U.S ethane production is expected to increase over the next two years as the petrochemical industry consumes more and new export facilities ramp-up their overseas shipments, according to the Energy Information Administration's (EIA) latest Short-Term Energy Outlook.

The EIA estimates that ethane production could rise from 1.25 million b/d in 2016 to 1.7 million b/d in 2018. Expansions at existing ethylene plants contributed to a 170,000 b/d increase in ethane consumption between 2013 and 2016, the agency said this week in a Today in Energy note.

By mid-2018, construction is expected to be completed on six ethane crackers and one is to restart on the Gulf Coast, which together collectively would be capable of using 450,000 b/d of feedstock. Ethane consumption is forecast to increase by 310,000 b/d between 1Q2013 and 4Q2018 as the plants ramp-up operations, EIA said.

Ethane in natural gas has lagged domestic demand and exports in recent years, forcing producers to leave it in stream. EIA noted that ethane is almost exclusively used as a petrochemical feedstock to produce ethylene, which is a building block for plastics.

Shale gas production has delivered the U.S. petrochemical industry a competitive advantage that has led to a wave of new construction. More crackers are scheduled to come online through 2019, mostly along the Texas Gulf Coast. Royal Dutch Shell plc's decision to move forward with a facility in resource-rich Western Pennsylvania is expected to lead a second wave of construction and start-ups in the 2020s. More consumption, EIA said, is expected to lift ethane prices and further encourage ethane recovery.

Exports are on the rise as well. Pipelines that have come online to take more ethane to Canada, such as Sunoco Logistics Partners LP's Mariner West, and two marine export terminals in the Northeast and on the Gulf Coast are expected to boost overseas shipments.

Sunoco's Marcus Hook Industrial Complex near Philadelphia shipped its first cargo to Europe in March 2016, while Enterprise Products Partners LP's Morgan's Point terminal in Texas shipped its first ethane cargo last August. EIA forecasts exports to increase by 180,000 b/d between the fourth quarters of 2016 and 2018 as those shipments continue to accelerate.

The agency also said in its short-term outlook that Lower 48 natural gas and crude oil production is expected to increase year/year in 2017 as commodity prices rise.