The outlook for gas production and supply is still looking strong but one of the big concerns for the growth picture is infrastructure challenges in key markets. An interesting new trend—increased drilling for gas to access natural gas liquids (NGLs) such as ethane, propane and butane—is set to add to the pressure on industry infrastructure, at least in the United States.
Recent figures from the Energy Information Administration (EIA) show that gas production from the US lower 48 has gone up by 10.5 percent from a year ago¹. Much of this increase is due to improved recovery rates at the "liquids-rich" gas plays, which offer producers robust economics as gas prices languish and chemicals prices strengthen.
Production of NGLs topped 2 million b/d in 2010 in the United States and is set to grow faster, with ethane and propane contributing much of the increase. Even OPEC production of NGLs, unfettered by quotas, could rise by more than 7 percent this year to 6 million b/d in 2012.
As long as the margins are good, use of gas to produce NGLs is likely to increase, leading to another positive. As the value of gas increases, the flaring of gas is likely to reduce—notably in OPEC countries, leaving more gas for use in petrochemicals instead of the more traditional naphtha or gasoil.
All this indicates a switch in focus among some companies to liquid rich assets and production, notably in the United States. However, what will be increasingly needed are substantial investments in gas processing, pipelines, liquids fractionation and petrochemical facilities. This growth of NGL production along with growing production generally in unconventional oil and gas—the bridge to a low-carbon future—means a real focus on infrastructure investment in our industry in the short term. The ability to operate gas infrastructure and pipelines safely and efficiently will become an important differentiator in the future, triggering hopefully an emergence of “smart” infrastructure. Accenture has identified a number of factors driving the need for operational improvement at pipeline operations in The Intelligent Pipeline: Accelerating the path from data to decision making