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Released July 22, 2015 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Three North American natural gas liquids (NGL) projects that were scheduled to kick off construction this year have been cancelled or placed on hold due to market conditions (mainly falling prices resulting from excess supply) or other constraints. Two of the proposed NGL projects have been cancelled; the value of those projects is about $765 million, according to Industrial Info's North American Industrial Project Database. A third project, valued at about $390 million, was placed on hold earlier this year.
Declining prices for NGLs has made development of NGL projects more perilous. The low prices stem from an imbalance between supply and demand for those products: Although demand has risen markedly in recent years, the supply has grown faster than demand, depressing prices. The U.S. is a net exporter of NGLs, but global demand has not kept up with rising supply. Producers in some wet gas plays that lack significant crude oil depend on the sale of NGLs to make their operations profitable. Unless NGL prices rise, some of those wet-gas drilling programs also could be at risk.
The two cancelled NGL projects are:
Surging domestic production of crude oil and natural gas from shale formations has created an over-supplied NGL market, driving down prices for ethane and other NGLs. U.S. ethylene futures recently settled at a 70-month low. Low prices for ethane and other NGLs could imperil the economics of some of the 37 active North American NGL projects that are scheduled to begin construction this year. The value of those active projects is about $3.1 billion, according to Industrial Info's North American Industrial Project Database.
Click the image at right to see NGL price declines since 2012.
The world currently is glutted with ethylene, which is derived from ethane, making development of additional ethylene projects more speculative and risky. Industrial Info is tracking 75 active ethylene capital projects in the U.S. and Canada with total investment value (TIV) of about $43.5 billion. Sixteen of these projects are valued at $1 billion or more each.
Between January 2014 and June 2015, 20 ethylene projects valued at about $1.7 billion have been completed across the U.S. and Canada, according to Industrial Info's North American Industrial Project Database. Over that same period, more than $15 billion in new ethylene capacity projects have begun construction. The attractive oil-to-gas price ratio is providing a cost advantage that continues to make these projects feasible and drive additional new capacity.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Declining prices for NGLs has made development of NGL projects more perilous. The low prices stem from an imbalance between supply and demand for those products: Although demand has risen markedly in recent years, the supply has grown faster than demand, depressing prices. The U.S. is a net exporter of NGLs, but global demand has not kept up with rising supply. Producers in some wet gas plays that lack significant crude oil depend on the sale of NGLs to make their operations profitable. Unless NGL prices rise, some of those wet-gas drilling programs also could be at risk.
The two cancelled NGL projects are:
- Dawson Creek NGL Fractionator, valued at $750 million, which was being developed by a unit of Spectra Energy Corporation (NYSE:SEE) (Houston, Texas). The developer planned to build a grassroot fractionation plant in Dawson Creek, British Columbia, capable of processing at least 500 million cubic feet per day (cf/d) of wet gas from the Horn River Shale in British Columbia.
- Equipment addition to the Bushton NGL Fractionator Complex, developed by a unit of ONEOK Corporation (NYSE:OKE) (Tulsa, Oklahoma). The developer planned to add additional motors and compressors to an existing fractionation plant in Bushton, Kansas, capable of producing up to 210,000 barrels per day (BBL/d) of NGLs. The project was valued at $15 million.
Surging domestic production of crude oil and natural gas from shale formations has created an over-supplied NGL market, driving down prices for ethane and other NGLs. U.S. ethylene futures recently settled at a 70-month low. Low prices for ethane and other NGLs could imperil the economics of some of the 37 active North American NGL projects that are scheduled to begin construction this year. The value of those active projects is about $3.1 billion, according to Industrial Info's North American Industrial Project Database.
Click the image at right to see NGL price declines since 2012.The world currently is glutted with ethylene, which is derived from ethane, making development of additional ethylene projects more speculative and risky. Industrial Info is tracking 75 active ethylene capital projects in the U.S. and Canada with total investment value (TIV) of about $43.5 billion. Sixteen of these projects are valued at $1 billion or more each.
Between January 2014 and June 2015, 20 ethylene projects valued at about $1.7 billion have been completed across the U.S. and Canada, according to Industrial Info's North American Industrial Project Database. Over that same period, more than $15 billion in new ethylene capacity projects have begun construction. The attractive oil-to-gas price ratio is providing a cost advantage that continues to make these projects feasible and drive additional new capacity.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
