U.S. Natural Gas Liquids Output Grows as Shale Gets Gassier

---

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Total U.S. production of natural gas liquids (NGLs), such as propane, are on the rise, in large part because of the increase in gas associated with oil production, the Federal Reserve Bank of Dallas found.

NGLs are used in various capacities, from petrochemical production to general heating. Citing data from November, the Federal Reserve Bank of Dallas found ethane production was up year-over-year by 28%, while butane increased 20% and propane grew by 15% over the same period.

"The rise in U.S. NGL production in 2024 was primarily because of an increase in associated gas production, including methane and other products, that are co-produced with oil from oil wells," the Dallas Fed reported on Thursday.

Inland shale basins, which account for the bulk of the oil and gas production in the U.S., are evolving. The so-called gas-to-oil ratio in a reservoir increases as pressure declines due to production. As the pressure drops, heavier hydrocarbons get trapped in subsurface pores, allowing room for lighter products such as natural gas to move into the production well.

That means basins such as the Permian are yielding more natural gas along with oil. The U.S. Energy Information Administration, part of the Energy Department, reported Permian gas production averaged 23.8 billion cubic feet per day (Bcf/d) during the first quarter of 2024 and reached 28.6 Bcf/d by the fourth quarter of last year, a 20% increase.

As U.S. gas production levels increase, so too are the nation's exports. The Dallas Fed found that Japan was the top destination for propane last year as the island nation is short on domestic resources.

China, meanwhile, took in the most U.S.-sourced ethane to feed its growing petrochemical industries.

"There is significant ongoing investment in China to build infrastructure to support an expected surge in U.S. ethane imports," the Dallas Fed reported. "This is because, as a close substitute for heating and power consumption, ethane is tied to the price of natural gas."

The Fed noted that natural gas markets have been upended since Russian military forces invaded Ukraine in 2022, leading to sweeping Western-backed sanctions on the Russian energy sector.

Alongside the U.S., Russia is a major producer of oil and gas. The U.S. has largely filled much of the market void, though U.S. President Donald Trump is aiming for more.

A report from Reuters found the Trump administration was courting Asian economies as a destination for liquefied natural gas (LNG). Much of the U.S.-sourced LNG goes to Europe, though economies like Japan take in their fair share.

But it may be expensive.

"Since the fallout from Russia's invasion of Ukraine significantly disrupted global LNG markets, LNG pricing in Asian markets has settled at around $12 to $16/MMBtu (million British thermal units), four to eight times the price of domestic U.S. natural gas," the Dallas Fed reported.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).