Natural gas liquids, or NGLs, are often overlooked despite being an important growth driver for the midstream space.
When investors think about the demand for hydrocarbons, many think about driving cars or using gasoline or jet fuel. Plastics and things in our environment that use hydrocarbons are often an overlooked aspect when considering long-term oil demand.
NGLs, like crude oil and natural gas, come from a well — you just don’t tend to hear as much about them. Just like how crude oil is refined into gasoline, diesel, and jet fuel, NGLs must also be processed into usable products, according to Stacey Morris, head of energy research at VettaFi.
The processing for NGLs is called fractionation, much of which happens in Mont Belvieu, Texas. Growing domestic and international demand for NGLs is contributing to infrastructure investment along the Gulf Coast. Several midstream companies are constructing new facilities in Mont Belvieu to process NGLs.
During processing, the mixed NGLs that were collected from the well are separated from the gas stream, and then are further fractionated into different components, Morris said. Specifically, ethane, propane, butane, isobutane, and natural gasoline.
Morris said many people have probably come into contact with these NGLs, perhaps without realizing it. Many grills used during the summer use propane, and butane lighters are also popular.
The Role of NGLs
Ethane, in particular, is a key growth area for midstream. Ethane ultimately becomes ethylene, which is an important, widely use chemical. Ethylene has even been called the world’s most important chemical, according to Morris.
See more: “The Fastest-Growing Hydrocarbon You Haven’t Heard Of”
Ethylene is used in a wide variety of products: plastic food packaging, plastic bottles, textiles, anti-freeze, PVC pipes, siding. It’s in numerous items in offices and homes, throughout people’s day to day lives.
Propane is similar, as it has uses that go far beyond heating fuel. It is used to dry crops after harvesting, as well as for cooking in various regions. Additionally, propane is used to produce propylene, which is another plastic building block. Propylene is used to produce acetone, furniture, and automotive parts.
See more: “Propane Helps Fuel Midstream/MLP Growth”
Notably, propane production has nearly doubled since 2014 and ethane production has more than doubled during the same period.
During “How the US Energy Outlook Benefits Midstream/MLPs” on August 9, VettaFi and SS&C ALPS Advisors will discuss energy production and distribution trends and the oil and gas fundamentals and alternative energy incentives that may benefit midstream.
For more news, information, and analysis, visit the Energy Infrastructure Channel.