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Source: Reuters

FACTBOX-Condensate, gas liquids pose oil market dilemma

Published: 15 Sep 2009 01:45:18 PST

Sept 15 - Oil and gas exporters are producing increasing amounts of condensate and gas liquids -- ultra light liquid hydrocarbons that are used to make chemicals and other high-value oil products such as gasoline.

Much of the new production comes from the Organization of the Petroleum Exporting Countries (OPEC), posing a policy challenge to the producer group and its efforts to exert a measure of control over the oil market.

These liquids, some of which are turned into liquefied petroleum gas (LPG), sold separately to petrochemical companies or which to go oil refineries as light feedstock, often compete directly with light crudes in downstream oil markets.

OPEC imposes no limits on their production.


Sometimes called "wet gas", condensate is a mixture of light hydrocarbons that exist as a gas in underground reservoirs but which condense to form a liquid at atmospheric conditions.

Condensate is a low-density, high-API gravity liquid hydrocarbon phase that generally occurs in association with natural gas, and so usually comes from gas fields. Its state as a liquid depends on temperature and pressure in the reservoir allowing condensation of liquid from vapour. It often has very few contaminants, such as sulphur, which increases its value.

Condensate has a typical API gravity of 50 to 120 degrees, making it much lighter than most crude oils. Some in the oil industry have a broader definition, saying they can have an API gravity of 44-53 degrees.

Light hydrocarbon liquids are particularly lucrative because they can easily be refined into high-value oil products.

Sometimes "condensate" is a word given to any liquid coming from a gas field or from the processing of natural gas that is pentane (C5H12) or a similar light gas liquid. Oilfields also tend to produce condensate when they are first drilled because lighter hydrocarbons move up towards the surface within fields.


Condensate and natural gas liquids production has been increasing worldwide for several decades.

Data on condensate and gas liquids production is very difficult and is often wrapped in with data for other light hydrocarbons such as the liquefied petroleum gases propane and butane in a general category of natural gas liquids (NGLs) and "others".

Global production of this broad category of light hydrocarbons is about 9.4 million boepd, equivalent to more than 11 percent of world oil production and up from 7.4 million boepd in 2000, according to Edinburgh-based oil and gas consultancy Wood Mackenzie. By 2015, production worldwide was likely to exceed 11 million boepd, it said.

Within OPEC the rise in gas liquids production has been even more rapid. The 12 members of OPEC have seen their output rise to over 4.7 million boepd this year from below 3.9 million in 2006, OPEC's figures say.

Other estimates of OPEC condensate and gas liquids output are even higher.

The International Energy Agency (IEA) says OPEC is producing around 5.05 million boepd, up from less than 3 million boepd in 2000, an increase of almost 70 percent so far this decade. By comparison, global crude oil production has risen by closer to 6 percent in the same period.

Some analysts, such as IHS Global Insight, say OPEC's production of condensate and other gas liquids are likely to reach almost 6.4 million boepd next year.

Condensate and gas liquids production has increased as a result of higher investment in the production of natural gas, which has seen output rise by more than a quarter this decade.

Countries with large natural gas fields, such as the United States, Russia and Norway, are also big producers of condensate and other gas liquids, as are OPEC members Iran, Saudi Arabia and Qatar. The latter three are expected to increase their condensate and gas liquids output by as much as 2 million boepd by 2016, according to a study by Asia Pacific Energy Consulting.


Unlike its policy on crude oil, OPEC imposes no targets for the output of condensate and gas liquids, partly because this group of hydrocarbons has no universally accepted definition.

Condensates and gas liquids have traditionally not been sold on their own and are a by-product of other production streams, two other reasons OPEC officials have given for not attempting to impose controls on their production.

Output of gas liquids is also inelastic because it is usually dictated by volume of gas production, rather than price.

Many oil and gas companies, particularly in Asia, have invested heavily over the last decade in processing units such as condensate splitters, which refine gas liquids. Condensate splitters are relatively inexpensive to build compared to complex refineries and repay investors quickly.

Because of the sophistication of new processing units, condensate and gas liquids are alternative feedstocks for the processing of high value oil and their use can replace crude.

For this reason some analysts argue that OPEC should impose production quotas on condensate and other gas liquids if the producer group wishes to retain some degree of control over the supply and demand of oil in the market and hence oil prices.

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