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June 2018 cover


Propane production up at natural gas processing plants

Cost Management Solutions    
Cost Management Solutions


Propane supply from natural gas processing is up significantly compared to previous years. This is good news since 80 percent of propane supply now comes from natural gas processing. The remaining supply comes from refining operations.

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An increase in natural gas production has caused a significant increase in propane supply from natural gas processing operations.

From January through April, U.S. propane supply from natural gas processing was 135,000 barrels per day (bpd) higher than during the same period last year. Through April, propane production was 1.307 million bpd, compared to 1.172 million bpd during the same months last year.

In March, we predicted propane supply from natural gas processing would average 138,000 bpd in 2018. January through April, the estimate was nearly on target. However, recent weekly estimates from the Energy Information Administration (EIA) suggest the year-over-year growth in supply has slowed considerably.

We expected a June 2016 through June 2017 drilling program to cause production to increase rapidly through March 2018, but the impacts from the drilling were delayed about eight months. We anticipated the growth to start slowing after March since drilling activity leveled off after June 2017, although still at a higher rate than before the drilling surge began.

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The weekly production estimates from the EIA for May, June and July suggest the impacts of the drilling tapered off much faster than we anticipated, which resulted in a slower rate of propane supply growth during that time.

We still need final production numbers from official monthly data to see how our forecast ultimately turns out, but, for now, it looks as if our forecast will be a bit too high by the end of the year.

We believed the high growth in supply would result in less draw on inventory in 2018 than in 2017. Inventory declined 18.893 million barrels between the end of 2016 and the end of 2017. We expected U.S. propane inventory at the end of 2018 to be about the same as 2017, with the surge in supply being a key reason for the stabilization.

That prediction was bolstered when export activity from December 2017 through April 2018 was lower than the previous year. With export activity picking up and growth in propane supply possibly lower than anticipated, a draw in inventory this calendar year is possible.

Currently, U.S. inventory is 1.360 million barrels higher than it was at this time last year, but inventory could shift from surplus to deficit fairly quickly if supply growth continues to taper off and exports kick into high gear – as they appear to be this month.


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