US propane price and distribution problems have been caused by extended cold temperatures and high oil and gas prices, says the US National Propane Gas Association.
This consensus emerged from a teleconference last month on winter supply issues among NPGA members-a first for the propane industry, the association said.
More than 160 people participated in the Dec. 12 event.
NGL curtailments
The association said speakers complained that the jump in natural gas prices may curtail NGL production, because it's not economic now for producers to recover propane from the natural gas stream. They also said many refineries are burning their propane as a fuel instead of selling it in the marketplace.
NPGA said marketers have had little trouble obtaining product so far this year, except in the western US.
Earlier, it released an analysis by OPIS Energy Group. The analysis noted that because propane is a byproduct of refining and gas processing, unexpected or unusual shifts in the supply and price of those fuels have a direct impact on the supply and price of propane.
OPIS said gas processing plants have been closed in Louisiana "because natural gas prices are higher than the gas liquids that are usually extracted from the raw stream. The usually more-expensive liquids can be sold for much more if they remain in the natural gas that is then sold downstream."
NPGA said about 8.1 million US households use propane for home heating.
Refinery use shift
The association said that some refiners that normally make propane by refining crude are burning it instead, backing out natural gas that has risen to more than $9/MMbtu on spot markets.
"The refinery use of propane is resulting in the removal of thousands of barrels per day of propane from the market, estimated to be 125% or more of their normal production levels, that would otherwise be available to traditional end-users such as homeowners and small businesses."
It said Pacific Northwest and West Coast refiners were the first to begin using their own production as a boiler fuel to counteract the high cost of gas. That forced propane imports from the Midwest and East. "Thus, much of the industry's fleet of trucks and rail cars that are normally used for product distribution in the eastern half of the nation are now positioned in the West. This is likely to cause temporary product delivery slowdowns in other parts of the country."
It said, "Wholesale propane price movements of as much as 20-50¢/gal in some areas of the country are being reported."
