The energy consultancy Wood Mackenzie notes that recent declines in NGL prices are exacerbating the financial stress facing operators following the fall in oil prices over the past year. This is due to an oversupplied global market, driven by North American rich-gas production and a lack of market access for ethane and LPG—with the exception of the Gulf Coast.

While operators able to segregate their natural gasoline production are still able to recognize some value uplift from sales into the Canadian diluent market, conditions are putting pressure on the remainder of the NGL barrel. Expansion of export capacity in the Northeast should reduce congestion on the U.S. rail system and free up storage capacity by next year.

However, the strength of global NGL prices in the face of a surplus of light hydrocarbons remains uncertain. The only market left for these NGL streams is ethylene cracking—for which ethane is the preferred feedstock—yet prices for propane and butane are falling to position them as an economic substitute.

Shale plays with rich-gas production like the Utica, southwest Marcellus, and Anadarko Woodford will be the primary sources of NGL production growth. Due to the additional costs associated with extracting, processing, and transporting NGLs, some dry gas plays like the Haynesville Shale could offer better investment opportunities than wet gas plays throughout the remainder of the year.