Natural gas liquids from Bakken production in North Dakota could be a tempting opportunity for Canada’s petrochemical producers, Rusty Braziel, president of RBN Energy, a multifaceted source of energy information, told a Calgary conference in June.
He said the Bakken “could easily” feed 200,000 barrels per day of incremental ethane supplies into Alberta chemical operations, a forecast that was challenged by executives of Nova Chemicals and Aux Sable.
The alternative is to leave the ethane in the gas stream and sell it as methane, which is headed for rapid production growth at “dirt cheap prices,” Braziel said.
Because of the Bakken’s distance from the U.S. Gulf region it would cost 32.4 cents per barrel to deliver ethane to Mont Belvieu, Texas, making the Bakken a significant source of ethane for Alberta’s ethylene crackers.
Braziel told the Canadian Energy Research Institute conference that natural gas liquids production in the United States could grow to 3.4 million barrels per day in 2018 from the current 2.4 million bpd and would be even higher if ethane were not sold as methane because the U.S. petrochemical sector is unable to absorb all of the ethane available in the U.S.
He forecast that the northeast U.S. will replace Conway, Kan., as the No. 2 trading hub for NGLs in the U.S. by 2018 at 600,000 bpd, trailing only Mont Belvieu.
Volumes crushing prices
But he said the rising volumes of ethane available on the market have “crushed” prices from four times the price of natural gas a year ago to roughly on a par with gas today, thus making “more sense to reject it and sell it in a lot of locations.”
The upshot is that ethane production in the U.S. Rockies was cut in half in May to 100,000 bpd and supplies have remained flat because stocks are so high, Braziel said.
He said that producers in the Marcellus and the Rockies have a problem because of their distance from the Gulf Coast.
Braziel also noted that liquids-rich plays in the Marcellus, Williston Basin, Eagle Ford and Granite Wash also need more plants and fractionators.
He estimated that 14 billion cubic feet per day of new processing capacity at 74 plants is under construction, with 5 bcf per day in the Marcellus/Utica, and most of its scheduled to come on stream within two years. Another 1.4 million bpd of fractionation capacity is due to be added at 28 facilities.
Nova questions predictions
Some of Braziel’s predictions were questioned by Graeme Flint, vice president of Nova Chemicals’ olefin business unit, who said he understood that while the Bakken might make 200,000 bpd of ethane available, some has already been earmarked for Gulf Coast markets, regardless of the economics.
He said Nova has a long-term deal to acquire ethane produced at Hess Corp.’s gas plant in Tioga, N.D.
Flint said plans by Vantage Pipeline Canada to deliver ethane to Empress, Alberta, will have startup capacity of 45,000 bpd, capable of reaching about 65,000 bpd with the addition of more compression.
Aux Sable: No more needed
Tim Stauft, president of Aux Sable Canada, which uses liquids from the Alliance gas pipeline from northern British Columbia to the Chicago area, said ample ethane and propane is available in Alberta, warning that any moves to “back up more NGLs” into the province could lower netbacks for producers, causing them to stop drilling and spreading losses through the entire value chain.
He said that Alliance pipeline and Aux Sable allow producers to access the market value of natural gas, provide access to the Gulf Coast NGL markets and, if they are processing as they should, “take out all their condensate in Alberta.”
Stauft said his company believes Alberta receives the best price for its resources without all of the ethane, propane and butane ending up with Alliance and Aux Sable.
As well he said gas producers can decide which NGLs are removed in Alberta to supply fractionators and could sell their gas into the West Coast LNG market.
He told the conference that Alberta’s ethane supplies have remained about 225,000-230,000 bpd, with supplies spread fairly evenly among straddle plants at Fort Saskatchewan and Cochrane and a fractionator at Fort Saskatchewan.
Stauft said Aux Sable estimates that Alberta’s ethane capacity will be full within five years, largely because of fractionator additions.
He said that with ethane used as feedstock, the cost of its production in North America is less than 10 cents a pound, against a global average of 50 cents, creating a “huge margin” for expansion of the petrochemical industry in the Gulf Coast and Alberta.
