American Oil and Gas Reporter - April 2018 - 84

VISION2020
FIGURE 2
U.S. Ethane Supply and Demand
3.00
2.50

1.50
1.00
0.50
0.00
2018

2019

84 THE AMERICAN OIL & GAS REPORTER

2021 2022

2023

with additional volumes expected to go
to China for petrochemical production.
With the demand increase, ethane rejection is expected to fall, reaching its
lowest level since 2012 in 2019. After
that, there will be room for additional
petrochemical or export projects as ethane
rejection appears likely to grow, reaching
390,000 bbl/d in 2023 (Figure 2).
Exports Balance Markets
U.S. LPG exports have played a huge
role in stabilizing the domestic propane
and butane markets. In 2005, U.S. LPG
imports peaked at 250,000 bbl/d, accounting for roughly 10 percent of total
U.S. supply. In 2005, the United States
exported only 50,000 bbl/d of LPG. By
2012, that number was 3.7 times greater,
at nearly 200,000 bbl/d and the United

FIGURE 3
U.S. To Asia Spot Propane Price Spread (U.S. Prices Delivered)

Panama Canal

Cape of Good Hope

3/
20
18
1/

3/
20
17
1/

3/
20
16
1/

3/
20
15

3/
20
14
1/

3/
20
13

120
100
80
60
40
20
0
-20
-40
-60

1/

ethane, which balanced the market.
Starting in 2014, U.S. ethane rejection
really ramped up, with nearly 25 percent
of the recoverable ethane in the United
States left in the gas stream. This was attributable to the rapid expansion of NGL
production without associated increases in
petrochemical demand. In general, the lag
between the announcement of an ethylene
production project and its startup is roughly
five years, so it took time for petrochemical
demand to catch up with production.
In 2017, three new ethylene production
facilities started operations on the Gulf
Coast, increasing ethane demand by
156,000 bbl/d or nearly 13 percent. In
2018 and 2019, six additional steam
crackers are scheduled to begin operations, increasing ethane demand another
20 percent.
The United States also has an additional
ethane outlet: international markets. Two
pipelines bring U.S. ethane to Canada,
one from the Bakken into Alberta and
one from the Marcellus to Ontario. In
both cases, the ethane is used for petrochemical production.
U.S. ethane also is exported overseas
from the East Coast (Marcus Hook) and
the Gulf Coast (Enterprise's terminal at
Morgan's Point). Exports from both terminals are forecast to reach nearly 230,000
bbl/d by 2019, accounting for 12 percent
of U.S. ethane demand. Nearly all these
export deals are conducted through longterm contracts with dedicated shipping
vessels. Material from the East Coast is
sent to Europe and material from the
Gulf Coast goes to Europe and India,

2020

Ethane Production

3/
20
12

2017
Rejection

1/

2016

ยข/gal

2015

Demand

3/
20
11

2014

1/

2013

1/

MMb/d

2.00

States was entering its third year as a net
LPG exporter.
In 2017, the United States exported
nearly 1.0 MMbbl/d of LPG and was the
world's top exporter. The United States
exports roughly 53 percent of its propane
production, and all but 6 percent of the
exports are sent out via seaborne trade,
with the balance traveling by truck, rail
and pipe to Mexico.
U.S. LPG goes to Europe, Northeast
Asia, Latin America and Southeast Asia.
The only locale that does not receive
U.S. LPG is India, a destination in which
Middle Eastern imports are the most economical. In 2017, more than 60 percent
of U.S. exports went to Asia, with the
bulk of those headed toward Northeast
Asia. Slightly less than 30 percent was
shipped to Latin America, including Mexico, South America, Central America and
the Caribbean. The balance went to Europe
and the Mediterranean.
A wave of investment in export infrastructure along the Gulf Coast has
dramatically shifted the economics of
U.S. LPG exports and balance. In 2012,
when U.S. exports first started to climb,
export terminal capacity was limited.
U.S. terminal capacity in 2017 was seven
times greater than in 2012, thanks to
terminal expansions and two new facilities. While this additional capacity was
being added, the domestic U.S. propane
market was extremely long. U.S. propane
prices, which historically traded at about
60 percent of West Texas Intermediate
crude oil prices, fell to around 35 percent
of WTI and storage numbers reached
record highs.



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