EIA: US ethane consumption and exports continue to grow

US ethane exports began in 2014 via pipeline to petrochemical plants in Canada. In 2016, the US started shipping ethane to Europe from marine export terminals, and by the end of 2018, the US was exporting ethane to six countries. Three marine export terminals in the US currently ship cryogenically cooled ethane overseas in specially built tankers.

Ethane serves mainly as a petrochemical feedstock to produce ethylene, which is used to make plastics and resins. Ethane and steam are fed into a cracker that heats the mixture to break down (or crack) the ethane molecule, resulting in a product stream composed primarily of ethylene along with some coproducts. Tankers such as Very Large Ethane Carriers (VLECs) transport ethane that is cryogenically cooled to -128°F so it can be transported as a liquid. The number and capacity of vessels shipping US ethane is growing as global ethane demand increases.

US ethane exports to China increased from 21 000 bpd in 2020 to 157 000 bpd in 2022. A second ethylene cracker came online in 2H22 at Satellite Petrochemical in Lianyungang, China, doubling the total feed capacity at the site to 150 000 bpd of ethane imported from the US. The first six VLECs started operating in 2021 for the first ethylene cracker at Satellite Petrochemical, contracted to carry liquified ethane from Energy Transfer’s Nederland, Texas, export terminal. An additional six VLECs began operation to support the second ethylene cracker in late 2022.

Norway is the only other country able to export ethane, and its exports go to three countries in Northwest Europe: the UK, Sweden, and Belgium. Norway’s ethane exports decreased from 13 000 bpd in 2020 to 10 000 bpd in 2021 because high natural gas prices in Europe incentivised ethane rejection in Norway (ethane rejection is a process that allows ethane to be left in the natural gas stream and sold along with natural gas instead of being separated at natural gas processing plants to be sold separately). Norway’s ethane exports averaged around 3000 bpd in 2022, according to vessel tracking data and the Norwegian Petroleum Directorate. Reduced ethane exports from Norway to Northwest Europe from 2020 to 2022 supported higher US ethane exports to the region, increasing by 40% over the same period.

Ethane is also consumed in the US as a petrochemical feedstock, and US ethane consumption has increased every year since 2014. US ethane consumption grew by 9% in 2022, averaging nearly 2.0 million bpd, a 164 000 bpd increase over 2021. By the end of 2021, new ethylene crackers came online in Portland, Texas, adding 108 000 bpd of US ethane feedstock demand. By the end of 2022, two additional ethylene crackers came online in Port Arthur, Texas and Monaca, Pennsylvania adding 156 000 bpd of US ethane feedstock demand. US ethane consumption is expected to average 2.1 million bpd in 2023 because of the additional feedstock demand and higher annualised cracker utilisation rates.

A variety of feedstocks can be used to produce ethylene in petrochemical crackers, including all natural gas plant liquids (NGPLs) and naphtha. The decision to use ethane rather than other feedstocks depends on relative prices and whether a petrochemical cracker has the capacity to switch feedstocks. Crackers using naphtha as a feedstock yield more coproducts than ethylene. Cracking ethane can yield more than 80% ethylene, while cracking naphtha can yield as little as 30% ethylene. Low relative cost, a high ethylene yield, and little coproduct have contributed to ethane’s growth as an ethylene feedstock in the US and, increasingly, around the world. Naphtha cracking can yield valuable coproducts such as propylene, butadiene, benzene, toluene, and xylene. However, demand for ethylene is outpacing demand for other coproducts, reducing the appeal of naphtha cracking.

Ethane spot prices are associated more with natural gas than crude oil, making ethane a cheaper feedstock in the US for ethylene production. Naphtha and heavier NGPLs such as butanes and natural gasoline are more closely associated with crude oil. Ethane spot prices have been consistently lower than naphtha spot prices, mirroring the trend of natural gas prices being lower than crude oil prices. In 2022, naphtha prices averaged US$0.34/lb because of the higher price of crude oil. Ethane, however, averaged US$0.16/lb.

In the US, margins for cracking ethane are higher for ethylene production than for naphtha, and ethylene remains in high demand globally as an input into producing resins and plastics. Until the US became a major ethane exporter in 2016, only a few countries had the infrastructure to use ethane as a petrochemical feedstock. Across most of Asia and Europe, naphtha serves as the primary petrochemical feedstock, followed by propane and normal butane. In the US, ethylene margins from cracking ethane averaged US$0.09/lb from the beginning of 2017 through 2022, while cracking naphtha averaged -US$0.13/lb during that time. US ethylene prices have been, on average, 44% lower than ethylene prices in Western Europe and East Asia.

US ethylene prices are generally lower compared with global ethylene prices because of lower feedstock prices in the US. During the rapid price increases reported in 2H20, when various COVID-19 mitigation measures increased demand for plastics and resins for consumer goods and personal protective equipment, US ethylene spot prices remained discounted relative to international ethylene prices by an average of 38%. This discount provided US manufacturers of ethylene derivatives, such as polyethylene and polyvinyl chloride, with a long-term cost advantage that resulted in expanded manufacturing capacity along the US Gulf Coast and in strong ethane export growth.

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