Propane (C3H8) Main Component of Marketed LP Gas: Storage and Transport Issues, Exports, Supply/Demand, Source of Home Heating, Cooking, Petrochemical Feedstock for Propylene, and a Long Established but Growing Transportation Fuel

Propane (C3H8): Main Component of Marketed LP Gas: Storage and Transport Issues, Exports, Supply/Demand, Source of Home Heating, Cooking, Petrochemical Feedstock for Propylene, and a Long Established but Growing Transportation Fuel

Propane Facts, History, and Current Production

About 70% of propane is derived from natural gas and 30% from refined petroleum. Propane is typically the third most common component of wet or rich natural gas after methane and ethane. In so-called “dry gas” there may only be trace amounts of propane or none at all. Propane and LP gas (liquified petroleum gas) as are not exactly the same. LP gas is mostly propane with some normal butane and some iso-butane. Propane is a gas at normal temperature and pressure but like the other natural gas liquids it can be compressed into a transportable liquid. Propane is liquefied when pressurized to 160 psi and is stored at in tanks at 200 psi at 100 deg F. When it is de-pressurized by being drawn from the tank for use it changes back into a gas. LP gases were first isolated around 1911-1913. By 1927 annual U.S. production reached 1 million gallons, by 1945 it was 1 billion gallons, and by 2004 there was over 15 billion gallons being used annually in the U.S. Some propane is imported, mostly from Canada (via pipeline and rail) although U.S. supplies are generally adequate. Even so, there was a temporary shortage in the recent winter of 2013-2014 with the polar vortices. Production growth for propane is greater than all the other NGLs – 50% of NGL production growth. This is due to its abundance in natural gas and no need to reject it (keep it in the natural gas stream) like ethane is rejected. Propane production from natural gas processing plants grew by 260,000 Bbls/day from 2012-2014. This is due primarily to the high propane content of much shale gas, especially the Marcellus and Utica, the main gas production growth drivers in the U.S.

Propane Combustion

Propane combusts cleaner than gasoline but not as clean as natural gas, or methane, which would be considered the “lightest” hydrocarbon. Basically the more carbon atoms in the formula of the hydrocarbon, the heavier it is and the “dirtier” is its combustion in terms of soot, carbon monoxide, carbon dioxide, and impurities like SO2 and NOx.

Primary Propane Storage and Transport

There is propane storage in places such as Sarnia, Ontario; Fort Saskatchewan, Alberta; Conway, Kansas; and near the NGL Hub at Mt. Belvieu, Texas. Propane is stored in huge underground salt caverns in these areas. Up to 80 MM Bbls can be stored. Propane is also shipped by pipeline, truck, ship, barge, and railway.

Propane as a Petrochemical Feedstock for Propylene in Propane Dehydrogenation Units

Several new Propane Dehydrogenation Units are scheduled to be built in the U.S. over the next few years. These plants can produce ethylene and propylene from propane. As ethane crackers rely on ethane as feedstock their production of propylene will decline. The propane dehydrogenation units can then be the most economic source of feedstock for propylene production. A new DOW Chemical propane dehydrogenation unit came online in December 2015 and one more new big one is slated to come on soon. These new plants will increase domestic propane demand slightly in the short-term but not a whole lot so exports will continue to increase. 

Propane Prices, Demand Projections, and Exports

New petrochemical demand in the U.S. is expected to be offset by reduced demand in the home heating sector as more customers switch to electricity and cheaper natural gas where available. More efficient appliances are also expected to slow propane demand. Exports to Latin America, Europe, and the Asia Pacific are expected to take up excess U.S. supply. Soon more propane will be exported from the U.S. than is used in the U.S. Propane prices, and indeed all NGL prices, dropped significantly in late 2014 with the oil price crash. In December of 2014 propane exports commenced from the Marcus Hook, Pennsylvania facility. So far 185 new propane-carrying vessels have been built with more expected. Currently, U.S. propane inventories are at an all-time high but are expected to come down as domestic gas production slows and as exports increase. Projections are that propane inventories will be in the normal range through 2017. The EIA predicts modest growth in propane production over the next few years. Propane exports increased drastically from 10,000 Bbls/day in 2011 to 500,000 Bbls/day in 2015.

The Potential of LP Gas to Alleviate Energy Poverty and Extend Lives

The portable, generally inexpensive, and generally safe nature of propane-dominated cylindered LP gas gives it the unique ability to alleviate energy poverty in remote and rural areas throughout the world. Propane fires for cooking and heating can replace dung and wood fires that when unvented or poorly vented can lead to very significant health problems as well as house fires. Even in the U.S. and developed countries it can be quite convenient to have a propane tank and small heater for backup in case of an outage or to stay in rural cabins without grid or pipeline access. 

