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U.S. Producers Target Wet Gas Production

EIA says hydrocarbon liquids enhance profits


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The U.S. Energy Information Administration (EIA) says the relatively high value of hydrocarbon liquids has driven producers to focus on wet gas production.

It said high production levels have depressed gas prices but the liquids in wet gas -- ethane, propane, butanes, and natural gasoline -- are linked to crude oil and give wet gas a significant price premium over pipeline-quality dry gas.

It said the natural gas plant liquids composite spot price (which approximates a value of liquids produced at gas processing plants) is about halfway between West Texas Intermediate (WTI) crude oil and natural gas spot prices.

EIA said wet gas production is increasing at a faster rate than dry gas. “Between 2008 and 2013, volumes of liquids produced from wet natural gas grew at an average of 7% annually, with increases concentrated in the Gulf Coast.”

It said increased liquids production has depressed NGL prices, particularly ethane and propane. Some ethane, which is currently priced below natural gas, is being left in the dry gas stream, a phenomenon known as ethane rejection. EIA said ethane rejection volumes range between 200 and 400 million bbl/day.

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