The United States is the world's largest producer of Shale gas and the world's largest exporter of liquefied natural gas. Shale gas contains a large amount of ethane, which is a light hydrocarbon and can be used to produce ethylene and other chemical products. Due to the limited demand for ethane in the United States and the high cost of Pipeline transport, the United States chose to liquefied the surplus ethane and export it to other countries.
In 2022, the domestic demand for ethane in the United States was approximately 36 million tons, with exports of 9 million tons. In addition, approximately 14 million tons of ethane were directly fed into natural gas pipelines as fuel. By 2025, the domestic demand for ethane in the United States will increase to 40 million tons. Assuming the export capacity can increase to 12 million tons, there is still nearly 20 million tons of ethane in surplus, which will have to continue to enter natural gas pipelines. Insufficient export capacity is the biggest bottleneck limiting the export of ethane.
The United States currently has three dedicated ethane export facilities, namely ETP's Marcus Hook in Pennsylvania (70000 barrels per day, 1 million tons per year export capacity), ETP and Satellite Chemistry's Orbit in Texas (180000 barrels per day, 4 million tons per year export capacity), and Enterprise's Morgan's Point in Texas (240000 barrels per day, 5 million tons per year export capacity), with a total export capacity of 10 million tons per year. Satellite chemistry has exclusivity in Orbit's export facilities, so for cracking devices such as Ineos and Reliance, ethane resources can only be obtained from the other two terminals. At present, the capacity of these three ethane export facilities in the United States is approaching its limit and it is difficult to make further breakthroughs.
Recently, Ineos and Enterprise announced the formation of a joint venture to jointly build an ethane export facility in the US Bay Area to meet the production of Ineos' cracking plant in 2026, which is expected to require 1.8 million tons of ethane per year. Jim, Co CEO of Enterprise? Jim Teague said that enterprise has reached a long-term agreement with Ineos to support the second ethane terminal along the US Gulf Coast, "along our ethane pipeline system, somewhere between Corpus Christi, Texas, and New Orleans". However, based on the latest developments, there is no news of any new site selection. Due to the relatively long cycle from site selection to construction of the new export facility, Ineos will have to compete for funding from two export facilities outside of Orbit before the new export facility is completed.
Due to the existing export facilities reaching their limits, it is necessary to build new ethane export facilities in order to export more ethane in the future. To increase ethane export facilities in the United States, it is necessary to first select a site and obtain permission. If a new ethane transmission pipeline is to be built, it will pass through many residential areas and require communication with local residents one by one. This time will be particularly long and the difficulty will be high. So more ethane export facilities can only be located in Louisiana and Texas, as the pipelines here are already mature and further expansion will be easier. The ethane export terminal requires the construction of storage tanks and docks, but the existing facilities are already operating at full capacity and can only be found in new places to build new facilities. This involves obtaining permits from all parties, environmental permits, and resolving land use issues through residential areas. Taking into account the above factors, it is impossible to land without 3-5 years. So the speed of ethane extraction in the United States is much faster than the increase in export facilities, and the construction of export terminal facilities is the biggest bottleneck that restricts the export of ethane in the United States, and it cannot be solved in a short period of time.
Secondly, suitable ships are also needed to transport ethane. Due to ethane being a highly volatile gas that cannot remain liquid at room temperature and pressure, it needs to be stored and transported at low temperatures (-104 ° C). VLEC (Ultra Large Ethane Ship) can carry over 90000 cubic meters of ethane. But the construction cost of VLEC is very high, about $120 million per vessel, and requires very professional shipping companies for transportation and management. At present, the corresponding berths of global companies that can build VLEC, such as HD Hyundai Heavy Industries Heavy Industry, Samsung Heavy Industries Heavy Industry, Jiangnan Shipyard and other shipbuilding companies, have been occupied by LNG ship orders. In the next few years, it will not be easy to increase enough VLEC.
Finally, for Chinese enterprises, even if they obtain approval for ethylene cracking, they still need to build new import facilities, usually including ethane dedicated terminals (50000 ton liquefied goods terminals, with a water depth of over 12 meters) and ethane cryogenic storage tanks. Investing in deep water terminals and ethane storage tanks for hundreds of thousands of tons of ethane feed is not worth the loss. So, the feed of ethane must exceed one million tons to be accounted for. And obtaining stable and long-term sources of millions of tons of ethane is the biggest problem.
For Chinese chemical companies that want to utilize low-cost ethane resources in the United States, the huge challenge ahead is how to break through the complex ethane supply chain problem from the United States to China.
Author: Dr. Zhao Jun, Distinguished Expert of the China Petroleum and Chemical Industry Federation and Editorial Board Member of the China Petroleum and Chemical Journal