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Short-Term Energy Outlook Model Documentation: Hydrocarbon Gas Liquids Supply and Demand

November 19, 2015

Overview

The U.S. Energy Information Administration's Short-Term Energy Outlook (STEO) produces monthly projections of energy supply, demand, trade, and prices over a 13-24 month period. Every January, the forecast horizon is extended through December of the following year. The STEO model is an integrated system of econometric regression equations and identities that link the various components of the U.S. energy industry together in order to develop consistent forecasts. The regression equations are estimated and the STEO model is solved using the Eviews 8 econometric software package from IHS Global Inc. Diagnostics for the regression equations are given in Appendix C. The model consists of various modules specific to each form of energy resource. All modules provide projections for the United States, and some modules provide more detailed forecasts for different regions of the country.

The hydrocarbon gas liquids (HGL) module of the Short-Term Energy Outlook (STEO) model provides supply, demand, and inventory forecasts for four types of HGL:

  1. ethane – including ethylene
  2. butanes – including normal butane and isobutane and their olefins, butylene and isobutylene
  3. propane – including refinery grade propylene
  4. natural gasoline - equivalent to pentanes plus

HGL are produced by natural gas processing plants, fractionation facilities, refineries, and condensate splitters (Figure 1). The HGL model provides forecasts of natural gas plant production, refinery production, net imports (exports), refinery inputs, stock build (draw), and consumption (product supplied) for each type of HGL.

HGL produced at natural gas plants and fractionators increased by about 65% between 2008 and 2014, because it is a co-product of rapidly expanding shale gas production (Figure 2). In recent years, relatively low natural gas prices and high crude oil prices have encouraged shale gas developers to concentrate on wetter gas plays, which have a higher concentration of HGL. From a demand-side perspective, HGL is both fuel and feedstock in various markets (petrochemicals, residential heating/cooking, agriculture, and motor fuel blending). Ethane (and its olefin ethylene) and propane (and its olefin propylene) are primarily consumed in petrochemical facilities such as ethylene crackers. Natural gasoline and normal butanes are primarily consumed by the transportation sector as a denaturant for ethanol and blendstock for gasoline. Learn more about the HGL market in Hydrocarbon Gas Liquids: Recent Market Trends and Issues.

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