Hart Energy Publishing's Gas Processors Report Says Profits From Making Propane, Ethane Were Highest Ever In 2006

Houston - Profits from the production and sale of ethane and propane by extracting them from natural gas were the highest ever in 2006, and probably will not be as high in 2007.

These are the conclusions from Gas Processors Report, an independent weekly newsletter of Hart Energy Publishing, based in Houston. Other industry experts confirm this outlook, said Editor John Hart. "Prices of propane, ethane and other natural gas liquids (NGLs) follow that of crude oil, while natural gas prices stayed moderate this year, so margins were exceptional," he said.

These margins are known as the fractionation spread, an indicator of profitability published each week in the newsletter. Where processing is the simple separation of liquid hydrocarbons from gas, fractionation is a step further downstream. By boiling off hydrocarbons from the mixed stream of NGLs, individual products such as propane, ethane, butane, iso-butane and pentanes are produced.

The two major market centers for these liquids are Conway, Kansas, and Mont Belvieu, Texas. This year's highest fractionation spread was around $64 per 42 gallon barrel on July 19, when crude oil futures reached $78 per barrel. Since then, the spread has fallen to around $30.50 at Conway and $35 at Mont Belvieu. The composition of the barrel is weighted per industry standards, with ethane and propane together comprising two-thirds of the NGLs.

SOURCE: Hart Energy Publishing