Ethane availability spurs US infrastructure build

Christopher E. Smith
OGJ Managing Editor-Technology

Strong natural gas production and ethane extraction in US shale plays have created an oversupply of NGLs, but plunging crude prices at the same time have reduced their global competitiveness with naphtha as a petrochemical feedstock. Domestic ethane, however, remains cheap enough that petrochemical producers in many instances have decided to build new crackers in the US instead of exporting ethane for processing overseas.

Ethane is currently more valuable left in the natural gas stream than used as a petrochemical feedstock. Wood Mackenzie estimates ethane will trade at a $0.50-1.00/MMbtu discount to natural gas "for the forseeable future."1 The consultant goes on to say that a combination of maximum rejection, fuel demand to replace natural gas, and exports is needed to return the US ethane market to balance.

Yearend 2014 ethane rejection totaled 540,000 b/d, or 34% of US extraction capacity, according to Peter Fasullo of En*Vantage Inc., Houston. The highest rejection rates, 63% of extraction capacity or ~67,500 b/d, occurred in Appalachia. Rejection has dropped US commercial ethane inventories to roughly 16 million bbl now from a mid-2014 peak of slightly less than 40 million bbl. Fasullo predicts US ethane either rejected or exported to peak at 696,000 b/d by 2016, falling from there to 357,000 b/d by 2020.2

The pace of infrastructure development to move, export, or consume ethane and other NGLs reflects these circumstances.

Pipelines

Enterprise Products Partners LP (EPP) is expanding its 181-mile Panola Pipeline Co. LLC NGL pipeline system, which runs from Carthage, Tex., to Mont Belvieu, Tex (OGJ Online, Jan. 22, 2015). EPP is installing 60 miles of pipeline as part of the expansion, as well as pumps and other equipment to increase capacity by 50,000 b/d as soon as first-quarter 2016.

Anadarko Petroleum Corp., DCP Midstream Partners LP, and MarkWest Energy Partners LP formed a joint-venture with EPP earlier this year, assigning 45% interest in equal 15% shares to the three new companies in the project, with EPP continuing to serve as operator (OGJ Online, Feb. 24, 2015).

EPP also is building its 270-mile Aegis Pipeline header to deliver ethane to US Gulf Coast petrochemical producers by second-quarter 2016. The initial 60-mile segment from Mont Belvieu to Beaumont, Tex., began service in September.

Meritage Midstream Services II LLC began operating the first 108-mile leg of its 15,000-b/d Thunder Creek pipeline in January, serving producers in Wyoming's Powder River basin. The line consists of 22 miles of newbuild pipeline and 86 miles secured through a long-term lease from Phillips 66. Meritage expects to expand capacity to 30,000 b/d as shipper demand increases.

Thunder Creek starts at Meritage's 50 Buttes NGL complex near Gillette, Wyo., and ends at an interconnect with Phillips 66's Powder River pipeline near Douglas, Wyo. Meritage is extending the line by 140 miles, including an interconnect near Cheyenne, Wyo., with the Overland Pass pipeline. It expects the extension to enter service first-quarter 2016.

Sunoco Logistics Partners LP and MarkWest in March withdrew their request that the Mariner East Phase I pipeline be designated a public utility. At the time, the companies expected the pipeline to be fully operational by May, delivering 70,000 b/d of propane and ethane from their Houston, Pa., fractionation complex to an interconnection with an existing Sunoco pipeline in Delmont, Pa., and subsequent shipment to Marcus Hook for export.

The Mariner East partners expect to expand the initial pipeline's capacity by as much as 40,000 b/d as demand grows. Beyond this, they have proposed Mariner East Phase II, a 350-mile newbuild pipeline with minimum 16-in. OD, using largely the same right-of-way as Mariner East I to ship as much as 275,000 b/d of mixed NGL. As part of this plan Sunoco would build two 750,000-bbl propane tanks, one 600,000-bbl butane tanks, and one 300,000-bbl ethane tank at Marcus Hook.

Mariner East Phase II completed a successful open season in November, and Sunoco expects it to enter service fourth-quarter 2016, pending regulatory approvals. Antero Resources Corp. signed on as an anchor shipper for 51,500 b/d: 28,000 b/d propane, 12,000 b/d butane, and 11,500 b/d ethane.

