[Plantagenet]

$this->bbcode_second_pass_quote('ROCKMAN', 'W')hat the Rockman finds very interesting is how the ethane/ethylene dynamic is spurring significant heavy industry expansion into areas that have seen such activities slip away from them for decades. From:

https://stateimpact.npr.org/pennsylvani ... port-says/

Pennsylvania could support four more ethane crackers

"Pennsylvania has the capacity to attract up to four more ethane cracker plants because of its abundant reserves of NGLs and its proximity to major markets for plastics feedstock. A report projects that more petrochemical companies could decide to invest in Pennsylvania, following the lead of Shell Chemicals which is building the state’s first ethane cracker plant in western Pennsylvania to take advantage of NGLs from the nearby Marcellus and Utica Shales. The need to develop the supply of NGLs from shale beds could also draw investment of $2.7 billion to $3.7 billion.

Pennsylvania currently has a sufficient supply of NGL to support a world-class petrochemical industry. Its major competitive advantage is access to an expanding supply of low-cost natural gas. Pennsylvania with abundant NGL (particularly ethane and propane) is capable of supplying up to four additional world-scale, integrated ethane crackers similar in size to Shell Pennsylvania Chemicals.

[ROCKMAN]

P - It was that article that got me into the ethane cracking buzz which I knew zero about before. And here's a bit of a cross over from ethane to Saudi Arabia's effort to generate revenue outside of oil exports. And there's no requirement that such efforts be physically located in the KSA. From:

http://www.rigzone.com/news/oil_gas/a/1 ... va_by_2023

Saudi Aramco Plans Up to $30B Investment in Motiva by 2023

Reuters - Motiva's Port Arthur, Texas, facility is already the largest refinery in the United States. Saudi Aramco plans an investment of up to $30 billion in its U.S. subsidiary. The company said that $12 billion would be the initial investment in a project to expand refining capacity and to extend operations in the petrochemical value chain. {IOW ethane/ethylene}

A likely additional investment of $18 billion is expected in Motiva by 2023. Since the completion of an expansion of the Port Arthur refinery in 2012, which more than doubled its capacity to refine crude oil to 603,000 bpd, Motiva has weighed plans for further expansion of the plant. Saudi Aramco has also looked at acquiring at least one additional Gulf Coast refinery and visited chemical plants {where ethane could be shipped to produce much more valuable ethylene} up for sale.

"We are investing in long-term job creation and the future of the refining industry in the United States, and we are delivering on Vision 2030 to expand the U.S.-Saudi partnership," Saudi Aramco President and Chief Executive Amin Al Nasser said on Saturday, according to the statement. Aramco said in the announcement that in the short-term an additional 2,500 jobs would be created in Port Arthur and an additional 12,000 jobs by 2023."

Thing about it: investing hundreds of $BILLIONS in revenue generating infrastructure in the US might be a safer long term plan then doing it in the kingdom.

[ROCKMAN]

Interesting how understanding the US shale play + ethane + ethylene + petrochemical/plastic dynamic causes one to notice stories one might otherwise skip:

ChemChina and Sinochem Press $120B Deal

Reuters - "Combining Sinochem and an enlarged ChemChina would put the group among the world leaders across the competitive chemicals, fertiliser and oil industries - a giant overseas."

Which doesn't click that hard. Until you search those companies:

Reuters - Sinochem will add an ethylene complex to its Quanzhou oil refinery, company vice president Zhang Wei told Reuters on the sideline of a chemical conference. Sinochem plans to build a 1-million-tonne/year ethylene production facility as well as one 800,000-tonne/year PX production facility.

All right! More plastic crap to export to the US!

But wait...the Chinese will still have to get ethane from somewhere to make that ethylene. How the hell will they do that? Ohh...

"Yield ordered for three ECO STAR 36K Liquefied Ethane Gas Carriers (LEG) in May 2014. The vessels will be the world's biggest LEG carriers and the first ethane-fuelled ocean going vessels. The eco-friendly gas carriers will be built with an estimated investment of $243m at Sinopacific Offshore & Engineering's Chinese shipyard. The three LEG carriers were scheduled to be delivered in August, October and December, 2016."

Ya know, it's almost as if the Chinese are into that long term game play that the US has a difficult time developing.

[ROCKMAN]

A heads up: in the future when you read about "LNG" it might be dealing with LMG (Liquefied Methane Gas...I just invented that acronym) or LEG (Liquefied Ethane Gas). I've run across stories where "LNG" has been used for both methane and ethane cargoes. Not an insignificant distinction given the very different value and end uses.

And Chenier isn't the only US company capable of exporting LNG as is commonly reported in the MSM...if you count LEG as an LNG...as some are doing:

Platts Feb 2017 - Braskem's first cargo of US ethane was expected to arrive in Rio de Janeiro, Brazil, on Wednesday aboard the Gaschem Arctic. The journey marked the first time US ethane moved to South America, as the previous exports out of Enterprise Products' Morgan's Point, Texas, (just across the bridge frtom the Rockman) ethane export terminal traveled to Europe and India.

