Enterprise Products Partners LP said Tuesday it will build a fully refrigerated ethane export facility on the Texas Gulf Coast and that it has long-term contracts in pocket to support the project, which is to be the largest of its kind in the world.
"We are pleased to announce the successful development of our fully refrigerated ethane export facility, which will be the largest in the world," said Michael A. Creel, CEO of Enterprise's general partner. "We continue to receive strong interest from the international community for this project and are having ongoing discussions with other potential customers that could result in our contracting the remaining capacity of the facility."
The project is to have an aggregate loading rate of about 10,000 bbl per hour, or up to 240,000 b/d. Operations are expected to start during the third quarter of 2016.
The facility is to be integrated with Enterprise's Mont Belvieu complex, which includes more than 650,000 b/d of natural gas liquid (NGL) fractionation capacity and 100 million bbl of NGL storage capacity. Mont Belvieu receives NGL supplies from the major producing basins across the United States, and the complex is connected to growing supplies of ethane from the Marcellus and Utica shale regions through Enterprise's recently completed ATEX ethane pipeline.
In January Enterprise said it was upsizing its planned liquefied petroleum gas (LPG) export terminal at Oiltanking Holding Americas Inc.'s complex on the Houston Ship Channel instead of developing a second terminal site (see Daily GPI, Jan. 7). At the time, Creel referenced the ethane export plans.
"Our site evaluation for this facility continues," he said then. "Depending on the outcome of these discussions, estimated ethane export demand and ship draft requirements, we expect the ethane export facility will be sited either adjacent to our refined products export terminal in Beaumont or on the Houston Ship Channel."
Enterprise has been working on developing the ethane export project for a while. Part of the effort has been talking with potential global customers and explaining to them how the major natural gas liquids (NGL) hub at Mont Belvieu, TX, works,
Enterprise COO Jim Teague has said in the past that the company was in talks with parties about ethane, but "other parts of the world" don't understand exactly what goes on at the U.S. NGL hub of Mont Belvieu, TX.
"The foreign ethylene companies have to find a way to contract for that ethane," En*Vantage Inc. consultant Peter Fasullo told NGI late last year (see Daily GPI, Dec. 30, 2013). "What I'm hearing is they don't want to buy it on a Belvieu-related basis. They want to buy it on a naphtha-related basis."
Ethane presents other challenges in a global marketplace as not many places around the world can accept ethane deliveries, according to Fasullo. "The rest of the world doesn't have the midstream infrastructure to handle and transport and store ethane like we do here," he said. "If you and I decide to build an ethane terminal, it has to be in partnership with a foreign ethylene player because that foreign ethylene player has to commit to us...If you build the terminal, I'll come and pick up the cargo, and I'll have the ability to offload those cargoes at my location."
For instance, a Range Resources Corp. subsidiary has a 15-year ethane sales agreement with INEOS Europe AG for delivery of ethane at Sunoco Logistics Partners LP Marcus Hook facility near Philadelphia for shipment to Europe (see Shale Daily, Sept. 28, 2012).
But Enterprise ultimately got its contracts. And for U.S. producers that will have been a good thing, especially if ethane stocks grow as many expect they will as liquids-rich gas plays remain the most popular gas plays in town.
"We estimate U.S. ethane production capacity currently exceeds U.S. demand by 300,000 b/d and could exceed demand by up to 700,000 b/d by 2020, after considering the estimated incremental demand from new ethylene facilities that have been announced," Creel said. "By providing new markets access to ethane, we are assisting U.S. producers to increase their production, which assures the U.S. will have access to abundant supplies of domestically produced natural gas and crude oil."
In a note Wednesday, analysts at Tudor Pickering Holt & Co. admitted to being skeptical of the practicality of ethane exports. “We’ve been longtime skeptics of ethane exports as lack of ethane-capable fleet, higher refrigeration costs make it a harder sell versus tried-and-true LPG exports,” they wrote. “That said, [Enterprise] proved us wrong, with a big facility (240,000 b/d).”
Still, they added that the dock isn’t fully subscribed and even if it were, the United States is long ethane through 2020. They added that the price of ethane will remain linked to natural gas, so finding a producer willing to lock in the current gas/ethane price for 10 or more years will be difficult. Harder still will be finding foreign chemical interests willing to spend $1 billion on ethane conversion without fixed prices. “So we’re not sold that it’ll run full by 2016 startup -- at least not yet.”