Ethane (C2H6): Prime Feedstock for Polyethylene Plastic and Other Uses, Current Fractionation and Production Potential, Storage, Rejection/Recovery, Future Demand, and Effects on Natural Gas Supply: Focus On Appalachian Ethane

Ethane (C2H6): Prime Feedstock for Polyethylene Plastic and Other Uses, Current Fractionation and Production Potential, Storage, Rejection/Recovery, Future Demand, and Effects on Natural Gas Supply: Focus on Appalachian Ethane

Ethane, or C2H6, is the second lightest of the alkanes, organic hydrocarbons. It is typically the most common component after methane (CH4) in natural gas. At standard temperature isolated ethane is a colorless odorless gas. It can be isolated from natural gas streams AND be refined from petroleum. Ethane is a gas at normal temperature and pressure but when pressurized and cooled it becomes a liquid. Typically, the percentage of ethane in natural gas ranges from 1 to 6%. However, gas from some sources is higher in ethane and some gas from the Marcellus Shale ranges up to 16% ethane. Other shale gas reservoirs such as the Utica are also high in ethane. It is common in the Marcellus for ethane to make up over half of total NGL percentages. In most U.S. reservoirs the avg. ethane percentage of total NGLs is about 45%. In the Marcellus rich gas area, it ranges from 55-65%. Ethane almost always makes up the highest percentage of liquids in natural gas, with Ohio Utica NGLs being about 60% ethane.

Ethane in Nature

Ethane is a trace gas in the Earth’s atmosphere at 0.5 ppb. It is thought that some of the ethane is naturally occurring and some is due to fossil fuel usage and leakage over the years. It is a greenhouse gas but with little effect at those concentrations and it has a much lower efficiency than methane as a greenhouse gas. Ethane is also a trace gas in the atmospheres of Jupiter, Saturn, Uranus, and Neptune, the so-called Giant Planets. It is also present on Saturn’s moon, Titan, where it is thought to be present in liquid form as at least one lake on the moon. It has also been detected on several comets and is thought be a primordial component of the solar nebula that formed the sun and planets.

Fractionation, Processing, and Re-Blending

If the relative value of leaving ethane in the natural gas is greater than extracting, or fractionating it out, then the ethane is “rejected,” or kept in the natural gas stream. Too much ethane in the natural gas stream can be problematic to downstream operations where ethane levels need to be controlled. Thus, some wells with high ethane and NGL content may be required to be shut-in or mixed with dry gas before entering pipelines closer to distribution. Thus, there will be a volume of ethane that must be recovered to meet pipeline specs and another (larger) volume that could be recovered if infrastructure and markets were available. These have been termed “must-recover” and “discretionary” ethane. Fractionation facilities may remove only enough ethane to meet pipeline specifications if there are no pipelines to move the ethane or an underground field in which to store it. Some midstream companies will blend the “must recover” ethane that was fractionated out with lower BTU natural gas from other systems. While this may seem wasteful to separate the ethane out then re-blend it, it is often more economic due to infrastructure availability relative to processing capacity. Ethane may be separated out of natural gas by liquefying it at cryogenic temperatures by several methods. The most efficient method utilizes an expander turbine and distillation. This is the turboexpander method which can recover up to about 90% of the ethane.

Special Considerations for Ethane Pipelines and Storage Tanks

Ethane has the highest vapor pressure of the alkanes and must be confined to special-made pipelines and storage tanks that can accommodate that pressure. Ethane is highly flammable but is not considered toxic or carcinogenic. The vapor pressure of ethane more than four times the vapor pressure of propane and vessels made to contain ethane must be able to withstand the high vapor pressure – which means strong and thick steel.

Ethane as a Petrochemical Feedstock to Make Ethylene for Polyethylene Plastic by Olefin Steam Crackers

This is the main use of ethane and although polyethylene feedstock can also be derived from refined petroleum it is most economic to get it from ethane and nearly all of it is currently derived from ethane. Olefin steam crackers (huge furnaces) “crack” the ethane molecule into ethylene (a gas) as well as propylene and benzene. Small polyethylene pellets are the end result and these are used to make everything from plastic bags to PVC pipe to antifreeze. Demand from the petrochemical industry has the most influence on ethane prices since it is by and far the main use of ethane. Petrochemical facilities store some ethane but when storage fills up prices drop. In 2015 the existing U.S. olefin crackers can process 1100 MBbls/day of ethane. Newly announced projects could increase that by a significant 600 MBbls/day by 2018. It is likely that ethane production, which is typically high in shale gas, will continue to exceed petrochemical capacity so exports are now happening to move some of the ethane. Ethane shipping has required new special made ships to be built. There is now ethane transport from Pennsylvania to Europe and soon to be exports of Mt. Belvieu ethane from Texas. International olefin crackers are mostly set-up to make ethylene from naphtha (a composite refined from petroleum) and must be refitted at great cost to make it from ethane. However, doing so is profitable when comparing prices and predicted future prices.

