Natural gas being processed to make propane???

I am from Pennsylvania where EM Key Energy, LLC. has built a processing plant  where one of the products they process from natural gas is propane.  They can purchase the natural gas from local wells at current prices and sell the propane at a much higher price.  Can some of you more knowledgeable members shed some light on the advantages or dissadvantages???  Are other locations doing the same thing?  What other byproducts???  

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Permalink Reply by Jack Young on March 18, 2016 at 8:11am

There is methane, propane, butane and lots of other trace stuff in the "gas" that a typical well produces. If you have enough of the non-methane substances it can be worth separating them out for sale, but there's a cost to the process too. In other cases you have to take out the propane etc to make the methane pipeline quality - even if you spend more doing so than you receive. So whether it's an advantage, a disadvantage or a necessity depends on what the methane buyer requires, the composition of your gas, the market prices for propane, butane, ethane etc, and the cost of gas processing. And that balance changes over time, and varies by well. So there's no easy answer, I'm afraid.

Permalink Reply by Brian Powers on March 20, 2016 at 5:00am

Jack - A lot of the stabilized liquid components that you mention become feedstock for petrochemical operations. If the pentane has a high naptha component, it becomes more valuable also. The processing stabilizes the natural gas component, removes any free liquid phase to enable compression. As you said, the richness of the raw gas can vary with time and depletion.

Brian

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on March 19, 2016 at 2:14pm

If you are in the Wet Gas, like we are in Ohio, the O&G company may not be telling you that you have Natural Gas Liquids, which are: Pentane (natural gasoline), Butane, Propane, Methane and Ethane.

The processing plant is more than likely separating the liquids and selling each product to the market that will bring the most. Since Chesapeake has been doing this in Ohio with no royalty payment, the word has more than likely gotten around to other producers as to how profitable it is to steal NGLs.

The state governments don't mind, and in fact like to keep all of this quiet.

I have the evidence in the Hope Christian Fellowship vs Chesapeake complaint.

Take a look. You'll be shocked that todays governments would allow such and thing while asking you to pay more taxes for much needed Roads & Bridges, when all they really need to do is make sure the citizens are being paid for what the O&G companies are stealing.

Permalink Reply by george m vietze on March 19, 2016 at 10:46pm

Interesting.  Are the gas companies paying royalties on the natural gas they get from the landowners?  If they are and the gas companies pay for the construction of the processing plant

why would they owe royalties on the by-products?

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