It Takes Two, Part 3 - More Ethane Export Capacity - And More Exports to China - On the Way

The U.S. is by far the world’s largest ethane producer, and exports one-seventh of what it produces, with most of the exported volumes tied to long-term contracts to supply ethane-consuming steam crackers. Canada is the #1 importer of U.S. ethane, receiving its volumes via three pipelines. As for U.S. exports by ship, India is on top, followed by the UK and Norway. But watch out! China, which started importing U.S. ethane a year or so ago, is poised to buy a heck of lot more, with most of the incremental volumes to be shipped out of a new ethane export terminal about to come online in Nederland, TX. Today, we continue our series with a look at the Orbit Ethane Export Terminal, which is being jointly developed by Energy Transfer and Satellite Petrochemical, the U.S. subsidiary of a Chinese petrochemical company.

As we said in Part 1, the Shale Revolution enabled the U.S. to become a leading producer of NGLs, including ethane. Just last week, the Energy Information Administration (EIA) reported that the U.S. produced a record 2.2 MMb/d of ethane in July 2020, and we estimate that around a million additional barrels per day on average this year has been “rejected” into the natural gas stream at processing plants and sold (at the price of gas) for its Btu value (see Turnin’ Natgas into Gold). About 280 Mb/d, or 14% of total U.S. ethane production, is currently being sent to other countries, with about one-third of the exports being piped to Canadian steam-cracker customers on either the Vantage, Mariner West, or Utopia pipelines. The other two-thirds is being loaded on Very Large Ethane Carriers (VLECs) or smaller ethane carriers and floated to crackers in a number of other countries, with 63 Mb/d, on average, being shipped to India, 36 Mb/d headed for the UK, and 32 Mb/d bound for Norway. China is next — since September 2019, it has been receiving an average of 22 Mb/d of U.S. ethane, with 80% of the volumes being shipped out of Enterprise Products Partner’s Morgan’s Point export terminal on the Houston Ship Channel and the rest coming from Energy Transfer’s Marcus Hook facility near Philadelphia.

In Part 2, we described the Marcus Hook Industrial Complex (ethane exporting capacity, 70 Mb/d) and the Morgan’s Point Ethane and Ethylene Export Terminal (ethane exporting capacity, 200 Mb/d) in some detail. We also discussed the long-term supply agreements that account for the vast majority of the ethane being exported. For example, Ineos, the London-based petrochemicals company, holds multiyear deals to supply its own steam crackers in Grangemouth, Scotland, and Rafnes, Norway, as well as ExxonMobil and Shell’s jointly owned steam cracker in Mossmorran, Scotland. Ineos also is under contract to supply ethane to SP Chemicals’ new 1,400-million-pounds/year steam cracker in Taixing City, in China’s Jiangsu province, which came online just over a year ago and is part of a much larger SP Chemicals complex there.

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