(Bloomberg – October 9, 2013) Ethane’s Tumble Seen Boosting Profits at Dow to Westlake: Energy (By: Jack Kaskey)
If you want to make a chemical company boss smile these days, here’s the word to use: ethane.
Ethane isn’t a term ordinary people come across every day but after processing the natural gas liquid into ethylene it does end up in a lot of ordinary things: plastic bags and bottles and even bumpers on cars. It’s used to make chemicals found in everything from antifreeze to diapers.
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ATEX Pipeline
The slide in ethane prices may begin to accelerate as soon as the first quarter of 2014, when Enterprise Product Partners LP (EPD) opens its Appalachia-to-Texas ethane pipeline, known as ATEX, Keller said in an Oct. 3 phone interview. The 1,230-mile (1,980-kilometer) pipeline has the capacity to bring 190,000 barrels a day of ethane to Gulf Coast petrochemical makers, exceeding current demand by about 20 percent.
Ethane could dip as much 4 cents below gas prices until suppliers from the Rocky Mountains and other regions respond by cutting ethane shipments to the Gulf, according to Keller.
The duration and depth of the discount depends on how much ethane is piped to the Gulf and the timing of expansions by LyondellBasell, Westlake and others at ethane-consuming ethylene plants, said Kelly Van Hull, manager of energy analytics at RBN Energy LLC. Dow and Enterprise declined to comment on the outlook for ethane and Westlake didn’t respond to requests for comment.
Ethane at Mont Belvieu in Texas, the main U.S. NGL storage hub, has traded at a steep discount to gas just twice in the past decade -- the fourth quarters of 2005 and 2008. Supply disruptions due to hurricanes played a role in both instances, Keller said. More recently, ethane fell to a discount of less than 2 cents for 10 days in June, the data show.
Propane, Butane
NGL producers are already supplying ethane at a loss, after taking into account the expense of separating it from the gas stream and transporting it via pipelines, according to Van Hull. They persist because of contractual obligations to supply chemical makers and because ethane is usually found mixed in with propane and butane, two much more valuable NGLs.
Propane has rallied 35 percent since June 20 at Mont Belvieu and butane has climbed 37 percent, while ethane has gained just 4.2 percent, according to data compiled by Bloomberg.
“Propane is what supports continuing production, because you are already eating it on ethane,” Van Hull said by phone on Oct. 3.
