Ethylene Plants

There’s never a dull moment in the ethane market. Four new steam crackers and an expansion at an existing plant are slated to begin operating along the Gulf Coast in 2019, and a recently restarted Louisiana cracker will continue to ramp up to full capacity — together adding about 250 Mb/d of ethane demand by year’s end. You’d think there would be plenty of ethane out there for them. After all, U.S. NGL production has been on the rise, driven in part by new Permian gas processing plants and new NGL pipeline capacity to the coast. But fractionation constraints at the Mont Belvieu hub are likely to linger through 2019, raising questions about how much ethane will actually be produced and how much will need to be rejected into pipeline gas. Today, we consider the challenges facing the ethane market this year as demand increases and fracs run flat out to keep pace.

Every day, about 1.8 million barrels of NGLs, naphtha and other ethylene plant feedstocks are “cracked” to make both ethylene and an array of petrochemical byproducts. And every day, decisions are made for each steam cracker on which feedstock—or mix of them—would provide the plant’s owner with the highest margins. Within each petchem company, these decisions are optimized by staffs of analysts and technicians using sophisticated and complex mathematical models that consider every nuance of a specific ethylene plants’ physical capabilities. Fortunately for us mere mortals, it is possible to approximate these complex feedstock selection calculations for a “typical” flexible cracker using a relatively simple spreadsheet model. Today we continue our series on how the raw materials for ethylene plants are picked with an overview of RBN’s feedstock selection model, a review of feedstock margin trends, and an explanation of how the model also can be used to indicate future NGL and naphtha prices and to assess the prospects for various industry players.

This week the first Gulf Coast ethane export cargo will depart Morgan’s Point, Enterprise Products Partners’ new export terminal on the Houston Ship Channel.  This is a history-making event for at least three reasons.  First, it inaugurates ethane exports from the Gulf Coast, only five months after the first-ever U.S. overseas ethane exports out of Sunoco Logistics’ Marcus Hook, PA, terminal.  Second, it launches a battle for Mont Belvieu ethane, to be fought between ethane exporters and new ethane-only steam crackers (ethylene plants) that will be coming online along the Texas/Louisiana coast over the next couple of years.  And third, Morgan’s Point is not just another export terminal.  It is a location steeped in Texas history, known in the 1830s as New Washington, with an important role in the Battle of San Jacinto – decisive battle of the Texas Revolution -- and legend has it, inextricably tied to the Texas anthem “The Yellow Rose of Texas.”   In today’s blog we examine the upcoming fight between ethane exporters and U.S. crackers.

Canadian ethylene plants have been receiving U.S.-sourced ethane by pipeline for two and a half years now, and waterborne ethane exports from Marcus Hook, PA to Norway started earlier in 2016. Soon the real fun will begin, when Enterprise Products Partners initiates (and quickly ramps up) ethane exports from a new, 200 Mb/d terminal on the Houston Ship Channel at Morgan’s Point.  The destinations of the ships leaving Morgan’s Point are likely to be places like India, Brazil, Europe, and maybe even Mexico.  Today, we consider the imminent bump-up in U.S. ethane export capacity, the international markets ethane will be headed to in the near-term, and the longer-term question about how much ethane exports can grow.