RBN's 5 to 6 year guess for ethane supply, export, etc
"...Whether U.S. ethane exports shift from being a small, localized activity to a major market with volumes totaling hundreds of thousands of barrels per day remains to be seen. The four barriers that we have identified, (1) loading and unloading terminal infrastructure, (2) shipping, (3) pricing, and (4) petrochemical demand must all be overcome to make significant ethane exports happen.
Two issues are clear.
1. Somebody will be spending billions to put the logistical and petrochemical cracker infrastructure in place to transport and use the ethane.
2. Somebody will be taking on the risk that significant ethane exports could push U.S. ethane prices back to the level of a couple of years ago.
Here is our best guess as to how this all plays out. Over the next 5-6 years, ethane exports will grow to somewhere in the 150-200 Mb/d range, with 4 or 5 crackers shifting some of their capacity to run ethane. Even combined with new ethane crackers being built in the U.S. after 2016, that won’t be enough to absorb all of the ethane that U.S. producers can make, so rejection will remain a part of the ethane landscape for the long run. That means that the economics of exporting ethane will work out to be a good deal for both U.S. producers and international petrochemical companies that get on the bandwagon."
What's really interesting about this analysis is that the predicted 150-200,000 barrels/day of ethane exports 5-6 years out going to 4 or 5 crackers implies that 1. The only foreign crackers will be two NOVA crackers in Canada and two INEOS crackers in Europe and 2. The bulk of ethane exports will be going out of Marcus Hook. One Canadian cracker is in Alberta getting ethane from the Bakken..So, with 50,000 b/d of ethane exported through Marnner West to NOVA in Sarnia and let's say 100,000 barrels/day going to Norway and Scotland via Mariner East I and II this analysis is predicting zero exports from the Gulf Coast 5-6 years out. Somehow, I doubt that. I'm guessing that either EPD,the DCP Enterprise,or Targa will find someone to export to. With ethane kind of a waste product here and global naptha still holding tough, there is going to be some conversion somewhere. Don't get me wrong...if Marcus Hook is the only seaport export source of ethane MWE will do well...however, we IMO won't luck out like that.
This whole issue is a lot more complex and long range than I thought it would be. Even the ethane going to the Gulf will have to be matched with immediate demand and plant availability. I cannot see anyone making any money having to store it before use. Before this is all said and done the Appalachians may wind up with more than two crackers. Of course that could be 2024.
Seems the biggest challenge overall is on the downstream side of the business. But that does not mean the up and midstream side is done. Billions have been spent and will continue to be spent in the coming years. One line upgrade no one has mentioned is SEP Ohio reversal. I would appear to me that this provides more flexibility for Marcellus and Utica E&P for ethane, either rejecting it in takeaway or processing it out and substituting with dry Utica as required. Note that a little more attention is being focused on both NE and SW Pa. Utica. Then we have REX, TRANSCO, and further penetration into the Northeast via SE/SEP. RRC is already selling nat gas to the ends of PADD-1, -2, and beyond. Also talk about spiking LNG, separating it at the terminus wherever that is. So too much ethane, not enough ethane, pricing etc., there are a lot of heads working the issues. Just 2 -3 years back, the concern was no way to get ethane out. But all three streams pulled together IMO, and did a pretty good job so far addressing those concerns, and we are still building, e.g., SXL ME1 and ME2. Wana make the eastern rails even happier, ship pellets to the shore by rail and then dry-bulk ship them overseas. Seems like it would be less capital intensive, and safer on both side of the ponds.
On another hand back on the 5th of this month, I posted a short brief regarding Carlyle's fund International Energy Partners, essentially buying out older refiners overseas, as they are participating in Marcus Hook. So on the oversea end, those outfits that cannot afford rebuilding to wean off naphtha could be bought at distressed valuations and new business created.