Frac Spread: Ethane Rallies In A Rocky Stretch

Ethane at Mont Belvieu, Texas, extended its rally to three weeks, with a near-tripling of last week’s margin.

As turnarounds go, this could easily be filed under “meh.” At a smidgen above 14 cents per gallon (gal), last week’s ethane price is still less than half of the year-ago mark. And the 199% one-week increase in margin still leaves it at well below 2 cents/gal. The year-ago spread was 11.11 cents/gal.

But with the global death toll from the COVID-19 illness exceeding 2,000 and the economic damage still just a guess, even a small uptick offers comfort, especially with the price languishing for 22 consecutive weeks below 20 cents/gal.

In the Rockies, not all issues involve making nice with regulators, as discussed at Hart Energy’s DUG Bakken and Rockies Conference & Exhibition. NGL production is expected to grow from year-end 2019 to year-end 2024, Enverus said in a report on Feb. 19. Most of that growth is expected to come from the Denver-Julesburg (D-J) Basin.

Pipeline projects, particularly SemGroup Corp.’s White Cliffs in the D-J and ONEOK Inc.’s Elk Creek in the Bakken, are alleviating capacity constraints. The White Cliffs conversion of one of its lines from crude oil to NGL in late 2019 increased takeaway capacity in the Front Range by 90,000 barrels per day (bbl/d), Enverus said.

Low ethane prices and the high cost of transportation in the Bakken have led to ethane rejection rates of about 80%, noted Marissa Anderson, manager of data analytics at BTU Analytics LLC. But now, ONEOK is discussing a change in specs for its Northern Border natural gas pipeline, a 1.412-mile line with capacity of about 2.5 billion cubic feet per day.

Bakken gas now accounts for about 70% of Northern Border’s flow (the remainder is from Canada). Ethane cannot be trucked or moved by rail because of its high vapor pressure so it has to be shipped by pipeline.

The problem, Anderson wrote in a recent report, is that Northern Border intersects with other pipelines—Enbridge Inc.’s Vector and Kinder Morgan Inc.’s NGPL—with heating value limits of 1,100 British Thermal Units per cubic foot (Btu/cf). Ethane’s heating value of 1,770 Btu/cf, which pushes the average up.

The solution, Anderson said, could be Elk Creek, which connects the Bakken to the Conway, Kan., hub.

“However, not all the ethane would have to be recovered to meet a heating value of 1,100 Btu/cf,” Anderson said. “At a [gallons per minute flow rate] of 10, just under 50% of the ethane would need to be recovered from the gas stream. … At current gas production levels, this means an incremental 90,000 bbl/d of ethane would need to be recovered from the region. To put that in perspective, demand from most large-scale ethane crackers is about 90,000 bbl/d.”

In the week ended Feb. 14, storage of natural gas in the Lower 48 experienced a decrease of 151 billion cubic feet (Bcf), the EIA reported, compared to the Bloomberg survey range of a 138 Bcf to 158 Bcf reduction. The EIA figure resulted in a total of 2.343 trillion cubic feet (Tcf). That is 35.4% above the 1.73 Tcf figure at the same time in 2019 and 9.3% above the five-year average of 2.143 Tcf.