The ethane market isn’t for the faint at heart — it’s got lots of ups and downs, and it’s impacted by an unusually wide range of variables. A year ago this month, a combination of fractionation constraints in Mont Belvieu and rising demand from new ethane-only steam crackers sent ethane prices north of 60 cents/gallon. For most of the time since then, though, ethane prices were in something close to freefall, bottoming out at only 10 cents in late July before rebounding in recent weeks to 20 cents or so. During the big, months-long price decline, ethane traders and cracker operators did what anyone does when they can buy something they’ll need in the future for next to nothing — they stocked up. Today, we examine recent trends in ethane supply, demand, prices and storage levels, and take a look ahead.
Natural Gas Liquids
Energy markets are constantly changing, but pipelines can take years to complete, and once they’re in the ground, that’s where they stay. Therefore, it’s critical for midstream companies to build as much flexibility as possible into their plans for new pipelines and other infrastructure, because you never know what the markets for crude oil, natural gas, NGLs and refined products might have in store. Energy Transfer apparently has that flexibility in mind as it’s been building out its Mariner East pipeline system across Pennsylvania to the Marcus Hook Industrial Complex (MHIC) near Philadelphia. Today, we consider recent developments regarding these key midstream assets in the Northeast and their still-evolving uses.
In May 2019, the first-ever propane unit train from the Bakken to Mexico reached its destination, and since then, three more of these 100-car, single-commodity “bulk” trains have made the same trip. Facilitating these shipments by Twin Eagle Liquids Marketing is Marathon Petroleum Corp.’s (MPC) unit train-loading terminal in Fryburg, ND, which was initially set up to load crude oil but was recently expanded to handle propane too. And soon, the terminal in Torreón, Mexico, that has been receiving these unit trains will have a new loop track too, enabling producers and marketers to take full advantage of the bulk transport option. Today, we look at the economics and challenges of this relatively new propane export route.
In May 2019, Twin Eagle Liquids Marketing shipped a 100-car train filled with propane from North Dakota to Mexico, marking the first-ever single-commodity train — i.e. “unit train” — between the Bakken and the U.S.’s southern neighbor. As it turns out, it was also the first of what appears to be a regularly scheduled run to Mexico. Since May, three more unit trains have made the journey south from the Bakken’s first unit train terminal for propane. Rail shipments of propane to Mexico as part of mixed-goods trains aren’t new, but figuring out how to economically ship large quantities of propane via unit trains has long evaded NGL marketers and producers — that is, until now. What are the economics and other factors that finally made it possible, and what are the prospects and challenges ahead for unit-train exports to Mexico? Today, we look at how the first all-propane train to Mexico came to pass and what the outlook might be for these shipments to continue.
For a few days in late July, the price differential between propane stored at Enterprise Products Partners’ salt caverns in Mont Belvieu, TX, and propane stored at facilities owned by others a few hundred yards away quickly widened to as much as 10 cents/gallon. That’s by far the biggest spread of its type we can recall, and while we can’t say for certain what caused the “Enterprise-vs.-others” propane differential to blow out, there’s a likely — and familiar — culprit: NGL infrastructure constraints. Something else this unusual pricing event confirmed is that, no matter where the NGL storage, fractionation or pipeline constraint may occur, it almost always has an outsized effect on the much smaller NGL storage and fractionation hub in Conway, KS. What’s with that? Today, we look at the recent, rapid slide in propane prices at Enterprise’s Mont Belvieu storage facility and discuss what it tells us.
Rising U.S. production of NGLs and so-called “purity products” like ethane and propane, as well as growth in steam cracker capacity and NGL and ethylene exports, are giving added importance to NGL and ethylene storage capacity in underground salt caverns along the Gulf Coast. Mont Belvieu, TX, has long been the epicenter of both fractionation and salt-cavern NGL storage — and it will remain so — but there are other areas along the Texas coast with frac capacity and NGL storage, as well as steam crackers and export docks. The questions now are, is there enough in the right locations, and can what’s stored there be received and quickly sent out? Today, we begin a look at existing and planned NGL storage facilities along the Texas coast that are not in Mont Belvieu.
By the third quarter of next year, the Enterprise Hydrocarbons Terminal (EHT) on the Houston Ship Channel will have the capacity to export nearly 1.1 MMb/d of LPG — 435 Mb/d more than it can today. Also, Targa Resources and Energy Transfer are each planning 200-Mb/d expansions at their LPG export docks along the Texas Coast, and Phillips 66 and MPLX may very well be announcing projects of their own soon. All this suggests that there will be ample dock space available to propane and butane shippers if, as we expect, LPG volumes continue to ramp up in the 2020s. And, with Enterprise Products Partners’ promise to offer super-competitive rates at EHT, shippers are likely to enjoy low send-out costs. Today, we discuss recent developments on the propane/butane marine-terminal front and what they mean for LPG shippers and exports.
