Shale revolution in the USA increased production of oil, gas and Natural Gas Liquids (NGL). The higher content of NGLs in both gas and oil wells make them abundant and lead to oversupply.
This is especially true for ethane, which does not have enough demand internally in the USA from existing crackers and has been therefore left in the natural gas stream and burned for power since 2013. Some months in 2014 and 2015 ethane gas was even cheaper than methane gas due to oversupply.
Such oversupply and low prices attracted new wave of ethane cracking projects in the US gulf Coast and created opportunities for ethane to be exported internationally. First ethane terminals oriented for export to Europe and Asia appeared in 2015-2016.
According to independent consulting and research companies, ethane supply will grow to 3.3 million barrels per day (equivalent of 67 mmtpa) by 2023. The graph shows that rejection will continue 5 years from now even with all new crackers and existing export facilities are fully operational. Such oversupply shows that new ethane export facilities are much needed.
Figure 1.8.5. U.S. Ethane Supply and Demand. Source: RBN Energy (February 2018)
petrockemical industry to produce ethylene and other olefins. The abundance of ethane in mid 2010s created new market for ethane – power generation – where ethane can compete with HFO and LNG in price and emissions.
Since 2015 ethane has been a proven fuel for marine engines and has been used successfully in ethane ships voyaging from USA to Europe.
Some countries in south-east Asia can benefit from ethane injection to natural gas network to increase Btu content. In such cases ethane is more economical than propane.
Hereby we see that abundance of ethane from US Shale Revolution expanded the use of ethane to benefit customers in various sectors of global economy.
Due to variety of applications, Ethylene is the biggest olefin by volume produced in the world. Demand and therefore production of ethylene is growing, majorly in China and other fast developing nations.
The graph below demonstrates that ethane will be the fastest growing feedstock for ethylene production and will exceed naphtha by year 2030.
Recently, ethane as part of NGLs was available in USA and Middle East. Today it gives big price advantage to ethylene producers in these regions.
Due to variety of applications, Ethylene is the biggest olefin by volume produced in the world. Demand and therefore production of ethylene is growing, majorly in China and other fast developing nations.
The graph below demonstrates that ethane will be the fastest growing feedstock for ethylene production and will exceed naphtha by year 2030.
Recently, ethane as part of NGLs was available in USA and Middle East. Today it gives big price advantage to ethylene producers in these regions.
In addition to its price and infrastructure cost advantages, ethane generates substantially higher yields than other feedstock sources when producing ethylene.
Currently China imports over 18 mmtpa of ethylene and polyethylene from middle east and North East Asia. It creates big opportunities for the country to substitute import with own production of ethylene with new built ethane-to-ethylene crackers.
American Ethane Company opened an office in Shanghai in 2015 and was the first company to introduce ethane advantages to Chinese customers and ignited an interest in new greenfield ethane-to-ethylene crackers with the highest yield guaranteed by US technology licensors.
In late 2017-2018 AEC has signed three binding SPAs with Chinese customers for total volume of 7.2 mmtpa of ethane per annum.
Due to a higher boiling point liquefied ethane gas (LEG) is easier and cheaper to liquefy than liquid methane (LNG).
The energy content of ethane makes it cheaper to transport than the same energy content of methane.
Other infrastructure costs, e.g. regasification, are also considerably cheaper to build and operate.
Ethane offers lower CO2 emissions than fuel oils, distillates and coal
Historically, LNG prices have been linked to crude oil price, including Asia-Pacific hubs like Qatar, Australia, Africa and wider Asia, as these markets produce gas themselves and control the cost of production.
In the USA natural gas is traded daily using the Henry Hub Index. New LNG export projects buy gas based on this index and add the fixed cost of liquefaction, storage and loading.
LEG from the USA offered by AEC has similar price structure while using a different index called Mont Belvieu Ethane (OPIS). LEG = Index Mont Belvieu (variable) + Liquefaction and Shipping (fixed).
Fixed part is about 2/3 of the total price, which make such price more stable and predictable on the 20-year horizon. As LNG over the next decade will come mainly from two countries USA and Australia, and with 2/3 of the price of LEG (US) fixed for 20 years, LEG (US) pricing offers more stability and less volatility that is important for base-load power generation.
Since 2015 AEC has been developing a 2400MW power project in Bangladesh with General Electric’s most efficient 9HA Gas Turbine. Coupled with GE’s HRSG and steam turbines, the power plant will be able to guarantee 60% + fuel efficiency at full load. The project is specifically designed as a dual-fuel so it can burn 100% ethane and ethane-methane blends without shutting down the operations.