Kinder Morgan Cochin LLC has proposed two new NGL pipeline systems, the 50,000-b/d Utopia East ethane-propane line and the Utopia West natural gasoline pipeline. Nova Chemicals Corp. executed a long-term transportation agreement with Kinder Morgan to support the 240-mile, 12-in. OD Utopia East, running from Harrison County, Ohio, to a Fulton County, Ohio, interconnection with existing company line for shipment to Windsor, Ont. The pipeline's initial design calls for two pump stations, with expansion to 75,000 b/d possible through building additional stations.

Pending sufficient commercial support, Utopia West would use 12-in. OD pipe following largely the same path as Utopia East, with the natural gasoline then moving from Fulton County southwest to Kankakee, Ill. Utopia West pump stations would be co-located with those for Utopia East.

Exports

EPP expanded its LPG export terminal at the Houston Ship Channel (HSC) by 1.5 million bbl/month to 9 million bbl/month (2,500 bbl/hr) of fully refrigerated, low-ethane propane (OGJ Online, Apr. 6, 2015). The expansion will allow EPP to accommodate three additional ships per month. The company is building a new refrigeration train that will increase loading rates further by fourth quarter. To help ensure adequate supply to the docks, EPP is completing a dedicated 30-in. OD LPG pipeline from Mont Belvieu to the terminal.

The company is also expanding the LPG export terminal at Oiltanking's HSC complex. Supported by long-term agreements, EPP expects the expansion to enter service by yearend, bringing its total aggregate HSC loading capacity to 16 million bbl/month of low-ethane propane and butane.

EPP plans to build a fully refrigerated ethane export plant on the Texas Gulf Coast. The company has executed 10-year or longer contracts based off the Mont Belvieu ethane price to support the development, designed to have an aggregate loading rate of about 10,000 bbl/hr, or as much as 240,000 b/d. EPP expects the plant to begin operations in third-quarter 2016

Occidental is building a fractionator and propane export terminal at its Oxy Ingleside Energy Center near Corpus Christi, Tex., supplied by Eagle Ford shale liquids. The company expects it to begin operations this year with a design capacity of 110,000 b/d, a ship-loading rate of 2,500 bbl/hr, and 80,000 bbl of propane storage.

Sunoco has proposed building Mariner South, a 200,000-b/d propane and butane pipeline from Mont Belvieu to its Sabine Lake export terminal in Nederland, Tex. Mariner South's export terminal will have an initial capacity of 6 million bbl/month and be designed to load 550,000-bbl LPG carriers. The company expects Mariner South to enter service this year.

Phillips 66 last year began building a 4.4-million bbl/month LPG export terminal in Freeport, Tex., at the site of its existing marine terminal, using its midstream, transportation, and storage infrastructure. The terminal would be supplied with LPG from both Mont Belvieu and Phillips 66's Sweeny complex, including Sweeny Fractionator One, expected to begin operations by second-half 2015. Phillips expects the terminal to enter service by mid-2016.

Ineos Europe AG last year signed a 15-year purchase agreement with Consul Energy Inc. for ethane shipped starting this year to Marcus Hook through Mariner East (OGJ Online, Feb. 17, 2014). Ineos has contracted Evergas to build 150,000-200,000-bbl vessels and plans to spend $500 million to revamp its Grangemouth, UK, plant and build an ethane import site.

Borealis signed a 10-year contract to buy ethane from Antero Resources through Marcus Hook, starting in 2016.

Domestic demand

Companies are also keen to crack ethane derived from US shale natural gas.

Ingleside Ethylene LLC, a 50-50 joint venture of Occidental Chemical Corp. (OxyChem) and Mexichem SAB de CV (Mexichem), began construction last year on a 1.2-billion lb/year ethane cracker at OxyChem's existing plant in Ingleside, Tex. (OGJ Online, Dec. 17, 2014).

OxyChem will operate the cracker, which is scheduled to be commissioned first-quarter 2017. Processing columns are being fabricated in Italy, with 2015 being the peak year of spending on the project.

ExxonMobil Corp. also last year began building a 1.5-million tpy ethane cracker at its Baytown, Tex., refining and petrochemical project, targeting a 2017 start-up as well (OGJ Online, June 19, 2014).

South Africa's Sasol Ltd. let a contract earlier this year to GE Oil & Gas to provide the main-compression trains for a low-density polyethylene (LDPE) plant at its proposed integrated 1.5-million tpy ethane cracker and downstream derivatives complex to be built next to the company's existing operations in Westlake, La. (OGJ Online, Feb. 2, 2015).

LDPE project equipment is scheduled to ship from Florence, Italy, to Westlake in first-half 2016 for 2018 commissioning of the complex. Ground breaking for the ethane cracker occurred in March.