SIC 1321
NATURAL GAS LIQUIDS



This category includes establishments primarily engaged in the production of liquid hydrocarbons from oil and gas field gases. Establishments recovering helium from natural gas and establishments recovering liquefied petroleum gases incidental to petroleum refining or to the

SIC 1321 Natural Gas Liquids

manufacturing of chemicals are classified in a range of chemical and allied product manufacturing industries.

NAICS Code(s)

211112 (Natural Gas Liquid Extraction)

Natural gas liquids (NGL) are found in natural gas, often in association with crude oil production. NGL is a reservoir portion of natural gas that is stripped out as a liquid at the surface by special processing facilities. NGL typically contains 35 percent ethane, 30 percent propane, 17 percent natural gasoline, 12 percent butane, and 6 percent isobutane. NGL should not be confused with natural gas, which is composed primarily of methane. NGL is denser than natural gas and becomes combustible at different concentrations than methane, according to the American Gas Association. Also, NGL is not liquefied natural gas, which is condensed natural gas that is compact and therefore convenient for overseas shipping.

NGL appears in a gaseous state at normal temperatures and pressures. NGL is removed from the gas stream at an extraction plant when the gas is processed. Using the most modern extraction technique, up to 90 percent of the NGL can be recovered from the gas stream. After the NGL is extracted, it is mixed together and transported to a fractionation center, where it is divided into individual gas products. The two largest centers are located in Texas and Kansas. Furthermore, Texas, the Gulf of Mexico Federal Offshore, New Mexico, Oklahoma, Louisiana, and Wyoming together accounted for 87 percent of all NGL production throughout the early 2000s. In addition, the 20 largest gas processing companies controlled 75 percent of NGL production.

The chemical industry accounts for roughly half of the total demand for NGL products ethane and propane. NGL is used as feedstock to produce chemicals and plastics. One common product called ethylene is composed of 75 percent NGL. Analysts expect worldwide demand for NGL should rise significantly through the year 2010 because of feedstock usage, especially in the manufacturing of ethylene.

The Clean Air Act bolstered butane demand by requiring gasoline composition to include a 12 to 15 percent greater oxygen content. Methyl tertiary butyl ether (MTBE), which has a high oxygenate content, has been the most highly regarded oxygenate to be used. MTBE is composed of 75 percent butane. The retail industry accounts for 30 percent of NGL demand. Propane is used for home heating, cooking, and transportation purposes.

The U.S. Department of Energy reported that 884 million barrels of NGL were produced in 2002, compared to 690 million barrels in 1998. Most of the domestic supply of more than 70 percent of NGL was derived from natural gas processing plants. Refiners accounted for about 20 percent, and the rest of the supply came from imports, according to the Oil and Gas Journal.

In 2002, the United States increased its NGL reserves by 1 million barrels to 7.9 billion barrels. Total discoveries of NGL reserves decreased 26 percent to 738 million barrels, with the largest share of the discoveries (34 percent) in Texas. Utah and Wyoming accounted for another 19 percent of discoveries. Despite waning discoveries, the NGL future looks promising as the Gas Processors Association predicts strong demand for NGL in the future as industrial and developing countries increase their use of cleaner burning fuels.

A leading producer of NGL throughout the early 2000s in the United States has been ChevronTexaco Corp. formed by the 2001 merger of Chevron Corp. and Texaco Inc. With 2003 sales of $112.9 billion, ChevronTexaco is the second largest energy company in the United States. Its domestic natural gas production in 2002 totaled 2.9 billion cubic feet per day. Another NGL powerhouse is Houston, Texas-based ConocoPhillips, formed by the 2002 merger of Phillips Petroleum Company and Conoco Inc. Gathering, processing, and marketing natural gas is one of four key activities of the firm, which is the third-largest U.S. energy concern with 2003 sales of $104 billion.

Further Reading

ChevronTexaco Corp. "2002 Annual Report. Available from http://www.chevrontexaco.com/investor/annual/2002/financials/financials3.htm .

U.S. Department of Energy. "Natural Gas Liquids." Washington, DC: 2002. Available from http://www.eia.doe.gov .

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