One of propane's unique features is that it is not
produced for its own sake, but is a by-product
of two other processes: natural gas processing
and petroleum refining.
Natural gas plant production of propane primarily
involves extracting materials, such as propane
and butane, from natural gas to prevent these
liquids from condensing and causing operational
problems in natural gas pipelines. Similarly,
when oil refineries make major products such
as motor gasoline and heating oil, some propane
is produced as a by-product of those processes.
It is important to understand that the by-product
nature of propane production means that the
volume made available from natural gas processing
and oil refining cannot be adjusted when prices
and/or demand for propane fluctuate.
In addition to these two processes, propane demand
is met by imports and by using stored
inventories. Although imports provide the smallest
(about 10%) component of U.S. propane
supply, they are vital when consumption exceeds
available domestic supplies. Propane
is imported by land (via pipeline and rail car
from Canada) and by sea (in tankers from such
countries as Algeria, Saudi Arabia, Nigeria,
Venezuela, and Norway).