What’s the fastest-growing U.S. hydrocarbon? You guessed it — ethane. Since 2016, ethane production has grown at almost 2.5 times the rate of crude oil or natural gas and 1.5X that of other natural gas liquids (NGLs). And there’s a lot more upside potential where that came from. It’s entirely demand-pull, meaning that U.S. ethane production growth is being driven by increasing domestic and export demand for the petrochemical feedstock. Shell’s new steam cracker in Pennsylvania is online, CP Chem and Qatar Energy are planning a new cracker in Orange, TX, and other projects are in the works. On the exports front, both Enterprise and Energy Transfer announced export-terminal-expansion projects in 2022. All this new ethane demand needs supply, and fortunately the U.S. has the barrels, not only from ever-increasing NGL production, but also from ethane that today is being rejected and sold as natural gas. And the markets will need new pipes, fractionators, and ships to get that ethane to market. With today’s RBN blog, we begin a series to explore what these developments mean for U.S. ethane market players.
For those who are not steeped in NGLs and petchem feedstocks, we’ll start with a review of current developments in ethane markets. Ethane is one of the five NGL “purity products.” It is the lightest of those products, and the most prolific of the NGL siblings, accounting for somewhere around 50% of each barrel of potential NGL production on a national basis, with the percentage varying by basin and within basins. We underlined “potential” there because the ethane recovered at natural gas processing plants is not all the ethane that is in the inlet natural gas stream. Instead of being recovered, some of the ethane is rejected into natural gas and sold for its Btu value. It is this either/or attribute that makes ethane a favorite of ours in the RBN blogosphere. Our greatest hits over the years include Where Has All the Ethane Gone, which looked at high rejection volumes; Ethane Asylum Revisited, where we considered the impact of a dozen new ethane-only domestic crackers coming online in the 2017-22 period, along with more export capacity; Reason to Believe, which looked at the logic of the new Gulf Coast Growth Ventures (Exxon-SABIC) cracker near Corpus Christi; and It Takes Two, which examined the link between export-capacity development and long-term commitments from foreign ethylene producers to receive ethane from U.S. suppliers.
Figure 1 shows the monthly U.S. supply/demand picture over the past decade. Domestic demand (orange layer in left graph) has doubled from 1 MMb/d 10 years ago to 2 MMb/d today, with almost all the increase coming from new ethane-only crackers built along the Gulf Coast and the new Shell cracker in western Pennsylvania. Exports (blue layer) are up from zero before 2014 to 445 Mb/d in 2022, with about 65% of last year’s volumes moving off the Gulf Coast from Enterprise or Energy Transfer terminals, 20% exported from Energy Transfer’s Marcus Hook facility near Philadelphia, and the other 15% flowing to Canada via pipeline.
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