Production, consumption by the US petrochemical industry, and exports all hit records, and the price collapsed.
By Wolf Richter for WOLF STREET.
US production of ethane – one of the natural-gas liquids that are in the hydrocarbon mix at oil and gas wells – rose 9% in 2023 to a record 2.6 million barrels per day (b/d), according to the EIA.
The record ethane production was a result of the boom in natural gas production that has made the US the largest natural gas producer in the world, and in 2023, also the largest LNG exporter in the world. Natural gas production in the US is in part a result of the boom in fracking for oil, that has turned the US into the largest crude oil producer in the world, with record production and exports of crude oil and petroleum products. These oil wells also produce profuse amounts of natural gas and natural gas liquids, including Ethane.
Over 60% of the ethane is produced in the Permian, which spans part of West Texas and New Mexico and is the most prolific oil field in the US. Natural gas processing plants dehydrate the raw natural gas, remove impurities, and then separate ethane and other natural gas liquids, such as propane, butanes, and pentanes, from the gas (chart via the EIA):
Ethane is used almost exclusively as feedstock by the petrochemical industry. Consumption of ethane by the huge US petrochemical industry rose 5% to 2.1 million b/d in 2023. The EIA reported:
“Two new petrochemical crackers, located in Port Arthur, Texas, and in Monaca, Pennsylvania, ramped up operations in 2023 after coming on line in late 2022. Ethane consumption in the Gulf Coast (PADD 3), where most crackers are located, increased 4% from 2022 to 2.0 million b/d. Ethane consumption on the East Coast (PADD 1) more than doubled, averaging 38,000 b/d in 2023, a 22,000 b/d increase from 2022.”
The rest of the ethane was exported. Exports of ethane increased by 13% to a record 471,000 b/d in 2023. About 45% of those exports went to China, 16% went to India, 14% to Canada, and 10% to Norway (chart via the EIA):
The EIA credited the growth in exports to growth in demand by the global petrochemical sector, rising tanker capacity, and low prices in the US for ethane.
The boom in natural gas production since 2007 has caused prices of natural gas to collapse in the US. Natural gas futures currently trade at $1.83 per million Btu (MMBtu). From 2000 through 2008, natural gas ranged from $2 to $15 per MMBtu, much of the time above $6 per MMBtu.
US production is now doing the same thing to ethane prices. But when ethane prices are low relative to natural gas prices, operators of natural gas processing plants can leave more ethane in the natural gas stream to be sold in natural gas markets. So there’s another outlet for some of the ethane, in theory. But natural gas prices are low too.
Ethane prices at Mont Belvieu, Texas, the main pricing hub for ethane (chart via the EIA):
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1st! 🏆
The Texas cracker was first, not even close.
Wonder if our planet will get annoyed one day with our poking and prodding and shake us off, maybe its pleased with our popping it’s zits, don’t know.
“Ethane is used almost exclusively as feedstock by the petrochemical industry.”
Why are methane and propane used for combustion, but not ethane?
Propane is used in the petrochemical industry as feedstock to produce ethylene, propylene, and other olefins.
Natural gas is used in the petrochemical industry to produce fertilizers, ammonia, etc.
There are lots of uses for all of them.
“Why are methane and propane used for combustion, but not ethane?”
Think plastics!
Asking the question differently: why are things like generators and furnaces commonly designed to run off methane or propane, but not ethane?
Ethane is very similar to methane and propane structurally, and its combustion is a similar chemical reaction as I understand.
I guess I’m wondering if the choice to use methane and propane for combustion is just an accident of history, or if there’s a specific reason why ethane is less ideal for this purpose. It does make. sense that ethane is the most ideal precursor to ethylene
Ethane is a viable fuel, but its only a fraction of the composition of natural gas, and so pure ethane is more useful used elsewhere. If there was a surplus we would probably burn it. As is, its better to take that pure ethane and use it for other things and burn the the refined natural gas once its processed to remove things like water vapor (which also isolates the ethane).
