INSIGHT: Enterprise terminal to kick-start deep sea ethane trade

25 April 2014 16:22 Source:ICIS News

By Nigel Davis

An ethane crackerLONDON (ICIS)--Enterprise Products’ plan for an ethane export terminal on the US Gulf Coast in Texas heralds the start of global commercial trade in ethane by water, something that would hardly have been envisaged a few years ago.

The facility is also likely to be only the first such commercial venture as the US continues to produce an excess of ethane and petrochemical producers globally consider accessing what could be an attractively-priced and abundant cracker feed.

Enterprise has all the resources and infrastructure capability to make such a project work.

It says it could load about 10,000 bbls/hour of ethane from the export facility which is planned to begin operations in the third quarter of 2016. Even if it operates at about half the expected daily loading rate, that would be 120,000 bbls/day or about 2.5m tonnes/year.

The exact location of the terminal is not yet known but it will be integrated with the Enterprise complex at Mont Belvieu, Texas, which includes more than 650m bbl/day of natural gas liquids (NGLs) fractionation capacity and 100m bbls of NGLs storage, according to the company.

“We estimate US ethane production capacity currently exceeds US demand by 300,000 bbl/day and could exceed demand by up to 700,000 bbl/day by 2020, after considering the estimated incremental demand from new ethylene facilities that have been announced,” Enterprise Products said this week.

“By providing new markets access to ethane, we are assisting US producers to increase their production, which assures the US will have access to abundant supplies of domestically produced natural gas and crude oil,” said Enterprise CEO Michael Creel.

Enterprise Products said it had long-term contracts in place to support the project.

“We continue to receive strong interest from the international community for this project and are having on-going discussions with other potential customers that could result in our contracting the remaining capacity of this facility,” Creel added.

Consultants expect most ethane volumes shipped from the US initially to go to Europe. However, ethane shipping requires considerable investment in export facilities, receiving terminals and storage, and in vessels, to make it work.

Only one company to date, INEOS, has committed capital to importing ethane from the US for crackers in Europe and it has confirmed that it would consider securing deep sea ethane from other sources. Currently, it has agreements in place to move ethane from Marcus Hook in Pennsylvania to import and storage facilities it is building in Norway and Scotland. 

En*Vantage consultant Peter Fasullo believes that most of the ethane from the Enterprise Products facility in Texas will be shipped to Europe but that volumes could be moved to Asia once the Panama Canal has been widened. That project to double the canal’s capacity is due for completion in 2015 although there have already been delays.

It is also believed that shipments to India and to China where some cracker operators have already expressed an interest in US ethane are likely, as might be shipments to southeast Asia.

Shipping ethane westward from the US Gulf and through the canal is expected to be made in relatively large, newly-built ethane carriers. Shipping ethane is not easy and it has to be compressed rather than liquefied, as methane is to liquefied natural gas (LNG).

A large ethane carrying vessel would be somewhere in size between an LPG (liquefied petroleum gas) tanker and an LNG carrier.

“Ethane has never been commercially transported by ship,” says Fasullo. “This is breaking new ground. There has to be a strong partnership with the customer to make it work.”

This trade, however, is proving necessary to help lift not just ethane production and transport in North America but to help maintain shale well exploration and oil and gas output.

Currently about 1.35m bbl/day of ethane could be extracted from shale in the US if the price was right but 350,000 bbl/day are being rejected - either not recovered or re-injected in the gas steam.

Not all of this additional volume has to come to market but some volumes could do if prices increased. Currently, ethane is priced at about 30 cents/gallon. That price would have to increase by about 20 cents/gallon to bring significantly more ethane to market, Fasullo says.

The new crackers planned to come on-stream in the US from 2016 and ethane exports to Canada and to overseas markets will all play a part in balancing the market and in helping to induce more extraction. The ethane export overseas element of this picture has been expected by some analysts but certainly not by all.

Today, ethane is selling under natural gas costs in the processing regions of the US.  

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By Nigel Davis