Ethane Prices Fell Last Week: What Was the Impact on Energy MLPs?
Key Energy MLP Indicators: October 2 Week’s Must-Know Update
Ethane prices
Mont Belvieu ethane prices fell to $0.191 per gallon for the week ended October 2, 2015. By comparison, the price was $0.196 per gallon for the week ended September 25. Low ethane prices combined with higher costs for storing and transporting ethane have resulted in ethane rejection. This means that producers leave ethane in the natural gas stream. Due to low prices, extracting ethane isn’t always economical.
The costs of storing and transporting ethane are higher than other HGL (hydrocarbon gas liquids) products. Read What is ethane rejection and why is it important for energy MLPs? to learn more about ethane rejection.
Key developments
The above graph shows weekly ethane prices over the past six weeks. Some recent developments in the ethane market are expected to positively affect MLPs involved in ethane projects, including Sunoco Logistics Partners (SXL), MarkWest Energy Partners (MWE), Energy Transfer Partners (ETP), and Enterprise Products Partners (EPD). EPD forms 10.2% of the Global X MLP ETF (MLPA).
One of these developments is higher ethane use from petrochemical companies. Lower ethane prices have resulted in petrochemical companies using ethane more as a feedstock in place of naphtha.
The EIA (U.S. Energy Information Administration) expects this trend to continue. Ethane is primarily used in the production of ethylene, which is used in plastics production. This trend should increase ethane demand.
Ethane infrastructure
Ethane-related infrastructure has been developing in the United States. This includes plants to convert ethane to ethylene. The development supports petrochemical companies’ rising demand and is positive for ethane demand and eventually for prices. Companies have invested in export terminals for ethane. There’s an attractive export market for ethane, including Canada, Asia, and Europe.
The Sunoco Logistics’ Marcus Hook project has the capacity to process, store, and distribute ethane to domestic and international markets. The initial operations of phase one of the project have already started. Phase two of the project is scheduled for completion by the end of 2016. Enterprise Products Partners is also working on a large ethane terminal in the Houston Ship Channel.
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