Ethane, one of the natural gas liquids (NGLs), is a byproduct of natural gas production. Ethane is used as petrochemical feedstock and is key in making polyethylene—plastic. Ethane is also used in the production of products like antifreeze and detergents.
Ethane prices in the U.S. have dropped with the abundance of gas coming out of the U.S. shale basins. The oversupply has led domestic ethane to be rejected in recent years—i.e., forcing natural gas producers to sell ethane at fuel value, rather than as a petrochemical feedstock. But European markets appear to be an outlet for future U.S. ethane exports, and contracts to build ethane infrastructure facilities have been on the rise in recent months. Expensive import and export facilities are starting to take shape on both sides of the Atlantic.
New European Ethane Import Facility
Switzerland’s $41 billion petrochemical manufacturer INEOS Group AG has contracted Germany’s TGE Gas Engineering to start construction of what has been described as Europe’s largest ethane storage facility. The Grangemouth [Scotland] plant will store and process ethane from shale gas “as North Sea supplies dwindle,” said INEOS Chairman Jim Ratcliffe. “Our ability to import U.S. shale gas underpins the future of manufacturing at Grangemouth and across many businesses in Scotland.”
INEOS said it has invested more than £300m at its Grangemouth petrochemical site as part of a long-term survival plan. It will bank on a £230m loan guarantee from the UK government to build the new ethane facility.
The company said the “new facility is central to the site’s plans to import shale gas from the USA. It views turning Grangemouth into a shale gas-based facility by 2016 as essential if it is to compete in world markets beyond 2017,” according to a BBC News story on July 17.
“[T]he new import terminal and ethane storage facilities is a key step in securing the long-term future of the site,” said Scottish Finance Secretary John Swinney.
INEOS owns two of Europe’s four gas crackers capable of using U.S. shale ethane gas feedstock. The other two are in Norway.
New U.S. Ethane Export Facility
Last Thursday, Houston’s Enterprise Products Partners L.P. (ticker: EPD), announced it has secured long-term commitments for approximately 85% of the capacity of its new Houston Ship Channel ethane export terminal, presently under construction. In a press release the company said it is evaluating expansion options for its new ethane terminal, “supporting further development of the world’s largest ethane export terminal,” said Teague, chief operating officer of Enterprise’s general partner.
Enterprise is targeting completion of its new ethane terminal for third quarter of 2016. The company said it will have the capability to load fully refrigerated ethane at approximately 10,000 standard barrels per hour. An 18-mile, 24-inch diameter ethane pipeline will be constructed from its existing Mont Belvieu natural gas liquids fractionation and storage facility to supply the new export terminal with ethane.
Range Resources (ticker: RRC) has also created a market based purely off of its ethane extraction. Contracts are already in place to move a total of 75,000 barrels of ethane per day to three LNG hubs across North America, and two of the projects are currently operational. Once all three are running, RRC will see a 25% cost uplift as compared to selling as a BTU.
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