building 60 percent of those projects. These companies, both foreign and domestic, are helping to create more manufacturing and refining jobs in the U.S.

An Upside of Surplus

Since the U.S. is unable to consume all the NGLs it produces, more are available for export which helps reduce our trade deficit. Industry first started shipping NGLs by pipeline to Canada and recently developed facilities to ship NGLs by tanker overseas and now U.S. exports of propane and butane have risen rapidly. Since the U.S. is not able to crack and process all the ethane it produces domestically, we also have begun shipping ethane abroad in recent years. Ethane exports from the U.S. increased from zero in 2013 to approximately 34.7 million barrels in 2016.

One example of this export trend is Kinder Morgan’s recently completed Utopia Pipeline. Utopia is a 270-mile pipeline which transports NGLs from Harrison County in the Utica shale fields of southern Ohio, to Kinder Morgan’s existing pipeline and facilities in Fulton County, Ohio, then north to plastics manufacturers in Windsor, Ontario, Canada. The pipeline has a current capacity of 50,000 barrels per day (bpd) and is expandable to more than 75,000 bpd. The project solves the current NGL challenge of getting the product to customers. NGLs are plentiful in southern Ohio and the Utica Shale where natural gas development has boomed in recent years. However, sufficient capacity to convert NGLs into derivative products is not available in that region. Fortunately, the export solution that Kinder Morgan proposes—connecting U.S. NGL producers with plastics customers in Canada—is also good for the American balance of trade.


Kinder Morgan Houston Central Plant

There are many immediate benefits of increased U.S. domestic natural gas production: lower costs for home heating and

electricity, reduced emissions from power generation plants as they switch from coal and oil to natural gas, and a decreased reliance on foreign countries for energy. However, the secondary benefits of the domestic gas boom are also incredibly important to the U.S. economy. Increased domestic natural gas, oil and NGL production is strengthening the refining and petrochemical industry, restoring the manufacturing sector and making

America a global energy superpower. Kinder Morgan intends to play a part in enabling this success story by moving these products safely and efficiently from production to economic use.

  • Date April 25, 2018
  • Tags 2018 April