26 October 2011 16:16 [Source: ICIS news]
By Sheena Martin
HOUSTON (ICIS)--NOVA Chemicals reigns supreme in the northeastern US ethane market, having beaten the pack to the biggest source of the feedstock, and having secured long-term supply contracts with producers to exploit a local supply glut and feed its petrochemicals facility.
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The problem of extraneous ethane in the Marcellus formation, preventing transportation of natural gas in many current pipelines without stripping it out, has attracted parties across the country to a small region that major producers had mainly ignored.
According to Jack Lafield, president of US-based Caiman Energy, there could be an excess of 200,000 bbl/day of ethane for potential production by the end of 2015. NOVA has contracted with three producers in the Marcellus Shale.
The vapour pressure of ethane encourages producers to strip it from the natural gas stream before the gas can be transported by pipeline. So NOVA’s arrangement benefits both it and the gas producers.
NOVA’s plan links the buyer and producer directly, said analyst Dan Lippe, of US-headquartered Petral Worldwide: “No other [Marcellus ethane] project has a commitment like this.”
These commitments will leave no excess ethane for pipelines heading towards the US Gulf for many years, he added.
NOVA signed contracts for ethane with
In early September, NOVA arranged transportation through an existing Sunoco pipeline to its cracker in
“The NOVA deal has likely been in the works for a long time,” said Anne Keller, president of Midstream Energy Group. “They are net short [of] ethane in their Canadian plants, and the Marcellus barrels will be a big help for them.”
NOVA is installing new hardware to upgrade its Corunna ethylene cracker to allow 100% natural gas liquids feedstock capability by the end of 2013, so the cracker can operate solely on local ethane from the Marcellus Shale region.
With the modifications, NOVA is estimated to use about 37,000 bbl/day of ethane, with another 13,000 bbl/day from the Marcellus going to other chemical companies in
Other projects for transporting ethane from the Marcellus to the petrochemicals market have been discussed: it has been open season for pipeline commitments.
US-based El Paso and Spectra Energy have formed a joint venture to build the Marcellus Ethane Pipeline System (MEPS), a 60,000–90,000 bbl/day pipeline using the existing Tennessee Gas Pipeline System, to take ethane to the US Gulf.
The project is currently being slowed down in response to the interest seen during its binding open season, which ended on 15 September.
Lippe said he did not “see anything left over for any pipelines to the Gulf coast for many years to come”, when considering the NOVA projects and its supply commitments.
El Paso said results from the open season do not allow for the joint venture with Spectra to pursue the accelerated schedule for an in-service date of November 2014. The companies have scaled back development.
“I was never convinced that El Paso and Spectra would actually be able to get commitments for their gas pipeline conversion project – it’s just not reasonable,” Lippe said.
Enterprise Products Partners also began a binding open season for ethane shipping commitments on its proposed pipeline, stretching from the Marcellus to the US Gulf.
Unlike the MEPS and
“Ethane will flow to Sarnia before it goes anywhere else. NOVA Chemicals has signed definitive agreements for ethane with three gas producers in Marcellus,” Lippe stated.
The companies will require permits from both the US and Canadian governments, but Polymer Consulting International’s Bauman does not expect that to be a problem.
Keller said Sunoco and NOVA will have to agree on who the shipper of the product will be on the line – which will most likely be NOVA – and how the ethane will be priced. The producers – Statoil, Caiman Energy and Range Resources – will sell NOVA the ethane at the tailgate of the regional fractionators, where the ethane is split from the natural gas stream.
The ethane will be transported to MarkWest Energy’s processing and fractionation facilities in southern Pennsylvania by Sunoco’s 50,000 bbl/day Mariner West project.
The project has a number of advantages, in addition to its being the first chemical company to approach producers for ethane.
The Corunna cracker is only about 300 miles (483km) from the Marcellus formation, which reduces transportation costs, especially compared with shipping the ethane to the US Gulf. The project could lead to production of more than 1m tonnes/year of ethylene, according to Bauman.
Sarnia has a strong transportation and logistical advantage to access the northeast, which is the largest polyethylene market in the top quadrant of the
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