Liquid gold

Natural gas hydrocarbons have many applications

Two decades ago, geologists knew the U.S. was sitting on vast reserves of natural gas, locked in shale rock located deep below the earth’s surface. What they didn’t know was that these hard-to-produce resources would one day become the pathway towards greater U.S. energy independence.

Fast forward to the 21st century: Advancing exploration and drilling technologies have enabled oil and gas exploration and production companies to economically tap these previously inaccessible resources. In fact, in 2015, the U.S. produced approximately 74 billion cubic feet of natural gas per day.1 In fact, according to many sources, it is estimated that U.S. reservoirs contain enough natural gas to meet America’s needs for nearly 100 years, a projection that has profound economic and geopolitical implications.

When gas is liquid

While the media are doing their part to spread the news about the North American energy transformation, one important chapter is sometimes overlooked: the virtual explosion in the production of natural gas liquids (NGLs). NGLs (ethane, propane, butanes and natural gasoline) can exist in a liquid state at underground pressures and then become gaseous at normal atmospheric pressure. The mixture of these liquids and methane gas are collectively referred to as “wet” or “rich” natural gas.

NGLs are found in natural gas (comprised primarily of methane and known as “dry” gas) and to a lesser extent in crude oil. NGLs include heavier hydrocarbons – compounds of hydrogen and carbon – that have slightly different combinations of those two elements in their molecular makeup. They are a very valuable byproduct of natural gas processing. (Other valuable hydrocarbons, such as heptane, hexane, octane and kerosene are obtained in the fractional distillation of petroleum.)

The product of decomposed matter, hydrocarbons come in different molecular lengths and constructs, from straight chains, to chains with branches, to complete rings. When broken down over time, hydrocarbons form crude oil or natural gas. Depending on the pressure and temperature in which they exist, hydrocarbons may be gaseous, liquid, semisolid or solid, according to how many carbon atoms they contain and whether they are under pressure or at atmospheric conditions. Propane and butane, for example, are liquids under pressure but are gases at atmospheric conditions.

Fossil fuels, deconstructed

Fossil fuels, deconstructed

As the chart above illustrates, the hydrocarbons found in natural gas have many uses. Methane (composed of one carbon atom and four hydrogen atoms) is the main component of natural gas, and is used primarily as a fuel for heating and power generation. Butane, isobutane, ethane, propane and natural gasoline (pentane) form natural gas liquids that have a higher monetary value than methane, so it’s economically feasible to separate them from the natural gas.

Depending on the pressure and temperature in which they exist, hydrocarbons may be gaseous, liquid, semisolid or solid, according to how many carbon atoms they contain and whether they are under pressure or at atmospheric conditions. 

Six degrees of separation

Detaching NGLs from natural gas takes place in natural gas processing plants, which are usually located near the production wells where the natural gas is gathered, such as the Gulf Coast (Texas and Louisiana), the Rockies and Alaska. NGL extraction has been steadily increasing in these areas as a result of the North American shale boom, technological advances in refining processes and increased demand from end users.

The first step in the natural gas processing involves extracting the liquids from the methane. The second step is separating the NGLs from each other, which is accomplished using a process called fractionation. Separating the NGLs apart can be done at the same natural gas processing plant where the NGLs are removed from the methane, or the NGLs may be sent via pipelines to specialized plants to be fractionated into butane, isobutane, ethane, propane and natural gasoline.

Natural gas value chain

Natural Gas Value Chain

Source: Tortoise Capital Advisors

There are two methods – cryogenic processing and absorption – used to remove the NGLs from the methane. Cryogenic processing, the more commonly used method, involves cooling the gas, which causes the hydrocarbons to separate. This method is particularly effective for removing the ethane, which is lighter. The absorption method uses oil, which is added to the gas and adheres to the NGLs, effectively separating them from the methane. Then, in a series of stages, the NGL-saturated oil is heated to a specific temperature, causing the liquid to boil, evaporate and separate the NGLs from one another. As each NGL separates, it exits into a specific holding tank.

Broad applications, strong demand

As indicated in the chart below, there are many applications for NGLs and a host of end products that are derived from them. Natural gas liquids differ from one another in their chemical structure, each having a unique combination of carbon and hydrogen molecules. Among the largest applications are ethane, propane and butane, which are “light” feedstock (raw materials) that help the petrochemical industry make various products. Ethane is used to make another feedstock, ethylene, which is used in the manufacturing of welding gas and plastics. Propane, also referred to as liquefied petroleum gas (LPG) is used in heating homes, in heating water and cooking, and as a fuel for engines. It is also increasingly in demand internationally, particularly in China, and demand for pentane also is rising rapidly. Butane is used in lighters and added to gasoline to help reduce pollution, and also is a feedstock for another NGL, isobutane, which is used as a refrigerant and in aerosol sprays and is a feedstock for the petrochemical industry. Also referred to as natural gas, it is used as a solvent and thinner, and can be combined with other, higher-octane substances to create gasoline. It is also used to determine octane ratings in commercially made gasoline.

Natural gas liquid (NGL) attribute summary

Natural Gas Liquid (NGL) Attribute Summary

Source: Energy Information Administration, Tortoise Capital Advisors

NGL extraction has been steadily increasing as a result of the North American shale boom in areas such as the Gulf Coast (Texas and Louisiana), the Rockies and Alaska.

Making life better

Clearly, natural gas liquids are used across sectors and industries, in myriad ways that touch us daily and improve the quality of our lives. An abundant domestic supply has had a dramatic effect on the cost of goods and services made possible by natural gas liquids and has potentially positioned the U.S. to become a growing NGL exporter.

    1. Energy Information Administration, November 2016