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As we’ve noted previously, the shale gas production boom is helping lift chemical industry profits and paving the way for further U.S. chemical industry expansion.
Another beneficiary of the gas production expansion is companies that process natural gas, which is often called fractionation.
Natural gas usually needs to have impurities removed from it before shortly after it is produced from wells and can be moved via pipeline. This includes natural gas liquids such as propane, butane, pentane, hexane and heptane — which can be very valuable products themselves.
Since many of the shale gas formations that are being tapped are particularly “wet” with NGLs, that means there’s a need for more processing capacity.
Enterprise Products Partners said Monday it will expand its Mont Belvieu, Texas, fractionation capacity by about 7,500 barrels per day, with plans to have the facilities online by early 2013.
DCP Partners and Targa Resources also have plans for an added 100,000 barrels per day in capacity at Mont Belvieu.
These projects and others announced in the past week alone will increase capacity in Mont Belvieu by 32 percent, the folks at Tudor Pickering Holt & Co. say in a research note today. That’s on top of the 14 percent expansion already underway.
All told, Mont Belvieu could go from 860,000 barrels per day capacity to 1,253,000 barrels per day by 2013. Now, what does that mean for NGL prices?
“After a decade of flat NGL production, it will be hard to absorb that capacity increase without reverberations,” TPH notes.
That’s a nice way of saying they’re gonna go down.
(What that means for us is that while we're expanding by 50%, the value of what is being produced is going to go down. Ultimately this does a couple of things for us - it increases our tax base by about 1.2 Billion (!) dollars, while ensuring that the industry stays in the area. It increases our work force opportunities, which is good. It also makes Mont Belvieu the leading location for this kind of facility - storage and fractionation - anywhere. And that's pretty cool.)
