What are 'Natural Gas Liquids - NGL'

Natural gas liquids (NGL) are components of natural gas that are separated from the gas state in the form of liquids. This separation occurs in a field facility or in a gas processing plant through absorption, condensation or other method. Natural gas liquids are classified based on their vapor pressure:

Low = condensate

Intermediate = natural gas

High = liquefied petroleum gas

BREAKING DOWN 'Natural Gas Liquids - NGL'

NGLs are valuable as separate products, and it is therefore profitable to remove them from the natural gas. The liquids are first extracted from the natural gas and later separated into different components.

Natural gas liquids (NGLs) are hydrocarbons; a hydrocarbon is a molecule composed exclusively of carbon and hydrogen. As a hydrocarbons, NGLs belong in the same family of molecules as natural gas and crude oil. Examples of NGLs include ethane, propane, butane, isobutane and pentane.

Types of NGLs

The chemical compositions of NGLs are similar, but their applications vary widely. There are many uses for NGLs; they can be used as inputs for petrochemical plants, burned for heating and blended into vehicle fuel. Among ethanes, applications include plastics production and petrochemical feedstock. End-use products include plastics, antifreeze and detergent. Applications for propane include residential and commercial heating, cooking fuel and petrochemical feedstock. Butanes are used in petrochemical feedstock or blended with gasoline and propane. Products include synthetic rubber for tires, and lighter fuel. Isobutanes are used in refinery feedstock and petrochemical feedstock. Pentanes are used in natural gasoline and as a blowing agent for polystyrene foam. Pentanes plus, a special category also known as natural gasoline, is blended with vehicle fuel and exported for bitumen production in oil sands.

Challenges and Opportunities

The U.S. shale boom increased extraction rates of NGLs. NGL extraction is positively related to the price of crude oil. Crude oil prices and NGL prices are positively correlated; during the last bull run in oil prices, NGL production increased. There are some positives to NGL production regardless of the price environment for energy products. NGLs provide natural gas producers with an additional income stream, which can be a positive in different price environments.

A challenge with NGLs is they are expensive to handle, store and transport compared to refined products. NGLs require high pressure and/or low temperature to be maintained in their liquid state for shipment and handling. They are highly flammable. This necessitates the use of special trucks, ships and storage tanks.

RELATED TERMS
  1. Natural Gas Equivalent

    The amount of energy used by the burning of natural gas versus ...
  2. Natural Gas ETF

    Exchange-traded funds (ETFs) that invest in natural gas futures ...
  3. Liquefied Natural Gas

    The liquefied state of natural gas, which is created by cooling ...
  4. Oil Price to Natural Gas Ratio

    A mathematical ratio comparing the prices of crude oil and natural ...
  5. EIA Natural Gas Report

    A weekly report provided every Thursday by the Energy Information ...
  6. Hydrocarbon

    An organic chemical compound composed exclusively of hydrogen ...
Related Articles
  1. Investing

    A Natural Gas Primer

    Learn why natural gas is playing a larger role in the energy industry.
  2. Investing

    Do Natural Gas Prices Always Follow Oil Trends?

    Prices for oil and natural gas are highly correlated. But investors should be aware of different factors affecting the prices of these commodities.
  3. Investing

    Winners and Losers of Low Natural Gas Prices

    Chemical and fertilizer manufacturers benefit from a low price for natural gas, while utilities and natural gas producers are adversely affected by it.
  4. Investing

    Top Natural Gas Stocks Worth Considering

    The stock prices of the largest natural gas producers are at 12-month lows, creating an opportunity for investors. Here are some to consider.
  5. Investing

    Top 3 Natural Gas ETFs (UNG, FCG)

    Explore the variety of options that are available through exchange-traded funds for investors looking to obtain exposure to the natural gas market.
  6. Investing

    Do Oil and Natural Gas Prices Rise And Fall Together?

    Do the prices of crude oil and natural gas affect each other? Investopedia explores price patterns and provides analysis.
  7. Investing

    Natural Gas Industry: An Investment Guide

    Investors looking into this industry are faced with a confusing amount of information. We explain the important concepts and terms.
  8. Investing

    Top 5 Natural Gas Stocks of 2016

    Natural gas spot prices rebounded by nearly 50% between February and July 2016, which should bolster the revenue and prices of these five natural gas stocks.
  9. Investing

    The World's Top 10 Natural Gas Companies (XOM, OGZPY)

    Read about the 10 companies that combined to produce about 105 billion cubic feet of natural gas in 2014, about 30% of the world's total production.
RELATED FAQS
  1. What economic indicators are important to consider when investing in the oil and ...

    Find out more about economic indicators and which ones are important when investing in companies in the oil and gas sector. Read Answer >>
  2. What percentage of the global economy is comprised of the oil & gas drilling sector?

    Read about a rising industry that already composes as much as one-twentieth of total global economic output: the oil & gas ... Read Answer >>
  3. What impact has the increase in shale gas drilling had on the oil and gas industry?

    Read about some of the domestic and global impacts of the shale oil and gas revolution on the oil and gas industry, particularly ... Read Answer >>
  4. What are the main benchmarks that track the oil & gas drilling sector?

    Read about several different types of benchmarks that investors can use to track the overall performance of the oil and gas ... Read Answer >>
  5. How does the risk of investing in the oil and gas sector compare to the broader market?

    Learn how the oil and gas sector has risk both with the broader market and the price of oil and gas, and understand how correlation ... Read Answer >>
  6. How does fracking affect natural gas prices?

    Take a deeper look at the impact of hydraulic fracturing on the price for natural gas, and why fracking may eventually price ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center