The 9,133 mt Gaschem Arctic departed from the Morgan's Point terminal on February 4. The vessel, which entered Guanabara Bay on Wednesday, is carrying about 78,000 barrels of ethane to Braskem's Rio de Janeiro plant, a source said. The company owns four crackers in Brazil.

[coffeeguyzz]

Braskem was far along to build third cracker in the Appalachian Basin, in the WV panhandle, but internal issues sidetracked those plans.
A second cracker located in Ohio, to be built by a Thai company PPT, is awaiting FID this fall. Already several hundred million dollars have been spent on engineering studies and plans.
The bigger, near term US ethane consumer will be Reliance Industry from India. They now have a six ship fleet of 87,000 metric ton capacity doing non stop shipments from MP.
The Chinese might be long term consumers as their vast shale reserves in the west - coming along slowly - are too deep to have much liquids.

[ROCKMAN]

Coffee - Unless something really big pops up I'll leave the updates to you and others. In think some folks are beginning to suffer a ethane overdose. LOL.

My primary interest was how the ethane/ethylene dynamic might generate a positive response by the shale players. But I think it will take the better part of a year to shake out. But the export/international components and their effect on the economies of various countries, including the US, might generate an interesting sidebar.

[coffeeguyzz]

Rock
Completely agree, and,once again, I think it is great you started to shed some light in this area.
The major upcoming event might be this fall as the Mariner East 2 should be online.
275,000,barrels per day of ethane/propane is a lot.

[ROCKMAN]

Coffee - One more post how ethane caught my eye as a potential factor that could provide a motivation for expanded drilling of plays such as the Marcellus and Utica even if there is not a significant increase in NG prices:

"Over the past five or six years, the amount of ethane contained in domestically produced raw natural gas has exceeded the capacity to consume and export it. This oversupply kept ethane prices relatively low, hovering at or below the price of natural gas, leading producers to reject the ethane stream by leaving it mixed with the stream that is marketed as pipeline natural gas, which is mostly methane."

{A very interest chart of ethane and methane prices. In 2012 ethane was selling for almost 3X the price of NG/methane. But just a few years later it crashed to the same price are slightly less. Which explained my companies left the ethane in the NG: the higher Btu could garner a slighter better price AND it cost nothing to not reject it.

https://www.eia.gov/energyexplained/ind ... gls_prices

"In 2014, the United States switched from being a net importer of ethane to a net exporter after the opening of two new ethane pipelines that began transporting ethane from North Dakota and southwestern Pennsylvania to Canada. EIA's Short-Term Energy Outlook (STEO) expects annual average ethane net exports to increase from 60,000 b/d in 2015 to 230,000 b/d in 2017, as new export facilities and ethane-carrying ships enable ethane to reach overseas markets. On March 9, the United States shipped the first waterborne exports of ethane from the Marcus Hook, Pennsylvania terminal to Europe. A second ethane terminal is expected to open at Morgan's Point, Texas in the third quarter of 2016. The two terminals are expected to export ethane mainly to European and Asian countries."

And I just found the formula to convert ethane gallons to mmBtu:

(Price/gallon ÷ 66,500) X 1,000,000 = $/mmBtu

So (0.22 ÷ 66,500) X 1,000,000 = $3.31/mmBtu
Or about the current price of methane

Mont Belvieu 1/2021 ethane futures = $0.37/gallon.
Currently around $0.25/gallon

I'm starting to suspect the big profit is ethane converted to ethylene. Too tired now to figure out that relationship. But I did find ethylene did increase in price 45% since Jan 2016.

One side note: as more ethane is rejected from Marcellus NG the Btu content reaching end users will decrease somewhat. Which means they'll be paying more for the energy content they burn. Being a zero sum game someone was going to take a hit as ethane became more profitable.

I'm staring to get as addicted to this ethane dynamic as much as I am to Blue Bell icecream. LOL.

[coffeeguyzz]

Rock
BTW, enthusiasm about this ethane stuff is both understandable and warranted, IMHO.
However, you may also be interested in checking out the liquified propane and propylene action.
Export graphs over at EIA are eye popping.

US is now world's leading exporter of LPG (more acronyms, right?), and the build out of PDH units (Propane hydrogenation) is creating WAY more of the needed feedstock propylene.

This whole NGL part of the industry is starting to assume VERY large economic influence on shale development.

[coffeeguyzz]

PDH is Propane DEhdrogenation.
Something like 40% of raw propane is used in petrochemical applications.
The remaining bulk is used for localized heating, BBQ, agricultural drying, ubiquitous propane tanks of all sizes, etc.

USA just has a ton of this stuff heading to market in coming years.

