The final two weeks of 2012 saw ethane gain some steam at both Mont Belvieu and Conway, though prices and margins were still depressed from their levels in the prior year.

Mont Belvieu ethane prices improved 14% to 25¢ per gallon (/gal) the week of December 19 and increased another 1% the week of December 26. These prices helped the frac spread margin returned to a positive state of 3¢/gal for the final two weeks of the year.

The Conway price rose 19% to 20¢/gal the week of December 19 before improving a further 2% to 21¢/gal the week of December 26. This was its highest level since the week of August 29 when it was also 21¢/gal. Despite these price improvements, margins remained negative as natural gas feedstock prices rose 5% to $3.37 per million Btu to close the year.

While a warm winter began 2012, a cold winter finally arrived as the year ended. Propane experienced a sizable increase in price due to heating demand caused by colder-than-normal weather in much of the Northeast.

The price rose 9% at both hubs the week of December 19 before increasing a further 11% at Conway and 7% at Mont Belvieu. The Midcontinent price of 82¢/gal was the highest at the hub since the week of October 31 when it was 84¢/gal and the Gulf Coast price of 88¢/gal was the hub’s largest price since it was 91¢/gal the week of November 7.

Interestingly, aside from ethane, prices at the two hubs traded at a relatively even level for the week with butane and isobutane having stronger values at Conway compared to Mont Belvieu. Although the Mont Belvieu short squeeze for butane ended when BASF’s Gulf Coast cracker was brought back online, there appears to be similar disruption in the Midcontinent.

The price of Conway butane rose 12% the week of December 19 to $2.04/gal and increased another 1% to $2.06/gal the week of December 26. This was the hub’s second- largest price reported by Hart Energy, following the $2.13/gal price the week of July 16, 2008.

Despite the large price increases for butane, its sister product, isobutane, remained flat at Conway as the price rose 2% to $1.83/gal the week of December 26 following a 1% price drop the prior week.

While both Mont Belvieu butane and isobutane prices saw improvements the week of December 26, they remained below their Conway counterparts. Butane increased 2% to $1.77/gal; this represents a 2% drop in value from the price a month ago. Isobutane also experienced a 2% gain the week of December 26 as it improved to $1.82/gal, but this was a 4% drop from the price four weeks earlier.

Pentanes-plus (C5+) prices traded at a very close level between the two hubs the final two weeks of 2012 as crude oil prices gained strength. Although natural gas liquid (NGL) prices have been diverging from crude prices, C5+ continues to have a closer relationship with crude.

This caused the Mont Belvieu price to increase 2% to $2.23/gal, its highest price since the week of October 31, when it was $2.25/gal. The Conway price rose 1% to $2.21/gal, its highest price since it was $2.25/gal the week of April 25.

These prices combined to increase the theoretical NGL barrel by 3% at both hubs with Conway experiencing a slightly greater overall value than Mont Belvieu for the second- straight week. The Conway price was $43.85 per barrel (/bbl.) with a 3% gain in margin to $31.54/bbl. The Mont Belvieu price was $43.54/bbl. with a 3% gain in margin to $31.41/bbl.

The most profitable NGL to make at both hubs remained C5+ at $1.84/gal at Conway and $1.86/gal at Mont Belvieu. This was followed by butane at Conway at $1.71/gal and isobutane at Mont Belvieu at $1.49/gal. The third most profitable NGL to make at Conway was isobutane at $1.49/gal while butane held this same spot at Mont Belvieu at $1.42/gal. This was followed, in order, by propane at 51¢/gal at Conway and 58¢/gal at Mont Belvieu; and ethane at negative 2¢/gal at Conway and 3¢/gal at Mont Belvieu.

Natural gas in storage for the week of December 21, the most recent data available from the Energy Information Administration, decreased 72 billion cubic feet to 3.652 trillion cubic feet (Tcf) from 3.724 Tcf the previous week. This was 2% greater than the 3.571 Tcf reported last year at the same time and 13% above the five-year average of 3.239 Tcf.

Unfortunately for heating demand, the National Weather Service’s forecast for this week anticipates warmer-than-normal weather for the entire eastern portion of the United States. The forecast anticipates colder-than-normal weather on the West Coast.

Data Provided by Intercontinental Exchange. Individual product prices in
cents per gallon. NGL barrel in $/42 gallons | Source: Frank Nieto

Price, Shrink of 42-gal NGL barrel based on following: Ethane, 36.5%; Propane, 31.8%; Normal Butane, 11.2%; Isobutane, 6.2%; Pentane+, 14.3%, Fuel, frac, transport costs not included. Conway gas based on NGPL Midcontinent zone, Mont Belvieu based on Houston Ship Channel. Shrink is defined as Btus that are removed from natural gas through the gathering and processing operation. Source: Frank Nieto

Data Provided by Intercontinental Exchange. Individual product prices in
cents per gallon. NGL barrel in $/42 gallons | Source: Frank Nieto

Price, Shrink of 42-gal NGL barrel based on following: Ethane, 36.5%; Propane, 31.8%; Normal Butane, 11.2%; Isobutane, 6.2%; Pentane+, 14.3%, Fuel, frac, transport costs not included. Conway gas based on NGPL Midcontinent zone, Mont Belvieu based on Houston Ship Channel. Shrink is defined as Btus that are removed from natural gas through the gathering and processing operation. Source: Frank Nieto

Contact the author, Frank Nieto, at fnieto@hartenergy.com

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