Ethane Field Measurement, Gas Component Analysis, and Field Mapping of Occurrence  

Ethane can be measured and quantified during drilling with a gas chromatograph. These are typically used at oil and gas well sites during drilling to measure the light alkanes from C1 (methane) to C5 (pentane). The gases typically bubble out of the drilling mud in small amounts. This is called mud gas and is measured by the mud logger. Plots can be made, for instance, of percentage ethane in the mud gas stream. Light hydrocarbon ratios from the mud gas stream can be compared to get a clue of the overall gas quality and potential for NGL and oil production in a new area. After wells are in production the gas can be analyzed by a lab for more accurate component analysis. With several wells and gas component analyses over an area one can map gas quality over an area in terms of BTU (gas richness) or individual alkane components. Such mapping can be used to further map maturity trends in a specific hydrocarbon play and predict where the most economical hydrocarbon combinations will occur. These natural gas liquids, or wet gas (C2 through C5) typically yield a higher price compared to methane without liquids, or dry gas. Ethane is the lightest of these natural gas liquids (NGLs). Marcellus and Utica rich gas core areas are now fairly well-defined although I am not sure if anyone has attempted to map specific NGL alkane trends.

Processing, Fractionation, Pipelines, and Storage of Ethane in Appalachia

NGL fractionation capacity has been building up since about 2011 in Appalachia with several small fractionation plants built and more planned. Currently there is interest and research underway to develop underground ethane storage capacity in the Appalachian region. Depleted Mississippian gas fields and Silurian-age dissolution salt caverns are the two most likely candidate reservoirs. The Sunoco Logistics Mariner East ethane pipeline runs from Western PA to Marcus Hook, PA along the Atlantic ocean and here at the export hub also employs refrigerated ethane storage in large tanks.

Appalachia will likely become a small NGL hub with plans for ethane steam crackers and alkanyl plants. Philadelphia is well on the way to becoming an NGL export hub with a currently functioning ethane and propane pipelines bringing ethane from southwest Pennsylvania to the Marcus Hook facility near Philly via the Sunoco Logistics pipeline. Range Resources is the main supplier with the buyer being INEOS, a Swiss chemical company with operations in Norway and Scotland - with the ethane currently being shipped to their petrochemical facilities in Norway. Rex Energy recently also signed a deal to supply INEOS with ethane.

Natural gas liquids can be pipelined all together as y-grade, or “raw make,” or they may be pipelined by individually in “purity” pipelines, ie. an ethane purity pipeline. They can also be delivered by truck, rail car, or barge. The main purity pipelines for ethane in the Appalachian region are the ATEX pipeline which moves ethane from the Utica/Marcellus to the Gulf Coast, Mariner West pipeline which moves it to Sarnia, Ontario, and the Mariner East pipeline which moves it to Marcus Hook, PA. When the announced steam cracker(s) in the Appalachian region are built there will be a local market for ethane which means cheaper transportation costs relative to long pipeline transport and exporting. The ATEX pipeline can move 170,000 Bbls/day of ethane. It went into service early in 2014.

Other infrastructure projects include the 50-mile Marathon pipeline to delivery condensates and natural gasoline (y-grade?) from Harrison County, Ohio Utica to their refinery in Canton. Another gas liquids pipeline is being developed by Kinder Morgan, the Utopia Pipeline across northern Ohio to bring liquids to an Ontario chemical plant.

Appalachian Ethane Exports to Europe and Potentially Asia

The above-mentioned export deals can only help relieve the Appalachian gas glut and allow operators to get maximum value out of ethane. Of course, this depends on the value of ethane which has been down since NGLs are more tied to global oil prices than natural gas. Processing/fractionation, pipeline transportation, and special-made ethane tanker transportation costs all factor in to make the economics tough but the supply is certainly available to meet the demand. Ethane from the Marcus Hook facility is also shipped from there to the Gulf Coast petchem plants. INEOS has built eight 575 ft tankers to ship ethane. Ethane prices are a little higher in Europe which helps both the sellers but still cheaper than using refined products to crack ethane, which helps the buyers. Antero Resources has a deal in the works to ship Utica and Marcellus ethane to Sweden, with the buyer being Austria-based Borealis AG. Ethane supply from the North Sea oil and gas drilling has been dwindling in supply.

