Decreases in natural gas liquids (NGLs) prices resulted in frac spread margins dropping for all NGLs aside from C5+, which was also the lone NGL to experience a price increase this week.

The largest drop in margin was for ethane, which fell 35% at Conway and 21% at Mont Belvieu. En*Vantage reported in its most recent Weekly Energy Report that the export demand for ethylene is down due to the recent surge in U.S. ethylene prices combined with the recent shutdown of ethylene plants.

The report noted that ethane inventories could increase in March due to these aforementioned outages. “There could be considerable volatility with ethane prices over the next several weeks; however with gas-to-crude ratios heading down gas processors should still be enjoying very healthy ethane frac spreads,” according to the report.

Pentanes-plus (C5+) margins were up 2% at both hubs this week due to the NGL’s close relationship with crude prices.

The most profitable NGL to make at Mont Belvieu and Conway was C5+ at US$1.36 per gallon (/gal) at Conway and $1.37/gal at Mont Belvieu. This was followed in order by iso-butane at $1.08/gal at Conway and $1.05/gal at Mont Belvieu; butane at 90¢/gal at Conway and $1.00/gal at Mont Belvieu; propane at 70¢/gal at Conway and 73¢/gal at Mont Belvieu; and ethane at 18¢/gal at Conway and 31¢/gal at Mont Belvieu.

Natural gas in storage for the week of March 5, the most recent data available from the U.S. Energy Information Administration, was down 111 billion cubic feet to 1.626 trillion cubic feet (Tcf). This was 4% below the storage level of 1.697 Tcf recorded last year at the same time and 1% above the five-year average of 1.607 Tcf.

Normal spring temperatures are expected throughout much of the country according to the U.S. National Weather Service. The forecast predicts that warmer than normal spring temperatures are expected in the New England region into the Tri-State area, as well as along the West Coast and into the Southwest. Colder temperatures are anticipated along the Gulf Coast into Florida as well as parts of the Midwest. – Frank Nieto

Current Frac Spread (Cents/Gal)

Date: March 18, 2010

Conway

Change from

Mont

last week

Belvieu

last week

Ethane

46.14

60.02

Shrink

27.71

28.71

Margin

18.43

-35.11%

31.31

-20.70%

Propane

108.66

112.32

Shrink

38.29

39.66

Margin

70.37

-4.58%

72.66

-5.79%

Normal Butane

133.44

144.60

Shrink

43.35

44.90

Margin

90.09

-2.39%

99.70

-2.06%

Iso-Butane

149.67

147.73

Shrink

41.63

43.13

Margin

108.04

-1.61%

104.60

-11.31%

Pentane+

182.50

184.85

Shrink

46.36

48.02

Margin

136.14

2.14%

136.83

2.23%

NGL $/Bbl

43.89

-5.45%

46.69

-5.29%

Shrink

15.27

15.82

Margin

28.62

-6.59%

30.87

-6.25%

Gas ($/mmBtu)

4.18

-3.24%

4.33

-3.35%

Gross Bbl Margin (in cents/gal)

65.36

-6.66%

71.75

-6.56%

NGL Value in $/mmBtu

Ethane

2.54

-19.11%

3.30

-13.25%

Propane

3.77

-4.11%

3.90

-4.94%

Normal Butane

1.44

-2.67%

1.56

-2.46%

Iso-Butane

0.93

-2.07%

0.92

-9.12%

Pentane+

2.35

0.72%

2.38

0.72%

Total Barrel Value in $/mmbtu

11.04

-6.79%

12.07

-6.38%

Margin

6.86

-8.83%

7.74

-7.99%

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.