The proliferation of natural gas and crude oil produced from U.S. shale deposits also created a bonanza of natural gas liquids (NGL). NGLs account for around 20 percent of U.S. natural gas production by volume at the wellhead, with ethane being the largest fraction. This surplus of ethane could lead to increased exports of the product.
“Everyone associates shale gas with natural gas but there are implications beyond gas and oil,” says Michael Schwartz, Head of the Strategic Business Advisory practice in Black & Veatch’s management consulting business. “There is the dramatic increase in the output of NGLs – ethane, propane, butane. The supply of ethane has grown faster than the domestic market can absorb, with a surplus coming from the Marcellus and Utica shales. At the same time, there is limited infrastructure to ship it out of the region.”
“There are a lot of people curious about the export of ethane from the U.S. and how they can make use of it in Asia and other locations,” said Kevin Currence, Vice President and Technology Manager of Gas Processing for Black & Veatch. Currence recently spoke in Singapore at “U.S. Ethane & LPG Export Asia 2015,” one of the first conferences organized to explore the potential ethane export market.
“I think the hope was, when the conference was being developed, that conversions of ethylene plants to ethane feedstock would be taking off and there’d be a lot of interest,” Currence said. “But with oil prices dropping, plants making ethylene from petroleum-derived naphtha have little reason to spend money to convert to ethane feed at this time. Naphtha prices are low enough that there is no reason to make significant investments in infrastructure.”
In 2014, when oil was approximately $100/barrel, buyers in Europe and India signed ethane export contracts with U.S. suppliers. But with the drop in crude oil prices by the end of 2014, the price relationships between ethane and naphtha became much closer, creating uncertainty over expanding the U.S. NGL export market, at least in the short-term.
Combining Ethane with PRICO-EX Technology
At the conference, Currence discussed Black & Veatch’s PRICO-EX™ technology and how it could be used in the ethane export market.
“There’s a significant cost in chilling ethane to 130 degrees below zero Fahrenheit so that it can be stored at very low pressure and put on a ship. PRICO-EX reduces both the required capital investment and operating expense. It has great potential to deliver significant operational and capital cost savings for operators who want to export ethane, helping make these projects more economically viable,” said Currence.
The fact that the U.S. is essentially the only ethane producer with excess supply for export creates uncertainty in the market.
“There is certainly risk and unknowns associated with ethane right now. There’s currently a lot available in the U.S., which is why the price is low, approximately 20 to 30 cents a gallon on the Gulf Coast,” Currence said.
Current Ethane Export Projects
Current export projects underway will use ethane to supply ethylene plants in Europe and India. Europe-bound ethane will be shipped from the terminal at Marcus Hook, near Philadelphia. Instead of shipping NGLs from the Marcellus Shale all the way to the Gulf, the ethane is being extracted in Pennsylvania and it is being shipped to the East Coast by the Mariner East pipeline, Currence said.
In another export project under development, ethane from a Houston Ship Channel export terminal will go to an ethylene plant in India starting in 2016. Six ethane carriers similar to the cryogenic ships that carry liquefied natural gas (LNG) have been commissioned for this project.
Ethane for U.S. Power Generation
The Singapore conference also discussed the use of ethane as a power generation fuel. In many areas, a portion of the ethane must be removed from the raw natural gas to meet pipeline specifications, even though it has little or no value to the producer.
“This ethane could be used for a number of fuel uses, including power generation,” Currence said. Since ethane has a higher energy content than natural gas, it can be injected into various combustors as a supplement.
For example, a new 549 megawatt merchant power plant near Moundsville, W. Va., will feed the Pennsylvania-New Jersey-Maryland Interconnection. The plant owner says it will be the first U.S. power plant to use ethane as fuel, blended with natural gas. It is expected to go online in early 2019.
Alap Shah, Associate Vice President, Turbine Technologies in Black & Veatch’s energy business, says that at least one major turbine manufacturer offers performance guarantees for turbines that can burn ethane and others are working towards it.
“We have done a few studies for fuel conversion to ethane,” Shah said. “In my opinion, it doesn’t indicate a huge uptick in the use of ethane yet, but if and when natural gas prices go up in North America, this may be a play.”
Ethane Not a Factor in Many Countries
Currence said that, due to a lack of local market, many countries don’t try to recover the ethane from natural gas. Others, like some in the Middle East, consume their ethane in a local petrochemical industry and are not a source of ethane for the global market.
“Every client has a different crystal ball on how they view the ethane market and how it will react over the next few years,” Currence said. “Some say there’s more than enough ethane to fill all of the U.S. ethylene crackers being built and enough left over for export so the prices aren’t going to rise too dramatically. Other’s think it’s much tighter than that, and we’ll see ethane prices go up.”
He said the variable is that there is a lot of ethane right now that could be recovered.
“It only takes a modest change in price and we could again start recovering ethane in gas plants all over the U.S. and have a lot of volume in a hurry. We just have to turn it on.”
Story by Samuel Glasser, Black & Veatch
Published originally on Black & Veatch Solutions.