Energy Transfer filed an 8K with the SEC on June 3 indicating that it, too, received a letter from the Bureau of Industry and Security (BIS) limiting ethane exports to China. As is the case with Enterprise, ethane exports to China cannot be done without a license issued by the BIS (Hey, Hey, What Can I Do?).
Butane was originally included in the letter to Enterprise, however, a press release from the company on June 4 indicated that the requirement for licenses for butane exports is no longer in effect. There was no mention of butane in the 8K from Energy Transfer.
Enterprise reported yesterday that three of its cargoes destined for China totaling 2.2 million barrels were denied licenses by the BIS. The addition of Energy Transfer to the list will further degrade the ethane market. One of Energy Transfer’s largest shippers is Satellite Chemical in China.
Ethane prices fell from 25 c/gal on May 28 to 19.5 c/gal on June 4. This has brought the ratio of ethane to natural gas down from 1.12 on May 28 to 0.79 on June 4. The last time the ratio was this low was in November 2014.
With prices at this level, the signal to reject as much ethane as possible is being sent to processing plants around the country. Ethane is rejected when it is left in the gas stream at the processing plant rather than sent down pipelines as part of a raw mix stream. Raw mix is then fractionated into purity products including ethane which is used in steam crackers to produce ethylene and export markets.
Areas that are geographically distant from the Mont Belvieu/USGC NGL complex, such as the Bakken, Rockies and Northeastern U.S. will be less likely to recover ethane in this price environment provided they are able to stay within contract minimums.
