Natural Gas Marketing: What is Ethane Rejection
Summary Ethane rejection is the term used by natural gas processors to describe selling ethane as a part of the residue gas stream rather than as a natural gas liquid (NGL). Residue gas or pipeline quality gas is used in electric generation stations, your stove top, or water heater. NGLs are used in petrochemicals to make plastics, among other things. Ethane rejection is an operational decision that affects professionals in both natural gas marketing and NGL marketing.
Background Natural gas comes out of the ground as methane mixed with other heavier components: ethane, propane, butanes, and pentanes plus. What we call residue gas or pipeline quality gas is mostly methane. Each of the components have progressively higher molecular weights, which causes them to boil at progressively higher temperatures. Differences in boiling points are what makes gas processing and NGL fractionation work.
Imagine a bootleggers still with a fire at the bottom and cooling coils at the top. As you heat the alcohol and water, alcohol readily boils out of the top (with some water), and the water comes out of the bottom (with some alcohol). Now, imagine doing the same thing with methane and heaviers. In our still, the demethanizer, methane (with some ethane and heaviers) comes out the top, and ethane and heaviers (with some methane) comes out of the bottom.
In Ethane Rejection, the plant operator tweaks demethanizer temperatures to cause more ethane to boil out of the top with the methane gas stream, leaving less ethane in the bottom to sell as a liquid NGL. Ethane, because of its higher molecular weight, puts more burnable energy into the gas pipeline. Why would the operator want to do that?
Economics Gas processors look at the market value of ethane burned as an MMBtu in the pipeline gas stream versus its value as a gallon of liquid. The plastics industry turns liquid ethane into ethylene, then polyethylene, and then into things like trash bags. So is ethane worth more burned in your stove top or lining your garbage can?
If ethane is worth more at a plant as a liquid (and ultimately lining your garbage can), the processor recovers ethane. If its worth more as a gas (ultimately burning on your stove top), he rejects ethane. This economic choice what we call a real option. The processor has the operational right but not the obligation to sell ethane as a gas, depending on what nets him the higher price at his gas processing plant. Of course, he can only reject as much ethane as permitted by the pipeline specs. We wouldnt want your stove top to blow out or blow up!
Does this explanation help? Let us know what you think.
I like that explanation ... Now I can go back and read the original article intelligently (to the extent that I can do anything intelligently).