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NGLs Week is PetroChem Wire's comprehensive summary of price trends, upstream and downstream costs, operations news and supply/demand forecasts. The report contains everything you'll need to understand what's happening in the NGL markets.

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Year in Review: Ethane set to close at highest level since mid-2014

HOUSTON, December 14, 2016 (PCW) -- Ethane prices look set to close 2016 at an intra-year high above 27 cpg, which is also a level that the lightest of the purity products has not seen since mid-2014, according to PetroChem Wire prices.

During the year ethane rose 11.5 cpg, or nearly 74%, but it also skirted dangerously close to all-time lows as well. This volatility is largely due to the push and pull of supply and demand with natural gas prices starting the year out at lows not seen since the 1990s and ethylene plant expansions and ethane exports exerting a more bullish influence than in years past.

With ethane’s forward curve in contango through Jan 2018,  could 2017 be the year that ethane pivots from being more of a supply-driven commodity to one more influenced by demand?

This year certainly brought more demand to bear in ethane with the first US ethane exports occurring in March, out of Marcus Hook, with Gulf Coast exports following out of Enterprise Product Partners’ 200,000 b/d Morgan’s Point facility in September.

The fourth quarter certainly promised a boost of cracker demand from Dow’s 600 million lbs/yr Plaqumine LA-3 expansion and Equistar’s 800 million lbs/yr Corpus Christi expansion, which might have added 32,000-34,000 b/d of additional ethane consumption, according to PCW estimates. However, operational issues have not yet brought these units back online and likely have prevented further gains in spot prices.

New Crackers

Next year, however, with six new crackers and one refurbished one slated to come online, a further 400,000 b/d of ethane demand will come into play. Although this demand is expected to occur in a fairly chunky fashion, given expected start-up delays and typical operational growing pains, the overall outlook for demand is bullish. Added to this is ramp-up of increased exports out of the two terminals.

Already two of the world’s largest ethane carriers – Sabic’s Gaschem Beluga and Reliance’s Ethane Crystal – are expected to dock at Morgan’s Point next week, beginning what is expected to be steady and significant export traffic out of that terminal to global markets. What could stymie this upward surge of prices is production. Ethane rejection is pegged around 600,000 b/d currently, as per EnVantage estimates, which if unlocked could keep the lid on spot prices in the coming year. -- Samantha Hartke

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