Record U.S. production knocks down NGL prices to 10-year low
(Financial Times, London; June 19) - Prices of crucial shale gas byproducts, such as ethane and propane, have tumbled to 10-year lows due to booming output, further hurting the profitability of energy companies such as ExxonMobil and BHP Billiton, which are already battling with ultra-low natural gas prices.
U.S. producers have tried to offset the impact of depressed natural gas prices by shifting their drilling from so-called "dry gas" wells, which produce only gas, to "wet wells," which produce a mix of gas and higher-priced oil liquids for the petrochemical industry. That shift has so far helped companies including Devon and Chesapeake to weather the impact of low gas prices, but it has now unleashed fresh natural gas liquid output that has pushed prices to the lowest level since 2002.
The Department of Energy estimates the country's NGL production rose in March - the latest data available - to a record high of 2.3 million barrels a day, up about 50 percent since 2009. "The same drilling boom that recently drove natural gas prices down to 10-year lows is now depressing the prices of NGLs as well," said Francisco Blanch, strategist at Bank of America Merrill Lynch. The price of the benchmark basket of ethane and propane has fallen to the lowest in a decade, according to Bloomberg data.