PITTSBURGH—Those with clear vision—specifically, 2020 vision—will see a resurgence in the NGL market, particularly in the ethane segment.

That’s because 2020 is when Shell’s long-awaited Appalachian petrochemical complex near Monaca, Pa., is expected to begin operations and add about 100,000 barrels per day (Mbbl/d) of demand for ethane. By that time, the Marcus Hook, Pa., terminal will be shipping between 200 Mbbl/d and 300 Mbbl/d and the Enterprise Products Partners facility at the Port of Houston will be handling about 300 Mbbl/d.

Those major projects, and incremental additions to others on the Gulf Coast, will absorb all or most of the estimated 800 Mbbl/d of ethane rejection plaguing the industry at the moment, Greg Haas, director of integrated oil and gas for Stratas Advisors, told attendees at Hart Energy’s DUG East conference on June 22.

Haas addressed activity for NGL domestic consumption and exports, much of which is centered in the Appalachian producing area.

“Certainly the terminal at Marcus Hook, Pa., that went into service this year to ship ethane will definitely help relieve ethane pressures in Appalachia and take that overseas to buyers, including everyone from the U.K. to Scotland and France, as well,” he told Hart Energy editors in his Houston office prior to the conference.

The final investment decision on the Shell plant, made after five years of discussions, is an indicator of the degree to which NGL production is fraught with uncertainty. The global demand is unquestionably there, but will pricing ultimately support the investment?

“Once you get down around the downstream, it’s a little more murky to forecast out and come up with that investment decision for several billion dollars in an area that’s never seen this kind of work,” Haas said. “All that said, demand is certainly going up.”

Less uncertain is the steady ramp-up in NGL prices so far this year, with E&P struggles resulting in supply that is flat at best.

“Our forecast for gas supply, our forecast for NGL supply and our forecast for crude supply from the field locations in the U.S. is actually going down for about six to eight quarters, depending on which commodity you’re looking at,” Haas said. “If that field supply is tightening up, processing and fractionation are going to tighten up and then the NGL supply in the market is going to tighten up, just when demand is going up.”

In short, falling supply combined with rising demand both domestically and abroad. That creates a pinch in pricing in NGL, he said.

Through last week, the price of ethane at the Mont Belvieu, Texas, hub had risen 56% this year. Hart Energy’s hypothetical NGL barrel, which tracks all five components, is up 21.3% for the year.

In the realm of energy prices in general, crude oil sets the ceiling and natural gas sets the floor. That leaves NGL prices to float in the middle.

That’s good for NGL, assuming that the rising tide of prices lifts all boats, but Haas returned to his point that ethane has exceptionally long supply.

“We’re still rejecting several hundred thousand barrels a day of ethane that could be utilized if we had demand,” he said.

Even with Canada and other export markets rapidly expanding, the Shell plant is barely beyond FID stage.

“It’s still a good three to four to five years away from impacting real markets,” Haas said. “We still see a good amount of rejection for ethane, so that will hold prices down.”

Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.

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