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The EIA has begun tracking heat content of end-use natural gas, providing state-to-state comparisons of natural gas consumption. Gas in states with heavy ethane rejection generates more British Thermal Units (Btus) per cubic foot than states whose gas content is closer to pure methane.

High-Btu natural gas contains higher concentrations of natural gas liquids (mostly ethane and some propane) that have higher heat content than methane. Pure ethane has a heat content of 1,770 Btu/cf and pure propane 2,516 Btu/cf, according to the EIA’s data. It’s common in a low price environment, or in states with processing constraints or little ethane demand, for natural gas processors to leave ethane in the natural gas stream, a practice known as ethane rejection, rather than separate it for sale as a distinct product.

eia-heat

Source: U.S. Energy Information Administration, Natural Gas Monthly

“This is particularly evident in 2013 in the Marcellus Shale play in Pennsylvania, West Virginia, and Ohio, as well as in the Bakken formation in North Dakota,” the EIA reported.

There are operators in these basins who are removing and selling ethane, such as Range Resources (ticker: RRC), a large Marcellus operator that uses its sprawling market access to sell ethane. In the Bakken, as much as 30% of associated gas was flared due to takeaway constraints. A state-enforced cutback on flaring has increased gas infrastructure, and the ethane demand is expected to grow once a new petrochemical plant with ethane feedstocks is built in the region.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.