Price and market trends: Enterprise may sell out ethane exports from terminal

08 May 2014 17:28 Source:ICIS Chemical Business

The company is in discussions with parties for contracts from its proposed 240,000 bbl/day export terminal

Enterprise Products is having talks with customers that could result in it fully contracting the remaining capacity of its proposed US ethane export terminal, the company’s CEO said on 1 May.

“We continue to receive strong interest in this facility,” said CEO Michael Creel during an earnings conference call.

However, even if Enterprise does not sign another barrel of ethane, the ethane project would give the company “a nice project that is not low-single-digit returns”, said Jim Teague, chief operating officer of Enterprise.

Late in April, the company announced that it would build the world’s largest ethane export terminal on the Texas Gulf coast.

The terminal will have a loading rate of up to 240,000 bbl/day, and it should start operations in the third quarter of 2016.

That much ethane would be the equivalent of three world-scale crackers, according to the CEO of LyondellBasell. The terminal project amounts to a bet on the part of Enterprise that US ethane supplies will remain long, petrochemical CEOs said during their companies’ conference calls.

This is despite the wave of cracker expansion projects that will start up in the upcoming years and cause ethane demand to increase sharply.

Enterprise, though, has backed up that bet with numbers. It estimates that current US ethane production exceeds demand by 300,000 bbl/day.

That excess could reach up to 700,000 bbl/day by 2020 even after considering the new ethylene plants and expansions announced by companies, Enterprise said.

“Producers have significantly more ethane than the US ethylene industry can consume and they need new markets,” Teague said. “We’ve tried to be clear about our views on supply and demand fundamentals because of rapidly growing shale. The US and global markets have come to the realisation that for many of these new molecules we’re rapidly becoming an exporting nation.”

As far as destinations for the terminal’s ethane, Enterprise has talked to customers all over the world, not just in Europe, Teague said. “I know Panama Canal doesn’t hurt,” he said.

If ethane is traded, it will not be in a spot market, Teague said, and he doubted if spot trades would ever occur for ethane.

Enterprise will integrate the export terminal with its Mont Belvieu complex, which has more than 650,000 bbl/day of fractionation capacity and 100m bbl of storage for natural gas liquids (NGLs).

Mont Belvieu is the main US hub for NGLs. It is connected not only to producers in the Gulf coast, but also to growing NGL supplies in the Marcellus and Utica shales in the northeast US.

Enterprise recently completed the Appalachia-to-Texas Express (ATEX) pipeline, which connects the US northeast to Mont Belvieu.

The 1,230-mile (1,979km) pipeline starts in Washington County, Pennsylvania and will be connected to four fractionators in the Marcellus/Utica Shale region, Enterprise said.

ATEX will have an initial capacity of 125,000 bbl/day, expandable to at least 265,000 bbl/day.

The Enterprise ethane terminal would be the second in the US. Sunoco Logistics’ Marcus Hook terminal on the US east coast will export ethane to the INEOS cracker in Rafnes, Norway.

The ethane would be transferred to Marcus Hook from the Marcellus shale reserves in the Appalachian region via Sunoco’s planned Mariner East pipeline project.

By Al Greenwood