While many analysts agree that oversupply, rather than
weak demand, led to the current slump in the price of crude
oil, few have looked closely at the nature of that supply overhang.
In a new study, Asia Pacific Energy Consulting (APEC)
has examined in depth the role of NGLs, in particular condensate, in creating the current surplus, as well as the impact of tight oil and its light derivatives.
1 The condensate,
other NGLs (LPG and ethane), light products, and tight oil
yielding much of the new light-product supply all occupy
the same light segment of the hydrocarbon spectrum.
The shale revolution has spurred a ballooning of NGL
output, paralleled by dizzying growth in tight oil production. Almost all of this incremental liquids production has
been light and sweet. The growing volume of this material,
with incremental supply in the millions of barrels per day,
has begun to shift pricing, trade, marketing, and supply-demand balances for crude—light-heavy vs. sweet-sour—
and in products, with notable supply gains in LPG, gasoline, and naphtha in contrast to middle-barrel and heavy
A “light-ends space” is emerging, not only in the US and
the Atlantic Basin but also globally, as markets attempt to
adjust to this surge in light, low-sulfur hydrocarbon supply.
Focus on condensate
The APEC study focused on the role of condensate as the
spearhead creating this light-ends space because it is the
only NGL that does not need specialized containment and
that, when refined, yields a full range of products, from LPG
to residual. Once condensate becomes a liquid it remains a
liquid, and in a refinery or condensate splitter acts much like
crude in the slate.
Condensate is often confused with light, sweet crude oil,
yet it has distinctive characteristics. Unlike crude, condensate always originates with gas, whether nonassociated or
associated. Whole condensate almost always yields more
than 50% naphtha and is almost always quite clean, low not
only in sulfur but also in metals and acid.
It is exceptionally clear, with most containing 0.3% sulfur
Many observers try to define condensate by setting an
arbitrary API gravity breakpoint: in the US commonly 45°
API, in international trade usually 50° API. But these are
rules made to be broken. There are crude grades well above
50° API, such as Saudi Arabia’s Super Light and Australia’s
Laminaria. There are condensate grades under 50° API, such
as Kazakhstan’s Karachaganak and Nigerian Oso. In defining what constitutes condensate, API gravity is only a general indicator, not an exact test of what is condensate and
what is crude.
What is important for condensate is that it always originates in gas, almost always yields 50%+ naphtha, is exceptionally sweet, contains little if any metals, and produces
little residual oil. A crude and condensate can have exactly
the same API gravity, but the condensate will always yield
far more naphtha and far less fuel oil.
The US has emerged as a major NGL power due to the
shale revolution. Despite the plateau and then decline of
tight oil production in 2016, overall NGL output will continue to rise despite declining condensate volumes produced
with tight oil, according to the US Energy Information Administration.
In part this is due to the nature of NGLs, caught in a twilight zone of production parameters. NGLs come from both
the crude and the gas sides of total production. And while
condensate has been the most prominent NGL derived from
gas produced in association with tight oil, plays such as the
Eagle Ford shale and Permian basins also have produced sizable volumes of LPG and even commercial volumes of ethane. Yet NGLs also come from primarily nonassociated gas
production as well, such as the Marcellus and Utica shales in
the US Northeast.
Tight oil production, concentrated in the Bakken, Eagle
Ford, and Permian plays, has accounted for much of the US
increase in oil production and, together with the Marcellus-Utica developments, condensate output in recent years. All
have experienced differing production profiles for conden-
Asia Pacific Energy Consulting
Surge in NGL and tight-oil supplies
creates worldwide ‘light-ends space’