By-Product Marcellus Ethane is Valuable to Whom?

Proposed ethane pipeline (Kinder Morgan)

EIA: Ethane Production to Keep Growing

From an Article by Casey Junkins, Wheeling Intelligencer, April 3, 2016

Wheeling, WV –There may just be plenty of ethane for pipeline projects to keep pumping it out of the Marcellus and Utica shale regions, yet still supply the planned $5.7 billion PTT Global Chemical cracker complex in Belmont County, according to data from the U.S. Energy Information Administration.

On Friday, the administration announced U.S. ethane production should grow from 1.1 million barrels per day in 2015 to 1.4 million barrels daily in 2017, an increase of 300,000 barrels daily.

For the last five years, the amount of ethane produced has exceeded the capacity to consume or export it, according to the administration. This has left many producers to employ “ethane rejection,” which is an industry term for mixing the liquid with the the dry methane for marketing as natural gas.

Along with propane, butane, isobutane and pentanes, ethane is one of the liquid forms of natural gas prevalent in the Marcellus and Utica formations. Presently, companies operating in the region have three options for their ethane: Reject it for blending with methane, flare it off to eliminate it or place it in a pipeline for transportation for use elsewhere.

The administration projects U.S. ethane consumption will jump by 50,000 barrels per day this year – and then by another 80,000 barrels per day in 2017. There are six ethane crackers under construction in the U.S. that could process some of this once they are operational: the Sasol ethane cracker complex at Westlake, La.; the Occidental Chemical/Mexichem ethane cracker at Ingleside, Texas; the Formosa Plastics ethane cracker at Point Comfort, Texas; the Dow Chemical ethane cracker at Freeport, Texas; the Exxon Mobil Chemical ethane cracker at Baytown, Texas; and the Chevron Phillips Chemical ethane cracker at Baytown, Texas.

The competition for ethane derived in Ohio, West Virginia and Pennsylvania remains fierce. Officials with Thailand-based PTT are scheduled to make a final decision on whether to build their massive Belmont County plant by the end of the year, but a projected four-year construction period likely means the facility would not actually crack ethane until at least 2020.

Officials believe such a facility could spur the development of additional plants that would use the material from the cracker. Moreover, officials with Royal Dutch Shell continue working on a potential ethane cracker near Monaca, Pa., while some West Virginia officials still hope for the Odebrecht project in Wood County.

However, some producers are signing deals to send ethane out of the region for cracking aboard pipelines such as the Mariner East and Mariner West operations, the ATEX Express and the Utopia Pipeline. In fact, Sunoco Logistics and Kinder Morgan collectively plan to spend about $3.5 billion to move ethane elsewhere for processing.

Last month, the first ethane tanker departed Sunoco’s Marcus Hook Industrial Complex for its trans-Atlantic journey to deliver the product to an Ineos cracker in Norway. Up to 70,000 barrels of ethane per day now cross Pennsylvania via Sunoco’s Mariner East 1 pipeline on the journey to Marcus Hook. Sunoco is now working on the Mariner East 2 pipeline, which the company plans to have carry additional ethane, propane, butane and other natural gas liquids through Pennsylvania by next year. The company estimates the total cost of its Mariner East project at $3 billion.

Simultaneously, Kinder Morgan is working on the $500 million Utopia Pipeline, which would send the ethane from MarkWest’s Harrison County fractionator across Ohio to a connection with existing company infrastructure in Michigan.

Still another outlet for Marcellus and Utica ethane could be for electricity generation, as developers of the planned $615 million Moundsville Power facility have said they would burn ethane at their plant.