Rising demand for LNG in the coming years could drive rejection rates higher, write Abby Downing-Beaver and Amy Strahan
US ethane production and export growth is expected to continue over the next few years but could be dampened by rising rejection rates into the natural gas stream as demand for US LNG firms, delegates heard at the Petrochemical Feedstock Association of the Americas conference in Lake Charles, Louisiana, on 26 October.
The US is the world's largest ethane exporter, shipping 491,000 b/d (839,000 t/month) mainly to China, India, Norway, Canada and Mexico under term contracts with petrochemical producers, the latest EIA data show. US ethane production from gas processing stands at nearly 2.6mn b/d this year. But a significant proportion of this is rejected into the gas stream, and rising demand for LNG in the coming years could drive rejection rates higher and limit ethane output growth, consultancy Midstream Energy managing director Anne Keller said at the event.
US production of dry gas, which is expected to rise by around 8.6bn ft³/d (88.6bn m³/yr) to 105bn ft³/d in 2022-26, may not be enough to satisfy demand for US LNG exports, according to Keller. As LNG export capacity is added in the US, gas producers may increase ethane rejection. The equivalent of around 175 LNG cargoes of ethane is rejected into the gas stream each year, she said. At the same time, US ethane exports are forecast to rise to over 1mn b/d by 2026, with 25 very large ethane carriers (VLECs) on order. This will lead to heightened competition with LNG that should result in ethane price volatility, as producers seek to exploit the best regional arbitrages between petrochemical and LNG markets, she said.
US market participants have already experienced something similar during the summer, when Mont Belvieu ethane prices in Texas rose to a seven-month high of 39.75¢/USG ($296/t) on 18 July, after natural gas prices in Waha, Texas, spiked in late June owing to high temperatures, driving up ethane rejection rates.
US ethane production will continue to grow strongly regardless of rejection rates, according to midstream firm Energy Transfer, which operates the 182,000 b/d Orbit ethane export terminal at Nederland, Texas, under a supply contract with China's Satellite Petrochemical. "We're very bullish on where ethane production is going in the longer term," market fundamentals manager Dan Wilson said.