I would assume anything that can burn natural gas could burn ethane but this is a guess on my part and some chemist may interject and say “no its got a lower boil point/whatever” which would require some conversion in the engine for the fuel to efficiently be used.
Oh that makes sense!
Propane is also a fraction of the content of raw nat gas, but its much easier to liquify and store in metal cans because of its higher boiling point.
Methane has the lowest boiling point of the three, so its the most difficult to compress & liquefy, but its also the most abundant component of raw nat gas.
Ethane has neither of these “features” and therefore isn’t worth refining down to a pipeline-grade fuel. That said, I bet most engines that can run on methane and/or propane would run on ethane.
NB: the lower boiling point just means you need a more aggressive regulator on the gas line, since the pressure will be higher all else being equal.
Also, the air:fuel ratio will be different since ethane needs more oxygens than methane (and propane needs more oxygens than ethane)
At our facility, we receive off-gases of a few neighboring oil refinery complexes. We separate these off gases into separate methane, ethane, propane, and butane streams.
We burn the methane to produce heat, crack the ethane and propane in the furnaces to produce ethylene and propylene – which we use to produce polyethylene, ethylene glycol, ethyl amines, polypropylene, etc. (most of these are intermediary petrochemical products).
We return the butane back to the refiners for their internal processes.
Ethane is the lightest even-numbered alkane.
As such, it is the basic raw material for polyethylene, synthetic ethanol, synthetic acetic acid, vinyl chloride, etc.
Something like 60-70% of plastic uses ethane as the feed-stock.
Exporting crude oil,natural gas and their byproducts,helps with our balance of trade accounts…
Yes, but in 2023, prices of these products collapsed, and so exports in dollar terms fell:
https://wolfstreet.com/2024/02/10/the-2-trillion-in-goods-the-us-exported-in-2023-led-by-energy-products-capital-goods-pharma-products-and-automotive/
With the days of fossil fuels numbered, countries are racing to exploit their reserves of oil, natural gas and ethane before the boom lowers. They only have a window of opportunity of 10-15 years. Then, electricity is king. There will still be a demand for oil, but it will be much shrunken. I wouldn’t be surprised if nuclear power didn’t make a resurgence.
But the electricity has to come from somewhere, which right now includes a lot of NG. Our current rate of transition to alternative energy sources means this will remain the case for many more than 10-15 years.
😂 There are still 2-3 billion people on this planet who use less than 5 kW per day (and population is growing) who will expect their standard of living to increase. Additionally, fossil fuels still account for about 75% of the world’s energy supply (and you’re completely forgetting about plastics and millions of other everyday products that are full of/packaged in fossil fuel byproducts).
If you think that’s going away in the next decade, you’re sadly mistaken.
10-15 yrs! Ha.
The world is slowly transitioning because it’s hard. That timeline is way too short. Maybe in 25 yrs but we need to have better baseload options like geothermal and nuclear developed out.
Nuclear is already making a resurgence.
Oil/Gas/Coal are not going anywhere. Not in 100 years.
A functioning economy requires a steady and reliable supply of electricity.
Windmills & Sunchips are not energy dense enough and too intermittent to power technology.
Nuclear power is THE most expensive form of power generation, and it is THE most subsidized form of power generation, to where a private entity using private funds cannot do it, but it must involve government funding, government loan guarantees, or outright government ownership. Nuclear reactors have melted down too many times — of the 500 or so commercial nuclear reactors used for power generation, a shocking percentage has melted down, including those at the Fukushima plant, not far from where my in-laws live.
Nuclear power is neither clean (see Chernobyl, Fukushima, etc.), nor cheap (see how many billions it cost to build a plant), nor save (Fukushima, etc.). Nuclear is the most expensive and dangerous way to generate electricity.
AND WE STILL DON’T HAVE ANY GOOD WAY OF DEALING WITH THE NUCLEAR WASTE that future taxpayers and rate payers will have to deal with and pay for.
The nuclear power industry has lied to me my entire life, and I cannot believe that there are now a bunch of people out there that are starting to believe the bullshit and lies from the nuclear power industry all over again.
