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 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.

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