# Understanding Natural Gas Liquids (NGLs): Types, Uses, and Challenges

## What Are Natural Gas Liquids?

Natural gas liquids (NGLs) are components of natural gas that have been separated and condensed into liquid form. They have a variety of applications, from producing plastics to fuels.

Thanks to innovations in drilling and refining technology, these chemicals represent a growing share of the U.S. petrochemical industry, but they can be expensive to store and transport safely.

### Key Takeaways

*   Natural gas liquids (NGLs) are valuable byproducts of natural gas extraction, offering economic opportunities through various industrial applications such as plastics production, heating fuels, and vehicular fuels.  
    
*   The extraction and production of NGLs have grown significantly due to advancements in technologies like hydraulic fracturing and horizontal drilling, providing additional revenue streams for the natural gas industry.  
    
*   While NGLs offer diverse applications and economic benefits, they pose logistical challenges due to their need for specialized handling, storage, and transportation given their volatile and flammable nature.  
    
*   The U.S. has become a major player in the global NGL market, driven by increased domestic production and export activities, positioning it as a leading exporter of these resources.  
    
*   Despite the potential profits, the volatility of NGLs limits their market reach, necessitating the development of processing plants to facilitate further use and international trade.

## How Natural Gas Liquids Are Extracted and Used

Natural gas liquids are valuable as separate products, and it is profitable to remove NGL from the natural gas. The liquids are first extracted from the natural gas and later separated into different components. Natural gas liquids are hydrocarbons. A [hydrocarbon](https://www.investopedia.com/terms/h/hydrocarbon.asp) is a molecule composed exclusively of carbon and hydrogen. As hydrocarbons, NGLs belong in the same family of molecules as do natural gas and [crude oil](https://www.investopedia.com/terms/c/crude-oil.asp).

## Exploring the Different Types of Natural Gas Liquids and Their Uses

Natural gas liquids are classified based on their vapor pressure:

*   Low = condensate
*   Intermediate = natural gas
*   High = liquefied [petroleum](https://www.investopedia.com/terms/p/petroleum.asp) gas

Additionally, chemical compositions of NGLs are similar, but their applications vary widely. Specifically, the many uses of natural gas liquids include cooking, space heating, and blending NGLs into fuels for vehicles.

### Uses and Applications of Ethane in Industry

Applications of ethane include plastics production and petrochemical feedstock—raw materials fed into an industrial production process to yield a different end product. End-use products include plastics, plastic bags, antifreeze, and detergent.

### Versatile Uses of Propane in Residential and Industrial Settings

Applications and uses of propane include residential and commercial heating, cooking fuel, small stoves, and petrochemical feedstock. Some vehicles also use propane as fuel.

### Key Applications of Butanes: From Rubber to Refrigerants

Butanes can be blended with gasoline and propane. Products include synthetic rubber for tires and lighter fuel. In its purest form, butane is useful as a refrigerant. Combined with propane, butane becomes liquified petroleum gas (LPG).

### Industrial Uses of Isobutanes and Their End Products

Industrial use of isobutanes can include refinery feedstock and petrochemical feedstock. End-use products include aerosols and refrigerants.

### Pentanes: Applications in Fuel Blending and Foam Production

Pentanes are used in natural gasoline and as a blowing agent for polystyrene foam. Pentanes plus, or natural gasoline, is mixed with vehicle fuel and exported for [bitumen](https://www.investopedia.com/terms/b/bitumen.asp) in [oil sands](https://www.investopedia.com/terms/o/oilsand.asp).

## Overcoming Challenges and Exploring Opportunities in NGL Production

The U.S. shale boom increased extraction rates of natural gas liquids and NGL extraction is positively related to the price of [crude oil](https://www.investopedia.com/terms/c/crude-oil.asp). When crude prices fall, companies expand their offerings to include NGLs, offsetting revenue loss.

There have been significant advancements in technologies such as horizontal drilling and hydraulic fracturing techniques, which involve using high-pressured water or liquids to extract gas. As a result, natural gas liquid production has increased steadily. NGLs offer [natural gas](https://www.investopedia.com/articles/fundamental-analysis/12/natural-gas-primer.asp) producers an extra income stream, helping diversify their revenue.

A challenge with natural gas liquids is that they're expensive to handle, store, and [transport](https://www.investopedia.com/terms/t/transportationexpenses.asp) compared to refined products because NGLs require high pressure or low temperature to be maintained in their liquid state for shipment and handling. NGLs are highly flammable, requiring special trucks, ships, and storage tanks.

The [volatility](https://www.investopedia.com/terms/v/volatility.asp) of NGLs limits their market use. As production increases, the need for processing plants to separate NGLs also grows.

Pros

*   NGLs are used in petrochemical feedstock that is turned into various chemical-based products.
    
*   NGLs have many applications including use as home heating, plastic production, and as a fuel.
    
*   NGLs are more widely available with advancements in drilling techniques.
    
*   NGLs offer oil and gas companies additional revenue streams.
    
*   The U.S. is increasingly exporting natural gas liquids.
    

Cons

*   NGLs are expensive to handle, store, and transport requiring special trucks, storage, and equipment.
    
*   NGLs require high pressure or low temperature to maintain their liquid state for shipment.
    
*   Increased NGL use has led to increased demand for processing plants that separate NGLs from natural gas.
    
*   Their volatility limits the number of natural markets available for their use.
    

## Examples of Natural Gas Liquid Processing

Let's say that a new production facility opened in Texas, whereby drilling for natural gas has resulted in a significant amount of the fuel. The gas is extracted from the well and sent to a production facility to be heated at various temperatures to generate the NGLs ethane and propane.

### XOM

Exxon Mobil Corp. ([XOM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=XOM)) is one of the largest producers of natural gas in the United States.

The ethane is removed from the natural gas stream after it reaches the necessary boiling point, followed by propane, which is a heavier gas resulting in a lengthier boiling process. Once the propane and ethane have been removed from the natural gas stream, in a process called fractionation, the NGLs travel via a [pipeline](https://www.investopedia.com/terms/p/pipeline.asp).

Eventually, natural gas liquids are shipped by specialized trucks to commercial businesses, industrial plants, and the local gas company. The propane can be used for residential and commercial heating as well as cooking. Lastly, ethane is used to create plastics such as water bottles and plastic bags.

## The Bottom Line

Natural gas liquids are chemicals that have been condensed and isolated after drilling. They have many uses, from heating and vehicle fuels to feedstock in the petrochemical industry. However, their volatility makes them hazardous, which represents an additional cost for transport and storage.

As refining technology improves, these components have provided a growing revenue stream for U.S. producers. Production of LNGs has increased due to innovations in hydraulic fracturing and horizontal drilling.