If you want to know more, read about Fukushima, read about the cost of the newest just opened US nuclear power plant, Georgia’s Vogtle plant. Read about how the US is dealing with nuclear waste (it’s not, the fuel rods just sit in big swimming pools for the next 100,000 years, LOL). Read about how much it costs and how long it takes to decommission a nuclear plant, and future rate payers and taxpayers are on the hook for that. Lots of people got rich of nuclear power, and they took a lot of money away from future generations. Everyone who promotes nuclear power lies when they open their mouth.
Nuclear energy has inly ever made sense as it is an effective way to subsidice the nuclear weapon industry.
And thats the main reason why certain countrys want it, including iran and other countries don’t, like Germany.
France has a problem with its many reactors as they all reach end of life in a decade and half. Not enough time to build enough new ones. They are looking at decommissioning over 30. But all you’ll read in the press are the plans for 5 new ones. And the one beeing build over budget and behind scedule.
Not that they really want to build that many. France has too many nuclear power plants to properly include solar and wind into their grid. And climate change or “weather” has a thing that rivers get to warm for quite a few creatures so its very problematic for the NPP to dump their excess heat into them in summer. And during winter they don’t make enough power.
Nuclear energy needs gas power to meet demand. Just like renewables.
=> And thats the main reason we see a big push of pro nuclear lobbying. Its basically about natural gas/LNG.
Correct. Nuclear is the most expensive method of making electricity, and is subsidized by national governments because of the fact that it helps them to manufacture nuclear weapons.
Interestingly, Photovoltaics are now the cheapest way to make electricity.
Wolf’s correct.
Nuclear power cannot be insured because of its risk. It’s ridiculous to make irrational, expensive exceptions for something that dangerous. The newest FOMO mania for sodium cooled reactors ignores the Rocketdyne melt in LA. Just a plugged up liquid sodium channel and the project’s toast along with the neighborhood.
Who WOULD want to believe Bill Gates after his last staging?
Sabotage of fossil fuel pipelines is actually now being taught at Harvard Law School.
It’s no coincidence that Al Gore’s father was the chief promotor of nuke power in Congress.
Uranium mining “digs up the cledge” as the Navajo put it. Enriching natural uranium ore produces DU, or U238 that winds up being burned on the world’s battlefields increasingly in cities. Alpha radiation, with its short linear energy density, unlike gamma with a long penetrating energy density, can be stopped by paper, but if it is inhaled in uranium soot, it distributes throughout the body like hot coals with an essentially limitless half life (the remaining lifespan of earth). Its electron voltage next to or inside cells is orders of magnitude greater than gamma. All of Rokke’s team cleaning up DU in Iraqi tanks got radiation sick within two days of arrival on the job.
The second huge problem of the total nuclear power cycle is plutonium production. Plutonium is the transuranic product of nuclear fission of U235. It does not exist naturally on earth. The steam explosion of Fukushima no. 3 spread plutonium MOX in the atmosphere. Is naivete comfortable with increased cancers today?
The third nail in the coffin of NPPs is they have no plan whatsoever for maintaining spent fuel pools in the event of grid interruption and loss of coolant. Nobody wants spent fuel buried near them.
A little known fact about DU is that it is produced not only from enrichment centrifuges but from reactor fuel rod reprocessing. That is how transuranics curiously appeared in battlefield residues.
Must be interesting how the deals must come together to get the rights to extract from land. Must be larger areas which cover vast swathes of land that might potentially have multiple owners. Have to assume if Federal or State land then they might get a cut but perhaps not.
Land owners, the state, and the federal gov get cuts ($$$) in the form of royalties when a production well is located and permitted for drilling and extraction on public or private lands. Depends on who has the mineral rights.
It’s always complicated and everything is negotiable, including surface work costs and eventual reclamation. I spent 30+ years in the oilfield business.
Thanks. I know BLM charges almost nothing for cattle and have to assume environmental damages occur. Guessing the company gets most of the benefit in all these cases.
