Enterprise Products Partners on Wednesday announced plans to move ahead on a new joint-venture ethylene export terminal on the US Gulf Coast, the latest major project to emerge from the US natural gas shale boom.
Enterprise and its partner, London-based Navigator Gas, said the 1 million mt/year facility with 30,000 mt of refrigerated ethylene storage on site would start up in the first quarter of 2020, after more than 11 million mt/year of new and expanded ethylene capacity in Texas and Louisiana is slated to have begun operations between 2016 and 2019.
Nearly 6 million mt/year more in expansions and newbuilds in those states is planned in 2020 and beyond, with much awaiting final investment decisions.
"The resulting rapid growth in the supply of US ethylene, combined with increased demand from international markets, like Asia, creates an ideal scenario in which markets abroad are able to diversify their supply by accessing cost-advantaged feedstocks made possible by the shale revolution in the United States," Enterprise CEO Jim Teague said in a statement.
Enterprise has discussed plans to export ethylene for more than a year, after starting up ethane and polymer-grade propylene export terminals on the Houston Ship Channel in 2016. While the company said Wednesday that the location and final investment decisions for the terminal are subject to reaching acceptable arrangements with local tax authorities, Teague said in October 2016 that Enterprise could build it next to its ethane export facility at Morgan's Point on the ship channel.
During the company's quarterly earnings call Wednesday, Teague said the facility could be built at a location other than Morgan's Point "if we get a tax abatement that's better somewhere else and there's another location we could put it."
Enterprise and Navigator, which owns and operates the world's largest fleet of Handysize and midsize liquefied gas carriers, signed a letter of intent in July to jointly develop the terminal on the ship channel.
US crude oil prices were in the mid-$40s/b at that time, but surpassed $60/b in late December, widening ethane's advantage over other ethylene feedstocks.
"When crude goes up, natgas doesn't, and it makes this a heck of a lot more attractive than it was at this time last year," Teague said on the call.
ENTERPRISE TO CONVERT CAVERN, BUILD PIPELINE
That announcement came three months after Enterprise said it would convert a 5.3 million-barrel ethane cavern at its natural gas liquids and petrochemical hub in Mont Belvieu, Texas, to hold ethylene. Enterprise said Wednesday that storage facility would begin service in Q1 2019, later than the initial startup target of mid-2018.
Enterprise also said in April that the company would build a new 24-mile, bidirectional pipeline connecting Mont Belvieu to Bayport, Texas, near the mouth of the ship channel where multiple producers have ethylene pipelines run by Shell, Chevron, LyondellBasell, Ineos and Flint Hills Resources. The company said Wednesday the pipeline would start up in 2020.
Plans for the ethylene cavern and pipeline were precursors to pulling the trigger on an ethylene terminal as Enterprise sought to secure export customers with long-term contracts, according to a source familiar with company operations.
Enterprise said Wednesday that the ethylene terminal is supported by long-term contracts with anchor customers that include Flint Hills Resources and a major Japanese trading company. Enterprise did not disclose the project's cost.
"We think we're going to add to the current level of commitments," Teague said during Wednesday's call.
Norwegian chemical company Odfjell also has been seeking customer commitments for a 750,000 mt/year, $250 million to $300 million ethylene export project at its terminal about five miles south of Enterprise's ethane export terminal near the mouth of the ship channel. Odfjell originally planned to make a final investment decision in mid-2017, but pushed FID to early 2018. A company source said this week those efforts were ongoing.
The US currently has one ethylene export terminal, operated by Targa Resources at its ship channel terminal, and it is contracted to Mitsubishi Chemical. The facility has a loading capacity of 1,000 mt/d, so it takes about 10 days to load a Handysize vessel.
The proposed Odfjell terminal, by contrast, would fill a Handysize vessel in 24 hours at 21,600 mt/d. Enterprise's project will be able to load 24,000 mt/d, the company said Wednesday.
INFRASTRUCTURE RAMPS UP
Of eight new crackers and 14 new polyethylene plants in Texas and Louisiana starting up through 2019, two crackers and six PE plants began operations in 2017. Two more crackers had been slated to start up last year as well, but were delayed to 2018 because of Hurricane Harvey-related flooding.
In second and potentially third waves beyond 2019, more derivative plants are expected along the Gulf Coast alongside additional ethylene capacity.
As the new infrastructure ramps up, there could be times when derivative plants reduce rates or shut down for maintenance, unplanned outages or bad weather that does not affect crackers. Rather than cut ethylene production during such downstream interruptions, an ethylene export terminal would allow crackers to run full-tilt regardless of operational status of polyethylene units, Teague noted in Wednesday's statement.
"This export terminal will also offer diversification opportunities for domestic petrochemical producers who will not have to rely solely on the export market for derivatives like polyethylene," he said.
Some industry players have been skeptical of whether enough excess ethylene will be consistently available to make an export terminal viable, and have questioned whether it's more cost efficient to just export polyethylene.
But Odfjell sees potential in addition to Enterprise. Energy Transfer Partners executives also have said ethane or ethylene export projects are possible at its Nederland, Texas, crude oil terminal about 78 miles east of the ship channel or its LNG facility in Lake Charles, Louisiana, but have not disclosed further detail.