It is estimated that over 1.5 million people die premature deaths annually around the world due to the chronic effects of smoke from biomass. It is also a fact that cooking smoke disproportionately affects women and children. In 2010 then Secretary of State Hillary Clinton and the U.S. State Department launched the Global Alliance for Clean Cookstoves which sought to provide aid for the 4 billion people who cook with solid fuels, often without adequate ventilation. Due to cost most of the stoves were pelletized and small biomass stoves that were a significant improvement but LP gas stoves are also offered to those who can afford to buy the fuel. Countries in need like India, China, Kenya, Nigeria, and many others may also subsidize safer fuels such as LP gas. The Clean Cookstove project can also potentially alleviate CO2 emissions by increasing the sustainability of biomass harvesting and processing and burning it in lower emissions stoves and thus could be benefited by carbon pricing by providing offsets say advocates. Black carbon, or soot, from wood and dung fires in India has also been implicated in accelerating the melting of Himalayan glaciers by altering the albedo if the ice so that it absorbs more heat and reflects less heat.

Propane in the Landscaping Industry and as a Fuel for Forklifts

Recently, there is a trend of outfitting mowers and landscape equipment to run on propane. There are significant advantages: less pollution, fueling from a tank installed on company premises, quieter operation, and lower cost. My guess is that maintenance may be easier than gasoline equipment where ethanol content in gasoline and condensation can sometimes be problematic. There are also federal and state incentives to covert gasoline and diesel equipment to run on propane which aids the economics further. Propane is a common fuel for forklifts and can be used inside warehouses due to its lower emissions, especially its lower carbon monoxide emissions.

  

Some Current Storage and Transportation Issues (Including the Multiple Mariner East NGL Pipelines and the Utopia Pipeline)

As mentioned above, propane storage fields are concentrated in just a couple areas in the U.S. and in Canada and yet demand is spread throughout both countries and demand can spike in the winter. These underground storage facilities are referred to a primary storage. Propane is transported via pipeline in “purity” pipelines which is pure propane or LP gas, or in y-grade or “raw make” pipelines which transport unseparated natural gas liquids. A current pipeline attempting to be developed is the Sunoco Logistics Mariner East 2 line which is slated to run alongside their Mariner East 1 pipeline that has carried both propane and ethane and on the same right-of-way. They are also evaluating an will make a decision soon as to whether to add additional capacity on a second Mariner East 2 line (ME2X). All the pipes will delivery natural gas liquids to the Marcus Hook facility for the petrochemical plant, for local markets, for export to Europe, and for export to the Gulf Coast. There has been significant opposition to this pipeline even though there is already a pipeline there! The opposition is due to the fact that much of the propane would be exported so that pipeline opposers are claiming that FERC eminent domain would not be applicable to exported products.

Propane may be transported via pipeline as a mix of NGLs in a y-grade or “raw mix” pipeline, in a propane “purity” pipeline with just propane, or in a mix with another NGL or two, typically ethane or butane. The Utopia East Pipeline is planned to carry a mix of ethane and propane from the Utica Shale areas in eastern Ohio to Toledo in northwest Ohio and on to Windsor, Ontario for a petrochemical feedstock. This pipeline is slated for an initial capacity of 50,000 Bbls per day with two pump stations to be expanded with additional pump stations to 75,000 Bbls per day. Its proposed full in-service date is Jan, 2018. It is a 240-mile 12-inch line. It is a ‘common carrier’ pipeline which means it will transmit product as supplied by any company requesting transmission that it can fit rather than being dedicated to specific customers. 

Crestwood Midstream Partners Propane Storage Project in New York Unlikely to Be Approved

New ideal underground storage opportunities have been sought. One is in the old Cargill salt works near Seneca Lake in upstate New York now owned by Inergy LP and Crestwood Midstream Partners. This is an ideal salt cavern storage situation and gas has been stored there for many years. The plan is merely to expand the storage to add LP gas. The gas would be stored in the brine that fills the salt caverns but also would need to be separated out from the brine when retrieved which requires flaring and compression. LP gas has been stored without incident in small brine-filled salt storage caverns in the same formation in New York nearby since the 1950’s. This planned expansion has met with anti-fossil fuel protests, led by Sandra Steingraber, a scientist but also an environmental activist. Famed environmentalist Bill McKibben also recently joined a blockade protest of the facility. She and other trained protestors are probably over-exaggerating the dangers of the facility although some dangers do exist with any hydrocarbon development and storage fields are no exception as the recent Aliso Canyon leak showed. However, that leak was clearly based on a known aging and faulty well and bad judgment. Even so, since Seneca Lake is a source of drinking water for 100,000 people and the project would entail significantly increased rail traffic of pressurized containers of propane and butane, there may be slightly more risk and I predict that the project as it is now will not be approved in light of the New York state trends against “fracked” gas. In addition, many local businesses and municipalities have come out in opposition to the project. However, New York residents still use significant amounts of propane and lack of storage may exacerbate shortages, causing more to have to be trucked on short notice in dangerous weather conditions. The NGL Hub at Marcus Hook, near Philadelphia may end up being a supply point for New York propane.