I’ve worked production wells on BLM land and they are very restrictive to oil companies. A permit to drill can easily take two years to obtain and a reclamation plan is required to be submitted for approval for eventual well closure. All topside equipment (storage tanks, plumbing, etc) must be painted with their choice of ugly brown/green. Periodic inspections are conducted by BLM agents, etc, etc.
But the BLM is nowhere as crazy as dealing with Indian tribes on the same stuff.
If there are environmental damages, typically the company has to pay for the cleanup. When the Exxon Valdez beached, the oil spilled was a factor in the company getting a black mark on its reputation and that was a greater cost still.
When you buy a house, make sure you also get the mineral rights. If not…
I’m not kidding. There are many suburban single-family developments where the homebuilders separated the mineral rights from the property, and are not making the mineral rights part of the sale, and someday they might lease those mineral rights to drilling companies, at which point homeowners would have to deal with drilling rigs in their neighborhood, and then with oil and gas wells for all times to come. It’s a filthy business, and you don’t want to live near it.
I remember seeing this in the closing documents of a house I once bought. The title company said it was sort of standard stuff. I was in my twenties and didn’t know better, or think much of it at the time. I would definitely think twice now!
As a biased retired oilfield engineer I think the view is impressive.
Worse yet, mineral rights are dominant over surface rights, meaning that the mineral interest owner has the right to use to the surface to “the extent reasonably necessary” to extract the minerals. Hope the oil companies don’t find it “reasonably necessary” to drill in your swimming pool…
That really doesn’t matter if they want it they will take it. It’s called Eminent Domain and I’ve seen it done for water. Big business and government are in bed together and if they want those mineral rights they’re gonna take them and there is nothing you can do to stop them.
Glen,
“Must be larger areas which cover vast swathes of land that might potentially have multiple owners.”
Next time you fly across the US, look down: you can see the gazillion wells, each in a neat little square with a dirt road leading to it, huge networks of them, fanning out across the land. This is not everywhere, but in lots of places.
It’s quite impressive and/or shocking if you still can be impressed/shocked by something like this.
But as a side note: producing relatively cheap, plentiful, and reliable energy in our own country – and not having to beg the Saudis for oil, like we had to in the 1970s, and not having to beg Qatar for LNG – has become an immense benefit for the US economy.
And national security
Yes, most definitely.
Agreed. My preference would be these be national assets but I get we don’t roll that way in this country.
Fun fact: The state agency in Texas that regulates oil and gas production is known as the Texas Railroad Commission…
After reading Wolf’s article, I keep asking myself why are conservatives screaming about Biden wrecking the US oil & gas industry.
Yes, this is a running joke. Everyone is having fun with that one.
Hard to wage war & shut down oil & gas.
An industry can grow despite headwinds placed on it. Think about that when you ask yourself the question you stated.
Not sure the Wild West is needed, but I can see parts of the US starting to import refined fuels in a “out of sight, out of mind” policy under the guise of environmentalism
Maybe the fact that energy production is up which normally pushes prices down, but prices for the consumer is surging.
I’m a 2020 Trump voter planning on voting for Biden in 2024. I’ve been telling all my conservative friends about Biden’s pro-America policies.
Biden shut down Keystone XL and that’s set the tone for his entire policy on US oil & gas policy for conservatives. They haven’t gotten the memo on the how much the industry has been booming under this administration.
Why would they, though? Conservative news outlets and pundits don’t want to make Biden look good. Liberal news outlets and pundits don’t want to make Biden look bad. There’s no money in being a moderate.
Fun fact: Since Russian natural gas liquids are not sanctioned anywhere, it’s giving US suppliers a pretty tough competition. Especially since the Russians don’t have the petchem processing capacity to turn NGL into something useful, they are just dumping it into the market at rock bottom prices.
You lucky Americans! If it wasn’t for Justin Trudeau and his sycophants, Canada would be the world leader and you’d be importing from us. We exported some of our pollution to you and pat ourselves on the back for our environmental concerns and actions.