US Enterprise dismisses ethane oversupply projections

01 February 2012 21:50  [Source: ICIS news]

HOUSTON (ICIS)--US ethane supply will likely stay in balance for the foreseeable future, an executive with US-based Enterprise Products Partners said on Wednesday.

Jim Teague, Enterprise’s chief operating officer, made the statement in reaction to recent analyst projections that there will be an oversupply of ethane as a result of increased production in liquids-rich natural gas plays, such as the Marcellus and Eagle Ford shales.

Enterprise is a midstream services firm that  provides pipelines, storage, natural gas processing, fractionation and NGL import/export terminals for the oil and gas industry.

“Out of all the scenarios we run, even a very high production scenario, we don’t show ethane being significantly oversupplied for any extended period of time,” Teague said during an earnings conference call with investors.

However, he tempered those comments by saying there would probably be times when ethane is oversupplied and undersupplied.

“In a market this big there are always variables on the supply and demand side of the equation,” he said. “These include things such as how quickly reserves can be developed and brought online; how quickly petrochemicals can do their new conversions and builds; turnarounds play a part, and how quickly new pipe will be built.”

Teague said new pipelines are never at full capacity on the first day, adding there is typically a three- to five-year ramp up on major pipeline projects.

Additionally, the petrochemical industry will continue to crack more ethane because of its price advantage over other feedstocks.

For example, Teague said producing ethylene from ethane costs 20 cents/lb less than producing ethylene from naphtha.

“On a 1.5bn lb/year plant, that is an annualised $300m [€228m] in margin,” he said. “The economics are compelling to not only crack all the ethane [the petrochemical industry] can but as quickly as possible. The cost advantage cannot and will not be ignored.”

($1 = €0.76)


By: Bobbie Clark
+1 713 525 2653



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