Growth of an Industry

Dave Cooley, GHPB

In September 2016, Enterprise Products inaugurated its ethane export terminal at Barbours Cut in La Porte, Texas,
with an export capacity of 240 MBD, making it the largest ethane export terminal in the world. Ethane, a component
of natural gas that is a key feedstock for chemical manufacturing, is already responsible for a revival of the
chemicals industry on the Gulf Coast. With ethane export capacity online, manufacturers overseas will be able to
take advantage of Texas’ low-cost ethane.
Background on Natural Gas Processing
Ethane is a component of the raw natural gas production stream and, at atmospheric pressure and temperature, it is a
gas that is colorless, odorless, and quite flammable. The production stream of raw natural gas is primarily composed
of methane with small amounts of ethane, propane, and butane, as well as other gases and impurities.
Once the flow of natural gas from the producing well reaches the surface, it passes through a multi-phase gas
processing activity designed to separate each of the components contained within the production stream. These
phases include oil and gas separation, if the natural gas is produced in association with oil; dehydration, which
removes water; and various additional phases that remove other gases, such as carbon dioxide, hydrogen sulfide, and
nitrogen.
At this juncture, the production stream now contains only the hydrocarbon gases. The next phase is to separate the
methane from the other gases, which is most efficiently accomplished by cryogenic separation. This process cools
the hydrocarbon gases to -120°C at which point the methane remains as a gas while all other components are
condensed to liquids. With the methane now separated from the remaining hydrocarbon gases, it is injected into the
national natural gas pipeline grid for distribution throughout the country.
The remaining hydrocarbon gases then pass through a fractionator, which is either co-located with the processing
plant or transported to a centrally located fractionation operation, where this additional processing occurs. The
fractionation process separates the remaining hydrocarbons, ethane, propane, butane, pentane, and natural gasoline
based on the individual and sequentially higher boiling points of each component. See Figure 1.

Demand for Ethane Fractionation

Currently, the incentive to fractionate ethane is only as strong as the immediate appetite of the U.S. ethylene plants.
Therefore, a gas plant operator will operate the gas processing facility at various discretionary levels to match the
recovery of ethane from the wet natural gas production stream with the demand from ethylene plants. Maximized
ethane recovery typically results in recovering between 80% and 90% of the ethane from the wet natural gas
production stream. However, when demand for ethane is insufficient to support recovery, ethane is rejected and
remains part of the dry natural gas stream along with methane, which increases the BTUs of the gas stream
compared to pure methane. This blended methane-ethane gas stream is injected into the natural gas pipeline system,
up to the BTU limits established by the pipeline, for distribution throughout the country.
At the end of 2014, the latest year statistics were available, the EIA notes there were 551 gas plants located
throughout the U.S. with a nameplate (or full load) capacity of 77 BCF (billion cubic feet). Of this number, 181
plants are located in Texas with a capacity of 24 BCF, or 31% of the national total. National utilization rates for
2014 were 66% while the plants in Texas averaged 75%.
Ethane Production
Ethane production is primarily sourced to the output of gas plants (99.5%) with a very minor amount (0.5%) being
supplied from the petroleum refining process. Nationwide, ethane production from gas plants rose from 314 MBD in
January 1981 to 1,345 MBD as of November 2016 and is shown by Figure 2.

Ethane Demand
The primary use of ethane is as a feedstock for the production of ethylene. Specifically, the ethane is the chargestock
to a thermal cracking process that re-arranges the carbon atoms in the ethane molecule from a single bond to a
double bond. This process creates ethylene (formally named ethene), a product used in the manufacture of plastics,
anti-freeze, and various detergents. Figure 3 displays the wide array of petrochemical products sourced to ethane.

Thermal cracking facilities are generally clustered near fractionation plants to minimize transport of the raw
material. A 2015 survey published in the Oil and Gas Journal noted that there are 34 thermal cracking units located
in the U.S., 21 of which are in Texas, representing all types of feedstock with a nameplate capacity of just over 28
million metric tons a year. The greater Houston area boasts 9 of the 21 Texas facilities with capacity of about 12
million metric tons a year, or 41% of the national total.
Ethane Exports
Large scale international trade in ethane was de minimis until recently. That changed, however, as suppliers from
the U.S. proactively and successfully sought foreign markets for the increased ethane being produced from shale
gas. Pipeline exports to Canada began in December 2013 and saw a boost in May 2014, reaching a level of 70 MBD
by the end of that year. Export volumes remained relatively constant until the spring of 2016 when waterborne
exports of ethane began. The first waterborne cargo embarked from Philadelphia during March 2016, and exports
increased again in September with the initial cargo sailing from Houston. Both initial cargos were destined for
Europe. Through November 2016, U.S. exports of ethane averaged about 90 MBD with about 20 MBD being
waterborne exports. See Figure 4.

Ethane Supply and Disposition

U.S. ethane supply is generally defined as the sum of gas plant production, refinery and blender net production, and
imports. U.S. ethane disposition, which is a proxy for ethane demand, is the sum of the change in stocks, net input
by refineries and blenders, exports, and product supplied. Ethane supply and disposition exactly offset by design,
meaning that supply equals disposition.
Ethane supply and ethane disposition have nearly doubled since 2009 and tripled since 1981. U.S. ethane-ethylene
supply and disposition capabilities each increased from 398 MBD in January 1981 to 1,349 MBD as of the end of
November 2016. Table 1 describes the composition of supply and disposition.

The Houston Port Region

Enterprise Products projects that its ethane export terminal will be at capacity during 2018. The capability to export
ethane further enhances Houston’s LPG portfolio by being able to handle waterborne trade for all LPG components.
On February 17, 2017, Odfjell Terminals awarded a basic engineering contract to explore the possibility of adding
an ethylene export terminal to its existing Seabrook facility. Enterprise Products is also considering ethylene
exports.
This is just another instance where the Houston port region remains a forerunner in the worldwide trade in
petroleum, petroleum products, and petrochemicals.