Secondary and Tertiary Storage

These days secondary and tertiary propane storage in production and distribution facilities and individual tanks is kept better documented than in the past in the event of winter shortages. This is due to the fact that secondary and tertiary storage is more immediately important in supply shortages than primary storage which in the past has held an overhang of about 20-25% of annual usage. Primary storage capacity vs secondary plus tertiary storage capacity are roughly the same (or at least were in 2000). Since propane is predominantly a heating fuel (it is not used for electricity and it transportation use is limited) its price, supply, and demand are seasonal. While there are extensive pipeline systems that transport propane, still much of the propane must be shipped from pipeline terminals to retail facilities by truck and truck transportation can be hampered by weather and re-supply can be slow in the event of a shortage.

  

Propane as a Growing Transportation Fuel

Propane has long been utilized as a transportation fuel. Currently, it is the third most commonly used fuel in the U.S. after gasoline and diesel.  Several million vehicles from light to heavy duty run on propane worldwide. Although LPG-fueled cars are rare in the U.S. there are about 4.5 million LPG vehicles in Europe. Compared to gasoline propane holds 86% of the energy of gasoline at the same tank size. It has advantages over gasoline and diesel in terms of greenhouse gas emissions, pollutants, and smog-forming NOx and VOCs. It runs quieter and remains cheaper than gasoline and diesel. It is also produced in America as opposed to refined diesel and gasoline which combines significant amounts of foreign imports. Vehicles typically have longer life than gas and diesel vehicles. Like CNG and LNG vehicles they are superior in fleets, buses, school buses, waste management vehicles, etc. due to the reduction in emissions of urban vehicles that have long idling times in populated areas.  Propane as a transport fuel is also called ‘autogas.’ Propane vehicles are said to have lower maintenance costs as well. Some people opt to convert their vehicles to run on propane with conversion kits but these can be expensive, subsidies are generally poor, and fueling requires proper connections which are not always universal. However, in places like the U.K. and other European countries, and Australia, propane or bi-fuel (propane and gasoline) vehicles are common and refueling infrastructure is generally more available.

The Many Other Important Uses for LP Gas

Other uses for propane gas include vented furnaces, unvented open-flame heaters, pizza ovens, cook stoves for food vendors, smokers, kilns, forges, torches, soldering, flame weeders, floor sanitizers for livestock enclosures, industrial burners, jewelry melting and moulding, hot water tanks, refrigerators, dryers, fuel for ballooning, LPG-fueled boats, welding and cutting torches, grain and fruit drying, outdoor patio heaters, BBQs, and home stoves. Thus, propane is a very versatile and portable fuel. It also has a very good safety record and accidents are quite rare – although they have occurred.

Bio-Propane?

LPG has been made synthetically with the use of genetically engineered E Coli bacteria that are tricked by enzymes into making propane as a waste-product from sugar consumption. This work is in the research stages and the authors of the work suggest 10 years to when it could become a commercial process.

References:

Short-Term Outlook for Hydrocarbon Gas Liquids, A Supplement to EIA’s Short-Term Energy Outlook, March 16, 2016

On the Cutting Edge with Propane Power in Pittsburgh – by Dan Dix, Shale Media Group, April 6, 2016

Propane, at Wikipedia.com

The Role of Liquified Petroleum Gas in Reducing Energy Poverty – by Masami Kojima, The World Bank, Extractive Industries for Development Series #25, December 2011

Storage Gaps Threaten US Winter Propane Supply – by Dan Lippe, in Oil & Gas Journal, 12/04/2000

Gas Storage Expansion Plan Adds New Wrinkle to Fracking Controversy – by Tina Casey, in Triple Pundit (triplepundit.com), April 23, 2013

Gas Storage at Seneca Lake Fuels Outrage and Support – by Ray Finger, in Star-Gazette (stargazette.com), Jan 16, 2015

Seneca Lake Gas Storage: Safety, Environment Concerns: Fears Over Explosion, Increased Lake Salinity, Danger of Rail Transport of Propane Gas – by Tome Wilbur, in pressconnects.com, June 26, 2015

Sunoco LP Delays Construction of Mariner East 2 Pipeline, (Sunoco LP Conference Call) from Seeking Alpha, posted at Marcellus Drilling News, Feb, 26, 2016

New, Heavier-Duty Propane Autogas F-750 In Production – Roush Clean Tech (roushcleantech.com)

Igniting Change: A Strategy for Universal Adoption of Clean Cookstoves and Fuels – by Leslie Cordes and the Global Alliance for Clean Cookstoves

LPG – Propane as a Transportation Fuel – Consumer Energy Center, California Energy Commission (Ca.gov)

The Domino Effect: GHow the Shale Revolution is Transforming Energy Markets, Industries, and Economies – by E. Russel Brazel (CWL Publishing, 2016)

The Properties and Composition of LPG – by Eric Hahn, LPG Gas Blog – elgas.com.au

LPG Becomes a Renewable Energy Source – by Eric Hahn, LPG Gas Blog – elgas.com.au

Kinder Morgan – Utopia East – utopiapipeline.com

Natural Gas – Fuel for the 21^st Century – by Vaclav Smil (Wiley, 2015)