When it comes to U.S. NGL exports, propane and ethane grab most of the attention. Each accounts for a big share of the typical NGL barrel, and ethane exports are a frequent topic of conversation because of the potential for growth — especially if the U.S. and China find a way to end their trade war. But three other so-called NGL “purity products” — normal butane, isobutane and natural gasoline — are being exported in increasing volumes too, providing important supplemental revenue to NGL producers and marketers. What’s their story? Today, we look at the export volumes and destinations of three often overlooked purity products.
Offer any energy commodity at a low-enough price and buyers will surface, as long as there’s a way to get that liquid or gas from where it’s being sold to where it’s being used or put on a boat for export. That’s been the recent experience of the butane market in Western Canada, where a perfect storm of events last fall caused butane prices in Edmonton, AB, to freefall to near zero. But things have turned around, at least for now. Today, we take a look at the dramatic recovery of the Edmonton butane market and what might lie ahead.
The margin for producing ethylene by steam-cracking ethane has been less than a dime per pound since mid-March 2018, and less than a nickel for nearly nine of the past 15-and-a-half months. In fact, for two weeks last September, the ethylene-from-ethane margin fell below zero. And yet, a joint venture of two of the world’s savviest companies — energy giant ExxonMobil and petchem behemoth Saudi Basic Industries Corp., or SABIC — recently committed to building what will be the world’s largest ethane steam cracker: a 4-billion-pounds/year facility to be constructed near Corpus Christi by 2022. Is this a case of blind optimism? No, not when you factor in the cracker’s location, the JV’s concurrent plan to construct two polyethylene plants and a monoethylene glycol plant right next door, and the co-developers’ global market reach. Today, we discuss the thinking behind ExxonMobil and SABIC’s big investment in Texas’s San Patricio County.
Keyera Corp. and SemCAMS Midstream, two major midstream players in Western Canada, in mid-May announced they are proceeding with the construction of their joint-venture project — a new NGL and condensate pipeline system out of the liquids-rich Montney and Duvernay plays of Alberta. The planned Key Access Pipeline System would provide the first direct competition for the transportation of NGLs and condensate out of these producing regions, currently dominated by Pembina Pipeline Co. Any and all transportation options for the movement of condensate and other NGLs out of the Montney and surrounding plays will likely be welcomed by Western Canadian natural gas producers, who are looking to capitalize on oil-sands producers’ growing demand for homegrown sources of condensate for use as diluent in bitumen transportation. Today, we provide key details about the project and how it fits into the region’s existing condensate/NGLs market.
U.S. ethane exports have risen steadily over the past five years, from next to nothing in early 2014 to an average of 255 Mb/d in 2018 and 269 Mb/d in the first three months of this year. But unlike its heavier NGL siblings propane and butane, which are in demand globally as fuels and feedstocks, ethane’s only established use is in steam crackers specifically equipped to process it, so there are only a few countries where exported ethane is likely to end up. Also, the waterborne transport of ethane is generally limited to specially designed ethane carriers, and there aren’t many of those around because of ethane’s restricted market. All this makes for an export commodity that stands apart. Today, we review the evolution of U.S. ethane exports and the challenges to export growth posed by the U.S./China trade war.
Global demand for propylene is rising, but lighter crude slates at U.S. refineries and the use of more ethane at U.S. (and overseas) steam crackers has reduced propylene production from these plants. That has led to the development of more “on-purpose” propylene production facilities — especially propane dehydrogenation (PDH) plants — in both the U.S. and Canada. More than 2 million metric tons/year of new PDH capacity has come online in North America since 2010, another 1.6 MMtpa is under development, and propane/propylene economics may well support still more capacity being built by the mid-2020s, maintaining the U.S. and Canada’s position as propylene and propylene-derivative exporters. Today, we begin a series looking at “on-purpose” production of propylene by PDH plants and what the development of these facilities will mean for U.S., Canadian and overseas markets.
It’s impossible to know for certain what will happen next in the international markets for propane, butane and ethane — there are too many variables and vagaries. What is very doable, though, is to gain a better understanding of the broader market forces at play. For example, the U.S. now has a few years under its belt as a major propane exporter, so it’s feasible to assess trends in where that propane is going — or no longer going — and to examine how propane exports to various parts of the world are impacted by everything from a high-stakes trade war to governmental efforts to encourage the use of cleaner cooking fuel. Today, we continue our deep-dive into propane, butane and ethane exports with a look at where propane exports from the U.S. East, West and Gulf coasts are heading, and why.
As Western Canadian natural gas production has been recovering off lows from a few years ago and pushing higher, one of the by-products of this recovery has been steadily rising production of natural gasoline, an NGL “purity product’ also known as plant condensate. Condensate production has been growing so much that Pembina Pipeline Corp. — a leading transporter of natural gasoline in the region — has been undertaking another round of expansions to its Peace Pipeline system to move more of the product to the Alberta oil sands. There, condensate is used as a diluent to allow the transportation of viscous bitumen to far-away markets via pipelines or rail. Today, we take a closer look at Pembina’s effort to expand the Peace Pipeline.