Possible Implications of Increased Ethane Recovery on Appalachian Natural Gas Supply 

BTU Analytics in an article referenced below notes that since much of Marcellus and Utica gas rejects ethane into the natural gas stream that once more ethane export deals are in place, ethane and y-grade pipelines are running at full capacity, there is ethane storage capacity, and an ethane cracker or two is running in the area the ethane currently in the natural gas systems could potentially further drop total  gas production by up to nearly 2BCFequivalent per day by the end of 2017 if all proposed projects go forward by their planned in-service dates. This is not likely but they suggest that half of it should so about 1BCF/day taken out of overall natural gas supply is likely. This is due to the “discretionary” ethane noted above that remains in the natural gas pipeline system that could now be fractionated out and typically sold for a higher price, especially if demand picks up and the price rises a bit. This is not likely to happen all at once or very soon but it could affect the local supply and demand equation and help reduce or even eliminate the current negative basis differential for Appalachian natural gas. They suggest that as % ethane recovery is growing and % ethane rejection is falling that this will continue as more ethane is exported, resulting in gradually lower natural gas supply. In any case, it should be a force against future oversupply after gas prices recover and gas drilling resumes. The EIA predicts U.S. ethane production (through increased ethane recovery) to increase from the current 1.1 MMBbl per day to 1.4 MMBbl in 2017. Over half of the expected increase is expected to be from exports. The rest of the new demand is from petrochemical plants that plan to ramp up production. Since the other natural gas liquids are already marketed and exported from the U.S. their production growth is predicted to be moderate though 2018 but as ethane infrastructure and processing capacity comes on-line and increases capacity then more ethane will be recovered and less rejected so its short-term growth through 2018 is predicted to be significant. EIA predicts ethane consumption to increase by 50,000 Bbls/day in 2016 and by 80,000 Bbls/day in 2017. Two-thirds of NGL production growth over the next two years is projected to be ethane production growth. Due to new crackers and plant capacity ethane throughput is expected to grow by 400,000 Bbls/day in 2017. Exports are set to nearly triple over the next two years to 25,000 to 30,000 Bbls/day. One analysis suggested that Appalachian ethane production will increase to 638,000 Bbls/day by 2020 with about one third coming from Utica and presumably two-thirds coming from Marcellus, as well as the Upper Devonian Burket Shale which also has a liquids-rich fairway.

Ethane as a Transportation Fuel or as an Additive to CNG

There has been some interest in ethane for this purpose. The potential advantages are: 1) greater driving distance per tank due to the greater energy density of ethane compared to CNG methane. 2) less greenhouse emissions if leaked, more CO2 emissions than an equivalent amount of methane but higher  energy density (higher BTU) means less carbon emissions than methane for a comparable amount of energy produced. Basically, burning ethane means less CO2 emissions per mile than CNG. Perhaps some of the Appalachian ethane surplus could be sold at favorable prices for sellers and buyers as a transportation fuel but this is uncertain. Apparently, cylinders designed for CNG can hold liquid ethane just fine. While ethane has a much higher vapor pressure than methane the compressed methane is held at a higher pressure than normal. Apparently, about twice as much energy in the form of liquid ethane can fit in a comparable cylinder filled with CNG. That would mean more mileage per tank. The applicability for ethane as a transportation fuel is still in assessment stage. Conversion of CNG vehicles to utilize ethane either as an additive or stand-alone fuel are thought to be inexpensive. It should be interesting to see what happens with this in the future.  

Below is a graph from the EIA showing the forecasted growth in ethane production (recovery) relative to the other NGLs

References:

Ethane Production Expected to Increase as Petrochemical Consumption and Exports Expand – by PennEnergy Editorial Staff, April 1, 2016

Short-Term Outlook for Hydrocarbon Gas Liquids, a Supplement to EIA’s Short-Term Energy Outlook, March 16, 2016

Ethane from Natural Gas Spurring Exports and Manufacturing – by Tom Shepstone, posted on Natural Gas Now (naturalgasnow.org), April 3, 2016

Natural Gas: Fuel for the 21^st Century – by Vaclav Smil (Wiley and Sons, 2015)

The Domino Effect: How the Shale Revolution is Transforming Energy Markets, Industries, and Economics – by E. Russell Brazel (CWL Publishing, 2016)

Ethane Demand Could Bring Strength to Henry Hub – by Corey Boettiger, BTU Analytics, posted April 12, 2016

INEOS Europe AG and Rex Energy Announce a New Agreement for the Purchase of Natural Gas Liquids from the Appalachian Basin for Offtake to Europe, press release, posted in Econo Times, April 11, 2016

Ethane, from Wikipedia.org

Infrastructure Projects Connect Marcellus Shale to Ethane, NGL Markets – by E. Russell Brazel, in American Oil & Gas Reporter, March 2011

Surging NGL Production Drives Infrastructure Projects in Marcellus, Utica Plays – by Jennifer Brickle, in American Oil & Gas Reporter, Dec. 2012

Ethane as a Cleaner Transportation Fuel – by Chi-Jen Yang, Lindsay Leveen, and Kimberly King, in Environmental Science & Technology, Feb, 2015

Ethane from Marcellus, Utica Shales Being Shipped to Europe - by Bob Downing, Akron Beacon Journal, April 17, 2016