NGLs And Olefins


Natural Gas Liquids and Olefins

Below you will find additional information on the Natural Gas Liquids and Olefins that we trade. We encourage you to contact us with any questions you may have or to begin working together today.


Natural Gas Liquids

Producers of natural gas, otherwise known as methane (which is a gas at atmospheric pressure), also produce a significant quantity of hydrocarbon liquids. These liquids include ethane, propane, butane (normal and iso), and pentanes. These liquids must be separated from the methane gas in order to move the product efficiently down the pipeline, but also because the methane and the liquids can have dramatically different uses or intended destinations. The methane is mostly used as a heating or industrial fuel. The liquids can be used as a fuel, as a feedstock to the chemical industry, or for blending into unleaded gasoline.

Thus the raw gas is quickly sent from the producer's wellhead to a separation plant to remove the liquids, and then the liquids are run through a fractionation plant. Fractionation is the process through which each of the liquids is chemically separated into the individual ethane, propane, butanes, and pentanes. The individual liquids can then be sent to their intended destination via pipeline, railcar, truck, or ship. Safety, in addition to logistics, is a factor in determining how the individual products are moved.

The New York Mercantile and Intercontinental Exchanges both offer financial & physical contracts tied to TET, Mt. Belvieu and Conway for each of the Natural Gas Liquids. In addition, these products trade financially and physically in the Over-the-Counter (OTC) Market.


Propane

Propane demand comprises about 40% of the natural gas liquids market. This market is also the largest and most liquidly traded market of the natural gas liquids. Its primary demand components are for home heating and as a feedstock for the chemical market. Much of this product physically moves through the U.S. Gulf Coast due to its proximity to major chemical/refinery complexes, liquids pipeline and storage hub, and major energy shipping ports. The Southwest U.S. and Gulf of Mexico are a major North American natural gas producing region. Mt. Belviue, TX has long been the worldwide hub for propane and much of the natural gas liquids trading, specifically because of its vast saltdome storage capacity and pipeline, which connects Mt. Belviue to the Northeast and numerous places in between. This is commonly known as the "TET" pipeline.

Most of the liquidity in the propane market is due to the physical and financial contracts tied to the TET pipeline pricing. This has developed, as the TET pipeline is the largest single propane pipeline in the world and directly impacts propane pricing for the Southwest, Southeast, Ohio Valley, and Northeastern United States.

The second most liquid U.S. propane location is Conway, Kansas. This location in southern Kansas is a Midwest production gathering site and chemical/refinery complex. Conway is also tied to Mt. Belivieu by a mostly southerly flowing pipeline.


Ethane

Ethane, the lightest of the natural gas liquids, makes up almost 25% of total NGL demand. Ethane is almost exclusively used as a feedstock to chemical plants for the production of Ethylene and Propylene, the building blocks of the plastics industry. It can also be used for fueling or at times even left in the natural gas (methane) stream, depending on current economics.

The vast majority of ethane trades along the Gulf Coast of the United States, as this is the largest producing region and home to most of the demand from Gulf Coast chemical complexes. The major hub for ethane trading is Mt. Belvieu, TX. Ethane is transported via pipelines, as it is very volatile and not well suited for truck or container transport.


Butane

Butane is used in the petrochemical industry as normal butane and iso butane. Both are naturally occurring byproducts of natural gas production and crude refining. Normal butane is primarily used for unleaded blending (roughly 85%) — this is almost exclusively in the winter when the RVP specs are higher. Cracking demand is steady throughout the year and is responsible for most of the remaining demand, aside from the chain smokers' butane lighter demand. The largest traded location for butane is at Mt. Belvieu, Texas. This location includes refinery grade LDM product, and fractionation grade NON-LDM product.


Natural Gasoline

Natural gasoline is a mixture of liquid hydrocarbons pentanes and heavier originating from natural gas production and crude oil refining. Demand is comprised of roughly 50% for chemical cracking and 50% for unleaded blending. A growing percentage is used as a crude diluent. The supply/demand picture is clouded by the market for the related product naphtha. C5 is the favored ngl unleaded blendstock in the summer when the tightest or lowest unleaded RVP spec of 7.8 psi is in place. Natural gasoline's most liquid trading hub is also at the Mt. Belvieu location at NON-LDM storage.


Olefins

Olefins are petrochemical derivatives produced by cracking (processing) feedstocks such as ethane, propane, butane, naphtha and gas oil. The primary olefins products are ethylene, propylene, butadiene and C4 derivatives. These petrochemical derivatives are used to produce plastics, chemical intermediates and industrial solvents. Ethylene and propylene are the two most actively traded olefins in the spot market.


Ethylene

Ethylene (C2=) is a colorless gas and is the most produced organic compound in the world. The typical unit measurement of ethylene is in pounds, and it is distributed via pipelines. Ethylene is traded both physically and financially in the over-the-counter spot market. Both physical and financial Ethylene are clearable through several New York Merchantile Exchange contracts, which are tied to the Mt. Belvieu Williams system.


Propylene

Propylene can be broken into three main categories: Chemical Grade Propylene (CGP), Polymer Grade Propylene (PGP) and Refinery Grade Propylene (RGP). Of the three, RGP is more likely to be traded on the spot market and is also a colorless gas. The typical unit measurement for RGP is in barrels.







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