Snout to Tail, So to Speak

We should strive to make the best use of all components of natural gas

I used to work with a lot of Scottish people in the oil industry. One day a colleague was explaining to me the history of haggis, a traditional meal made largely from the internal organs (heart, liver, lungs) of a sheep and boiled in the animal’s own stomach. It’s better than it sounds, especially if you’re invited to a banquet at Edinburgh Castle. My plain-speaking colleague described the dish by remarking, “It ain’t ribeyes.” Indeed. But poor people all over the world have long made do with eating the less desirable parts of animals—so-called “snout to tail” consumption habits designed to maximize both the nutritional and economic value of farm produce. My grandfather was especially fond of menudo, a Mexican soup made from a cow’s stomach (also better than it sounds). As it turns out, we can (and should) apply this same ethos of conservation to natural gas. In many cases we do a fair job of that, but current trade policies are threatening to upend the market for what are known as natural gas liquids (NGL), the heavier hydrocarbon components which are—for the most part—not salable as pipeline gas and which are essential feedstocks for many common materials.

NGLs (ethane, propane, butane, pentane, and trace amounts of even larger molecules) burn as well as methane, the principal component of commercial natural gas. However, they liquefy inside pipelines and can obstruct gas flow. They can also increase the heating value of pipeline gas above safe levels if not removed. Moreover, NGLs have unique value for manufacturing ethylene, propylene, and butylene, the chemical precursors of polyethylene and polypropylene plastics and butyl rubber, respectively. As reported by the Wall Street Journal:

“Last year, China bought nearly 18% of all the propane exported by the U.S., behind only Japan. Some of it was for heating and cooking. But most was fed into propane dehydrogenation plants, which make propylene for use in such products as carpets, car bumpers, buckets, water bottles, eyeglasses, food wrap, grocery bags, mattresses and socks.”

The current reciprocal tariffs being levied by both China and the United States threaten to make this entire export market, which is one of the largest flowing through the Port of Houston, uneconomic. The economic consequences are one thing, but potentially even worse could be waste of the material. We do have substantial facilities for storing NGLs, including at Mont Belvieu, Texas and Conway, Kansas. On the other hand, if the plant which separates NGLs from pipeline quality natural gas, called a fractionator, cannot earn a profit on its operations, then we risk this “rich” or “wet” gas being flared at the wellhead by oil and gas companies who have no one to sell it to (recall that such gas cannot be sold directly to a pipeline company). Modern society would be all but impossible as currently structured without plastics. Even more than gasoline or diesel oil, plastics derived from petrochemicals are scarce resources that we should be mindful of preserving. There are no electric or solar plastics as such. Some items typically made from conventional plastics can be substituted for by plant-based polymers, wood, metal, or glass. But by no means all of them, and not at the same cost, weight, or durability specifications.

A great deal of attention has been paid of late to the harm caused by plastic pollution, from ocean trash islands to roadside litter to microcontaminants that find their way into foods. We should use fewer disposable, nonrecyclable plastic products to be sure. I do not, however, foresee the end of plastics manufacturing, and many plastic products are complex mixtures of different chemicals, dyes, and additives that cannot be easily separated or recycled. Susan Freinkel’s Plastic: A Toxic Love Story tells the story better than I can. I did, at one time, work to ensure that NGLs were properly valued, from a purely financial perspective, as individual products within raw natural gas mixtures. A former colleague of mine had developed a spreadsheet that would, essentially, simulate the fractionation process and provide royalty accountants with a breakdown of the physical and dollar amounts of each end product (ethane, propane, butane, and “natural gasoline” [pentane plus anything heavier than that]). I took that spreadsheet, rewrote it as a collection of Python scripts, and added new functionality to make formal thermodynamic vapor-liquid equilibrium (VLE) calculations. My VLE calculations were implemented by embedding an open-source chemical process simulation engine behind what looked to the user to be a plain-vanilla Excel interface.

If ongoing tariffs make US NGL exports uncompetitive at current prices, then there are a few possible scenarios that could emerge. First, propane (especially) prices could fall as storage facilities fill to capacity. That would lower the profits of fractionators and, eventually, well owners. Second, NGL exports could be diverted to lower tariff locations, but this is difficult to do quickly since the infrastructure needed to turn NGLs into plastic precursors is complex and expensive; it isn’t available everywhere. Third, operators could have to make the choice between discarding (flaring) rich gas and selling only pipeline quality gas or else shutting in their gas (and even oil) wells entirely. It is difficult to imagine that any of these scenarios would make American energy companies more competitive. It is also difficult to imagine that resource conservation would benefit under such conditions. Liquid petroleum markets are truly global, and that has been the case for generations. Arbitrary trade barriers which disrupt those markets are likely to be bad news for just about everyone. Might we suddenly start using more propane and butane domestically? I suppose anything is possible. It is almost summer grilling season, after all… I hope you’re hungry!