When propane was first identified as a compound in gasoline in 1911, entrepreneurs immediately started looking for ways to produce it and begin marketing it as a fuel. They recognized that propane gas can easily be converted to liquefied petroleum gas (LP gas) at the right temperature and pressure. Propane’s easy storage and safe transportability made it a widely used fuel across the United States within 10 years of its discovery.
Ways Propane Is Produced
Although processing has changed in many ways over the years, there are still two main ways that propane is produced today: refining, and natural gas production.
- Propane from natural gas production: In the U.S., the majority of propane is produced as a byproduct of natural gas extraction, or else extracted from oil wellhead gas at processing plants. Propane makes up about 5% of unprocessed natural gas. During natural gas processing, byproduct gases like propane, butane, and ethane are removed from the raw natural gas so they will not condense in natural gas pipelines.
- Propane from crude oil refining: Propane is also a natural byproduct in the crude oil refining process. Oil refineries crack crude oil into multiple products, including gasoline, jet fuel, diesel fuel, heating oil, and kerosene. During the refining process, LP gases are produced at various stages. The actual percentage of propane extracted from the crude oil depends on the process and the type of refinery.
In the future, it’s possible that other propane production options will exist. Scientists are currently researching ways to synthesize propane or produce it from renewable sources like vegetable oil or biomass. Possible biomass sources for propane include switchgrass, sugarcane, or microorganisms.
Why Propane’s Production Method Matters
Propane is different from other fuels in the way it is produced and transported, and as a result, the propane market is somewhat unique.
Domestic production: In the United States, the vast majority of the propane market is produced domestically. In fact, with the atmosphere of increased energy exploration in recent years, the U.S. has been a net exporter of propane for many years. Since the U.S. currently meets most of its propane needs domestically, propane is less subject to energy security risks than other fossil fuels. Consumers who are concerned about dependence on foreign fossil fuels may be reassured by the fact that in most years, almost all propane used in the United States is also produced in the U.S. The domestic production of propane is generally a marketing advantage for propane.
Byproduct status: Propane is a unique fuel because it is a naturally occurring byproduct of other fuel production processes. As a result, the availability of propane depends on production of natural gas and crude oil. Currently, the abundance of U.S. propane is increasing along with natural gas supplies. However, since propane a byproduct of producing other fuels, its availability is also tied to production of those other fuels.
Liquefied form: Propane itself is stored and transported in its liquefied form, and the exact makeup of propane must meet various standards. The ASTM has a standard for LP gases that regulates factors like vapor pressure, residue, and relative density. These standards ensure that propane is a unified commodity. Therefore, factors like safety and experience become important differentiators in the propane marketplace.
As a global commodity, propane’s availability and value are subject to complex influences. For propane retailers, it’s an advantage to work with a company with long history in the industry and a strong understanding of the marketplace. Smith Gas Liquids Company works with you to meet your particular requirements, so contact us for your wholesale propane needs.