Update On Bakken Ethane Production -- June 28, 2016

Updates

Later, 1:40 p.m. Central Time: after posting the story below, I went back and did a search on "Hess Ethane Canada" on the blog. Some of the posts:

• updates on all the crackers being considered, back in January, 2012
• expansion of the Hess Tioga plant, October 30, 2011
• Canada's biggest plastics producer will purchase all the ethane Hess produces at its Tioga plant, July 16, 2013
• $4 billion plastics plant announced for North Dakota, October 13, 2014
• connecting some dots, October 1, 2015
• Bakken ethane reaching Canadian feedstock facilities in Alberta, June 24, 2014
• this might have been the first, February 14, 2022

And that's just a small sampling.

Original Post

 

If you have time to read only one detailed report today, make it the RBN Energy post: US ethane exports to Asia and Latin America are about to pop.

Link here.

The entire post is eye-popping.

For newbies, it provides a lot of background to ethane.

When I first started blogging, I had no idea what "ethane rejection" meant. At risk of explaining it incorrectly, ethane is "more valuable" when used as feedstock rather than simply burned. Producers achieve a "higher margin" on ethane when it is used as feedstock for plastics and other derived products, than when it (ethane) is burned for heat or electricity. But because there is not enough midstream infrastructure to process all that ethane, much of it is currently being "rejected" and put back into / or left in the natural gas pipeline. Operators are "leaving money on the table" as they say.

The RBN Energy post at the link above provides an incredible update on the ethane situation. For folks interested in the Bakken, note this:

Let’s take a detailed look at all this capacity, beginning with a recap of the two ethane-only pipelines that for two years or more have been transporting U.S. ethane to Canada. 

Sunoco Logistics’ 50 Mb/d Mariner West Pipeline (blue layer in graph to the right of the figure below) since December 2013 has been moving ethane from the heart of the wet Marcellus/Utica (Houston, PA) to near Detroit (MI), and from there to steam crackers in Sarnia, ON.

Similarly, since May 2014 Pembina Corp.’s 40 Mb/d Vantage Pipeline (green layer) has been moving ethane from the Williston Basin in western North Dakota to the Alberta Ethane Gathering System (AEGS) near Empress, AB, again for use by Canadian ethylene plants.

Pembina is just finishing up a Vantage expansion project that (with a new lateral and pumping stations) will boost the pipeline’s capacity to 70 Mb/d this summer (note that the green layer thickens).

Here's the graphic:

One will find multiple posts regarding Pembina Corporation and its ethane pipeline on the blog. In addition, back in 2013, it made the top ten list for fastest growing energy companies in North America.

From RBN Energy:

As you can see from looking at the mid-2016 points in the two graphs in the figure above, the run-up in ethane demand from exports and from incremental ethylene plant capacity is only just beginning.

By late 2017/early 2018 (a year and a half from now), ethane exports could be approaching 300 Mb/d (200 Mb/d over today) and demand for ethane from new or expanded steam crackers could rise by 300 Mb/d—taken together, that’s some 500 Mb/d in new ethane demand!   

That rising demand will pull a lot more ethane out of volumes being rejected into natural gas today and increasingly move the ethane barrels through fractionators and into pipelines for deliver to petrochemical crackers, mostly crackers along the Gulf Coast.

But there is a catch. 

For ethane to be extracted instead of rejected, the price of ethane must be high enough to make the economics work.  That means higher than natural gas at the processing plant.  And that means high enough to cover the cost of transporting mixed NGLs (also know as Y-grade) to market (from a nickel per gallon all the way up to more than 25 cents per gallon) and fractionating that ethane out  (another nickel or dime per gallon).  And that means that all that new demand will not be satisfied unless ethane prices are higher. 

Perhaps a lot higher. 

One may want to take another look at Badlands NGLS. 

From RBN Energy, October 19, 2017: