How would you estimate the price of y-grade NGLs? 1

[taranjka]

Hi,

I'm analyzing the technical (via HYSYS) and economic performance of different deep cut turboexpander plant configurations for natural gas processing as part of a personal project.

This area (Northwestern Alberta) has the following natural gas supply chain:

Wells (product: wet rich (raw) natural gas) -> shallow cut gas plant (products: dry rich natural gas, condensate) -> deep cut turboexpander plant (products: dry lean natural gas, y-grade NGL) -> fractionation plant (products: ethane, propane, butane, and pentane+)

I'm trying to estimate the selling price for y-grade NGLs (also know as natural gas liquids (NGLs) mix, C2+/C3+), which is a mixture of ethane, propane, butane, pentane+). Y-Grade NGLs are not a commonly-traded commodity, hence I couldn't find pricing information online. It is a mix of NGLs that is sold to a 3rd-party that is operating a fractionator, which produces pure products (ethane, propane, butane, pentane+). Y-Grade NGLs are C2+ or C3+, depending on the turboexpander plant configuration.

How would you estimate the selling price for y-grade NGLs?

I think the best approach is estimate the value of the mix of NGLs in the y-grade, then subtract the fractionator plant costs and profit margin.

For example:
Y-grade NGL mix: 57 mol % C2, 21 mol % C3, 10 mol % C4, 12 mol % C5+
Prices: 18 CAD/bbl C2, 42 CAD/bbl C3, 52 CAD/bbl C4, 70 CAD/bbl C5+
Value of y-grade NGL mix after fractionation: 33 CAD/bbl (weighted average)
For the fractionator (on a per bbl basis): Profit = Revenue - Cost of y-grade NGL – all other costs
Cost of y-grade NGL = Revenue (which is 33 CAD/bbl) - all other costs – Profit

This cost of y-grade NGL for the fractionator is the revenue from y-grade NGL sales for the deep cut plant turboexpander.

Does anyone have better ideas/resources for estimating the selling price of y-grade? If not, how would you estimate the costs/profit margin of fractionation plants?

Thank you

 

[georgeverghese]

Though I dont have the info you're looking for on what to assign as the transfer price of y grade NGL to the 3rd party fractionation plant, must say the example component split on the y grade NGL mix has an unusually high composition assigned for C4 and C5 - in most cases, the rich gas overheads leaving a shallow NGL extraction plant would easily be quite lean on nC4 and heavier. Also, presume the remaining 10% not quoted is mostly methane with a small contribution from CO2?
Also, pls note there is some shrinkage when you mix C2 / C3 /C4+, so it is not as simple as calculating the weighted average price to get the total revenue.

 

[taranjka]

Thank you for your response, George.

The composition I posted was an example (off the top of my head) in order to illustrate the concept. You're right, my composition is too rich.

Thank you for pointing out shrinkage to me. This is a concept that I did not consider.