NGL’s (Natural Gas Liquids)

I am now anticipating a future post on IEA WEO 2008, which will be about…… NGL’s.

NGL’s are mainly proceeds from Natural Gas production. IEA combines NGL’s and condensates in their projections.
NGL’s normally have a volumetric energy/heat content in the range of 70 - 75 % of crude oil.

To describe the “wetness” or “dryness” of Nat Gas from a reservoir, it is common within the industry to describe this through a parameter that shows the development of the ratio between NGL’s and Nat Gas with time. The “wetter” a Nat Gas is, the higher this ratio is, and vice versa.

It has been observed for fields, areas and regions that the Nat Gas normally becomes “drier” with time, i.e. yields fewer liquids per unit of Nat Gas produced. If this is plotted onto a diagram, it shows that the ratio of NGL’s (liquids) on Nat Gas over time has a downward slope.

Click on the diagrams for larger versions.

The above diagram shows IEA WEO projections on NGL’s production. The blue area shows the projection from IEA WEO 2008, the yellow line the projection from IEA WEO 2006.

It is worthwhile noticing that the IEA in their most recent WEO projects a stronger growth in NGL’s towards 2030, while they simultaneously have lowered their projections on growth in Nat Gas production from WEO 2006 to WEO 2008. This suggests that IEA in WEO 2008 projects higher liquids (NGL’s) to Nat Gas ratio than in WEO 2006.

The diagram above shows the parameter of NGL’s to Nat Gas ratio with time. The red line is derived from IEA WEO 2008, the grey line derived from IEA WEO 2006, and the blue line has been derived from BP Statistical Review 2008 (Nat Gas production) and form EIA International Petroleum Monthly Table 4.3 which only lists NGL’s that is without Condensate.

Here it is worthwhile to notice that IEA now projects a higher world NGL to Nat Gas ratio towards 2030. In IEA WEO 2008 there have been found no explanation for this.
Actual figures, though only on world’s NGL’ suggests that this ratio has been running flat through the recent years.

The diagram above shows OPEC’s NGL production (light blue area) stacked on OPEC’s Condensate production (darker blue area) based upon EIA IPM tables 4.1, 4.3 and 4.4 for the years 1980 to 2008YTD (YTD; as of August 2008, from EIA IPM Nov. 2008) plotted against the primary y- axis.

In the same diagram is OPEC Nat Gas production from BP Statistical Review 2008 (for the years 1980 - 2007) shown as a red line plotted against the secondary y-axis. BP SR does not yet list Nat Gas production for Angola, Ecuador and Iraq, and judging from BP data the contribution from these 3 is estimated to be around 2 % of present total OPEC Nat Gas production. Angola and Ecuador are presently listed as having relatively small Nat Gas reserves.

In the diagram note how Nat Gas production for OPEC is growing faster than NGL’s and Condensate’s production. This suggests that the Nat Gas within OPEC is becoming “drier” with time.

Again, IEA defines NGL’s as NGL + Condensate.

As NGL’s and Condensate’s are not part of the OPEC quota system, OPEC members has an incentive to produce these as it generates additional revenues.

It is also worth to take note of that OPEC NGL’s and Condensates continued to grow during the period of the mid 80’s that by some has been referred to as the “quota wars” within OPEC. OPEC lost market shares (both relatively and absolutely) for crude oil to growing production from Alaska, the North Sea and Western Siberia during these years.

The above diagram shows the actual development in liquids (NGL + Condensate) to Nat Gas ratio for OPEC based upon data from EIA and BP (and derived from the tables listed further above in this comment) as white circles connected with a black line.
The actual NGL to Nat Gas ratio for OPEC is based upon actual data from presently two of the world’s present most acknowledged and respected data sources.
The light green circles connected with a black dotted line shows the NGL to Nat Gas ratio derived from IEA WEO 2008.

NOTE: The diagram of the actual NGL to Nat Gas ratio for OPEC shows a downward slope over time, i.e. the Nat Gas becomes drier. This is in accordance with what has been observed as “normal” for fields, areas and regions, and OPEC as a group does not, as of now, represent any exemption.
(More on this in an upcoming post about NGL’s and IEA WEO 2008 on The Oil Drum.)

What is interesting is what has made IEA in their WEO 2008 assume that Nat Gas within OPEC will become 30 - 50 % “richer”/”wetter” towards 2015?

IEA have in their reference scenario forecast a strong growth in Nat Gas production from OPEC (inclusive Middle East) towards 2030, but they have come short of explaining why OPEC Nat Gas grows “richer”/”wetter” in their projections.

This is important as IEA have balanced their liquids supplies towards 2030 in WEO 2008 with an increase in NGL’s supplies, while crude oil supplies has been revised down relative to earlier editions of the WEO’s.

Perhaps some of the readers can help out in explaining this?