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Eastern Pacific wins ethane carrier deal as US-China trades rise

Third ethane export terminal opening in US in November as shale oil revolution continues to reshape petroleum gas trade flows

Petroleum feedstock in demand for ethane-to-ethylene plants. Ethane exports have kept the lowest profile in the US shale oil evolution. The Eastern Pacific-owned ships linked to the deal will have dual-fuel ethane propulsion

EASTERN Pacific, the Singapore-based shipmanagement company, will build and operate four 98,000 cu m very large ethane carriers for a Chinese petrochemical company that is about to start shipping regular cargoes of the refrigerated gas from the US Gulf.

The 15-year deal with Zhejiang Satellite Petrochemical underscores China’s rising dominance in US ethane export trades.

Zhejiang Satellite Petrochemical is poised to ship its first cargo from the newly constructed 175,000 barrels per day Orbit Ethane Export Terminal, at Nederland, Texas, in November.

US-based Energy Transfer owns the Orbit terminal in partnership with the US subsidiary of Zhejiang Satellite Petrochemical.

The deal will see as much as 150,000 bpd of ethane heading for two ethane steam crackers in China.

The first steam cracker comes online in the second quarter of 2021.

Ethane exports have kept the lowest profile in the US shale oil evolution that is still reshaping crude and liquefied natural and petroleum gas trade flows.

Ethane is the lightest natural gas liquid, used as a petrochemical feedstock for steam crackers that produce ethylene, propylene and other products. It is also mixed into the NGL stream in various volumes, depending on the price at which it can be sold.

The deal with Eastern Pacific is part of a 12-ship fleet of VLECs being established for Zhejiang Satellite Petrochemical to ply the US Gulf-China ethane trades.

Six VLECs are either on the water or under construction to Malaysia-based MISC Berhad, also under a 15-year time charter deal. Another two VLECs will be delivered to Tianjin Southwest Maritime.           

The Eastern Pacific-owned ships will have dual-fuel ethane propulsion like the other eight VLECs, with delivery scheduled in the first half of 2022.

This suggests these vessels will be used for supplying the second steam cracker, which is not due to come into operation until then.

Two VLECs will each be built at South Korea’s Hyundai Heavy Industries and Samsung Heavy Industries. These yards also received orders for other vessels in the fleet.

The first ethane exports from the US began in 2016, with two terminals now established for the trade. One in Houston and another near Philadelphia on the Atlantic east coast.

Houston-based energy consultant RBN Energy estimates ethane exports at the Energy Transfer facility averaged 31,000 bpd in 2018, rising to 51,000 in the first eight months of 2020.

Exports from the Enterprise terminal on the Houston ship channel were tracked at 129,000 bpd in 2019, falling to 110,000 bpd so far this year,

The Orbit terminal once commissioned in November adds at least 75,000 bpd to export volumes over the next year, rising to 150,000 bpd in 2022. It will also catapult China to become the largest buyer of US ethane. At present, China is behind India, the UK, and Norway (see table below).

About 290,000 bpd of ethane is exported from the US, RBN Energy estimates, of which about a third is sent via pipeline to Canada and the rest compressed or refrigerated for shipping.

“Our understanding is that China’s petchem sector is very open to importing a lot more US ethane, but that the ongoing trade war between the two countries has been a hindrance to those plans,” RBN Energy said in a recent report.

“Delivering those volumes from the new Orbit terminal will involve the regular shuttling of a half-dozen VLECs from the Gulf Coast to China and back. When the second cracker starts up and Zheijian’s ethane needs double to 150,000 bpd, the company’s fleet of 12 chartered VLECs will be needed.”

The ethane is for the Lianyungang ethylene plant for Zhejiang Satellite Petroleum. Another ethane-to-ethylene plant in Taixing, also in Jiangsu province, is owned by Singapore-based SP Chemicals sources US ethane too.

This is provided under a long-term deal with Ineos, which also uses a specialised fleet of VLECs, and supplies ethane to two refineries it owns in the UK and another in Norway.

US ethane production reached a record 2.2m bpd in July, the last month for which Energy Information Administration figures are available.

Some 13% is exported, while US cracker demand comprises of 1.6m bpd of the total 1.9m bpd in demand.

Demand rose by 600,000 bpd since 2016, RBN Energy calculates. About 38% of total supply is ‘rejected’, a term that means the ethane goes into the natural gas stream at processing plants.

While US production of shale oil has yet to return from record pre-pandemic volumes, NGL supply “has surprised with its resilience”, the International Energy Agency said in its October Oil Monthly Report.

NGL output reached a record 5.37m bpd in July, although the IEA expected this to ease back in coming months.

“The majority of the increase stemmed from ethane, of which production in July was 500,000 bpd or 30% higher than a year ago,” the report said.

US ethane exports

India                63,000 bpd      (Reliance Industries)

UK                  36,000 bpd      (Ineos-operated tankers)

Norway           3 2,000 bpd     (via Evergas tankers)

China               22,000 bpd      (since Sept) via Ineos

Sweden           5,000 bpd        (supplied by Borealis)

Source: RBN Energy

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