During the 2-day S&P Global Platts 9th Annual NGLs Conference that we recently attended, we learned about the Natural Gas Liquids (NGLs) market and examined the current supply/demand condition. The presentation topics ranged from infrastructure readiness for producing and exporting NGLs to plastics recycling and how it will affect the future of the industry. Here are some highlights from the conference including some NGL terminology reminders.
Export! Export! Export!
We heard across several discussions that there has been a dramatic increase in exports due to the increase in NGL supply and decrease in demand in the US. NGL companies with operations near the Gulf of Mexico have a significant location advantage for export markets such as Europe, Asia and Saudi. Steve Woodard, SVP Business Development for Antero Resources, talked about how US exports are projected to surpass the entire Middle East Region in 2019. The US & the Middle East will supply incremental fuel for the rest of the world in the near future. It is important to note that even though exports to China are declining as a result of the newly imposed 25% US import tariff on HDPE (High-density polyethylene) and LLDPE (Linear low-density polyethylene) effective August 23, 2019, US exports will be redirected to the other existing markets in Europe, Asia and Saudi.
Sustainability, reducing plastic waste and social responsibility were issues widely discussed across presentations. Rob Stier, Senior Lead Global Petrochemicals with Platts Analytics, talked about the implications of IMO 2020, single use plastics (SUP) bans and regulations and plastics recycling. Let’s dive into each topic a little bit more in depth:
There were multiple discussions around IMO 2020. A good description of IMO 2020 is on Shell’s website. “On 1 January 2020, the International Maritime Organization (IMO) will implement a new regulation for a 0.50% global sulphur cap for marine fuels. Under the new global cap, ships will have to use marine fuels with a sulphur content of no more than 0.50%S against the current limit of 3.50%S in an effort to reduce the amount of sulphur oxide. The Emission Control Areas (ECAs) will remain at the 2015 standard of 0.1%S content.” This new regulation could have a significant impact on fuel pricing and availability of appropriate fuels. Although there is a global trend for cleaner fuels, freight costs will potentially increase and consequently decrease net backs.
Plastics Recycling & impact on virgin plastic demand
The US defines recycling as recovered material which displaces virgin polymer demand. Platts Analytics forecast that the amount of recycled PE, PP and PET will double over the next decade and displace 650,000 bpd of polymer feedstocks. Longer term, mixed plastics wastes to fuels technologies could replace an additional 750,000 bpd of oil demand. This chart from Dakota Valley Recycling is a helpful guide to understand what types of items are made out of each type of plastic.
The conference was full of industry acronyms. While most of these are familiar to us, it is always a good refresher to define what each means.
FCC = Fluid Catalytic Crackers
LNG = Liquified Natural Gas
LPG = Liquified Petroleum Gas (Propane or Butane)
NGL = Natural Gas Liquids
PDH = Propane Dehydrogenation
RGP = Refinery Grade Propylene
VGO = Vacuum Gasoil
VLSFO = Very Low Sulphur Fuel Oil
Increasing NGL global demand is driving the US to look for more efficient and new ways to export from building pipelines to developing new transportation technologies. In doing this, the NGL community should be aware of the environmental initiatives that companies are taking in order to meet the new clean fuel requirements in the most economical way possible.
At Veritas Total Solutions, one way we stay up-to-date with the latest energy industry trends is by attending conferences and events. We believe in sharing our thoughts and ideas with peers, clients and colleagues so everyone can benefit from what we learned at these conferences and events. Please note, all of our event recaps are interpretations and opinions on the topics discussed. If you want to chat with us about a specific event or if you are interested in learning more about our specific capabilities, contact us or subscribe to our blog to stay connected.