[ROCKMAN]

Coffee - Yep, I avoided the other NGL's to focus on ethane. Interesting to see how booming propane production AND exports will hit our consumers. Just between the summer of 2008 and 2015 US propane exports increased 900%. But domestic production only increased 50% during that time. But fortunately prices didn't move much during that time frame.

Might be a bit of trouble for US propane consumers this winter:

"U.S. propane inventories saw the largest draw on record from October to March 2017 according to the EIA. Propane inventories had been above normal levels since 2014, rising above 100 million barrels in both 2015 and 2016. Inventories in early October were about 19 million barrels above the five year average, but have since fallen to just below the five year average stock. Inventories have declined by 59 million barrels since their peak in September 2016, almost double the average draw in that period. While propane is sometimes used in industrial and agricultural sectors, its primary use in the U.S. is as a heating fuel for homes and businesses during winter. While this winter has been relatively mild, inventory draws have been 19 million barrels larger than even the very cold winter of 2013-2014."

IOW if we don't burn it those dang foreigners will. LOL. Next fall might be worthwhile tossing out a propane thread.

[ROCKMAN]

And now stepping back to a more general picture of individual NGL's and looking at the total seems a bit of great news for our industries and my Yankee propane burning cousins...both depending on NGL's.

Since 2006 US exports of all NGL's increased 2000%. Yes: 20X. From 920 MILLION gallons to more the 18 BILLION gallons

https://www.eia.gov/dnav/pet/hist/LeafH ... gexus1&f=a

But fortunately our NGL production increased by 23 BILLION gallons. Could not find a composite consumption figure but it must not have increased much since the price has from $13/million Btu to $5/million Btu.

And we now where to boost came from: our shale plays. Which only highlights the childish assertions that the light oil and NG production from the shales had little positive impact.

[coffeeguyzz]

Might be worthwhile for folks to have some awareness of the growing impact of Natural Gas Liquids (NGLs) - particularly ethane - on this whole 'shale revolution topic.

Two items of note ...

CEO of large petrochemical company, INEOS, just said the low prices of US ethane and propane give US manufacturers an insurmountable cost advantage over the rest of the world.
They, along with Chinese and Indian petchem outfits, currently employ - or soon will - over 36 large liquefied ethane-carrying ships, an industry that did not hardly exist 2 years ago.
The original 8 ship Dragon fleet is now actually the smallest size (275,000 barrels) with the largest running at 800,000 barrels capacity.

Second item should be considered more noteworthy for many reasons.
Foxconn, assembler of Apple products and others, is set to announce the location - Wisconsin or Michigan most likely - of a 5 to 7 billion dollar manufacturing plant.
The biggest factors to locate in US and not expand in China is LOW COST feedstock (ethylene/polyethylene mainly) as well as LOW COST electricity pricing.

The 2 step component, NGLs for creating products and methane for producing the electricity, provide an incredible advantage to the US for many decades to come.

[ROCKMAN]

Coffeeguy - What is wrong with you, bro? Seriously? How many times has the death of the petroleum industry (just a few years down the road) been explained to you? Granted it has been explained by some who have never drilled a well like you or even drew a paycheck by producing fossil fuels as you have.

But wake up and smell the coffee, dude!. LOL.

[ROCKMAN]

pstarr - "This is a peak oil web site, not a peak plastic-gadget place." FYI: the expansion of the ethane/ethylene market adds value to the production stream from the shales. IOW gives a little more economic incentive to drill more shale wells. And more shale wells mean more oil production. Which, obviously, direct reflects on our conversation about PO.

[coffeeguyzz]

RM

Did a little checking on the economics of NGL components.

Current approximate spot, expressed in barrel (42 gallon) units ...

Ethane. $12
Propane. $28
Butanes. $31
Pentanes. $44

Handling and transportation costs have a big effect, naturally.

The mere fact that INEOS, several years back, invested $2 billion in, literally, creating from scratch, a mechanism - liquefied ethane transporting ships - should speak volumes to a discerning observer,
All the more so with the rapid build out of numerous other ships by various companies (Borealis, SABIC, Reliance).

This NGL aspect could assume much larger prominence in these matters as the years roll on.

[Synapsid]

coffeeguyzz,

I may be off on this, but I think I remember that the Chinese ships for carrying ethane were actually powered by ethane as well.

Is this correct?

[coffeeguyzz]

Hey, Synapsid.

Nice to see you post here and on POB.
Always appreciate your input.
Yes, the Dragon ships are designed to run on ethane and, I believe, LNG. Definitely two potential fuel sources.

Many (all?) of these other ships also can run on ethane as well as alternate fuel making them pretty economical operationally.

I'm about as fascinated with the ships and their construction as much as the global market impact.
Apparently, the ships can manipulate the temperature as well as the pressure to most effectively transport this product.

As it was only 15 months ago the very first shipment was made to now having about 36 huge ships plying the oceans with this stuff, I think it is remarkable.