U.S. ethane consumption and exports continue to grow (6/1/2023)

U.S. ethane exports averaged 537,000 barrels per day (b/d) in March 2023, an all-time high since the United States began exporting ethane nearly a decade ago (Figure 1), according to our May 2023 Petroleum Supply Monthly (PSM). U.S. ethane exports have increased every year since 2014 (when the United States began exporting ethane), except for 2020, when the economic slowdown triggered by the COVID-19 pandemic triggered a slight decrease. As global demand and capacity for ethane as a petrochemical feedstock grows, we expect ethane exports to grow by 4% in 2023 and 5% in 2024, averaging nearly 500,000 b/d by the end of next year. Domestic consumption of ethane has also grown, but we expect growth to slow in 2023 and 2024 because we do not expect new ethane cracking capacity to come online in the United States.

Figure 1. U.S. ethane exports and capacity

U.S. ethane exports began in 2014 via pipeline to petrochemical plants in Canada. In 2016, the United States started shipping ethane to Europe from marine export terminals, and by the end of 2018, the United States was exporting ethane to six countries. Three marine export terminals in the United States 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 U.S. ethane is growing as global ethane demand increases.

U.S. ethane exports to China increased from 21,000 b/d in 2020 to 157,000 b/d in 2022 (Figure 2). A second ethylene cracker came online in the second half of 2022 at Satellite Petrochemical in Lianyungang, China, doubling the total feed capacity at the site to 150,000 b/d of ethane imported from the United States. 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.

Figure 2. U.S. ethane exports by destination

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 b/d in 2020 to 10,000 b/d in 2021 because high natural gas prices in Europe incentivized 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 3,000 b/d 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 U.S. ethane exports to the region, increasing by 40% over the same period.

Ethane is also consumed in the United States as a petrochemical feedstock, and U.S. ethane consumption has increased every year since 2014. U.S. ethane consumption grew by 9% in 2022, averaging nearly 2.0 million b/d, a 164,000 b/d increase over 2021 (Figure 3). By the end of 2021, a new ethylene crackers came online in Portland, Texas adding 108,000 b/d of U.S. ethane feedstock demand. By the end of 2022, two additional ethylene crackers came online in Port Arthur, Texas and Monaca, Pennsylvania adding 156,000 b/d of U.S. ethane feedstock demand. We expect U.S. ethane consumption to average 2.1 million b/d in 2023 because of the additional feedstock demand and higher annualized cracker utilization rates.

Figure 3. U.S. ethane consumption

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 United States 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 United States for ethylene production (Figure 4). 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 $0.34 per pound because of the higher price of crude oil. Ethane, however, averaged $0.16 per pound.

Figure 4. U.S. ethylene feedstock spot prices and margins

In the United States, 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 United States 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 United States, ethylene margins from cracking ethane averaged $0.09 per pound from the beginning of 2017 through 2022, while cracking naphtha averaged -$0.13 per pound during that time. U.S. ethylene prices have been, on average, 44% lower than ethylene prices in Western Europe and East Asia (Figure 5).

Figure 5. Global ethylene spot prices

U.S. ethylene prices are generally lower compared with global ethylene prices because of lower feedstock prices in the United States. During the rapid price increases reported in the second half of 2020, when various COVID-19 mitigation measures increased demand for plastics and resins for consumer goods and personal protective equipment, U.S. ethylene spot prices remained discounted relative to international ethylene prices by an average of 38%. This discount provided U.S. manufacturers of ethylene derivatives, such as polyethylene and polyvinyl chloride, with a long-term cost advantage that resulted in expanded manufacturing capacity along the U.S. Gulf Coast and in strong ethane export growth.

Data changes to the Weekly Petroleum Status Report (WPSR)

Beginning with today's release, EIA's Weekly Petroleum Status Report (WPSR) will show Fuel Ethanol and Total Motor Gasoline (sum of Finished Motor Gasoline and Motor Gasoline Blending Components) estimates separate from Other Oils exports estimates. This Week in Petroleum will reflect changes from WPSR in gasoline export data series. Please see full notice for more information.

Source: EIA

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