According to the most recently available data, U.S. production of ethane is expected to increase from an average of 1.25 million barrels per day (b/d) in 2016 to 1.7 million b/d in 2018 according to EIA’s latest Short-Term Energy Outlook (STEO). Increased ethane production is expected to be consumed in the petrochemical industry domestically as well as exported to other countries.
Ethane is a hydrocarbon with two carbon atoms that may be present in raw natural gas extracted from the ground. In recent years, the amount of ethane contained in raw natural gas has exceeded U.S. demand and exports, so some ethane has been left in the natural gas provided to end users instead of being separated and marketed as a distinct product. Increases in domestic consumption and exports of ethane are expected to support higher ethane prices relative to natural gas prices, which will encourage more ethane recovery from raw natural gas.
Ethane is used almost exclusively as a petrochemical feedstock to produce ethylene, a compound used in the creation of many plastics. Expansions at existing ethylene plants contributed to a 170,000 b/d increase in ethane consumption between 2013 and 2016. By mid-2018, construction is expected to be completed at six new ethylene plants and one restarted plant, collectively capable of using 450,000 b/d of ethane feedstock. Most of these plants are designed specifically to use ethane without the ability to switch to other feedstocks. EIA expects U.S. ethane consumption to increase by 310,000 b/d (26%) between the first quarter of 2013 and the fourth quarter of 2018 as these plants ramp up operations.
Ethane exports are also expected to increase. Until December 2013, when the new Mariner West pipeline provided a route to the Canadian market by bringing Marcellus ethane from southwestern Pennsylvania through Ohio and Michigan to Ontario, Gulf Coast petrochemical plants were the only outlet for domestically produced ethane. Since then, the completion of the Vantage pipeline project, which ships ethane to Canada, and of two marine export terminals have allowed ethane exports to expand to an estimated 130,000 b/d by the fourth quarter of 2016.
The first ethane export terminal in the United States, located at Marcus Hook, Pennsylvania, with an export capacity of 35,000 b/d, shipped its first ethane cargo in March 2016. A second export terminal, located at Morgan’s Point, Texas, with a capacity of 200,000 b/d, shipped its first ethane cargo in September 2016. Morgan’s Point terminal is 90% contracted, and exports are ramping up quickly. Although the first shipments out of Morgan’s Point went to Europe, the facility sent shipments to India in December and January.
The shipments to India were transported on two new very large ethane carrier (VLEC) vessels, which can hold up to three times as much ethane as existing ethane-shipping vessels. These vessels are the first two of six VLECs commissioned by Reliance Industries for transporting Gulf Coast ethane to their petrochemical plants in India. EIA’s Short-Term Energy Outlook forecasts exports to increase by 180,000 b/d between the fourth quarters of 2016 and 2018, as shipments ramp up at existing facilities.