NGL hedging takes off amid shale gas boom
US production of natural gas liquids (NGLs) has surged in recent years, causing NGL derivatives trading to expand as market participants hedge more of their output. But the market for NGL risk management products remains a work in progress, finds Alexander Osipovich
One of the lesser-known side effects of the US shale gas boom has been a surge in the supply of natural gas liquids (NGLs), which are by-products of natural gas drilling. As shale gas developers have unlocked huge new deposits of so-called wet gas – natural gas mixed with liquids – the supply of NGLs has climbed. In 2012, production of NGLs hit 2.4 million barrels per day, according to the US Energy Information Administration – a rise of 34% compared with 2008 (see figure 1, below).
The sudden
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