Growth in US ethane production may slow as the country's largest gas processors are all operating near maximum recovery rates, leaving limited upside for ethane volumes.
Since the US began waterborne exports of ethane in 2016, ethane production, or "recovery", from gas processing has surged from 1.27mn b/d to 2.87mn b/d last year, US Energy Information Administration (EIA) data show, with yearly ethane output growing by 20pc in 2018 alone. Yet the pace of growth may finally be slowing down.
The EIA forecast in its most recent Short-Term Energy Outlook (STEO) that total ethane recovery will average 3.06mn b/d and 3.15mn b/d in 2025 and 2026, respectively. If so, production would have grown at consistently slower rates each year since 2022 — the growth rate fell from 11.9pc in 2022 to only 8.1pc in 2024.
The slowdown partly comes alongside a similar lull in natural gas growth. US marketed natural gas production, excluding Alaska and the Gulf of Mexico, rose by 0.5pc from 2023 to 2024, the slowest pace since 2020.
Furthermore, growth in the broader natural gas liquids (NGLs) complex may already slow relative to natural gas as US producers target drier acreage. STEO contributor Joshua Eiermann told Argus that the agency sees a possible slowdown in NGL output gains. "A lot of the growth we're seeing for crude oil and gas output is coming from the Haynesville formation [in Texas and Louisiana]… It's a lot less liquids-rich," Eiermann said.
Still, gains in US ethane production have historically outpaced those of natural gas. Lower-48, on-shore production of marketed natural gas rose by only 50pc between 2016 and 2024, while ethane output more than doubled. This trend may stall, however, if near-full recovery becomes more dominant in the US.
Ethane, which is entirely produced as a byproduct of natural gas, is left in gas to be burned as fuel, or "rejected", if not separated for use as a petrochemical feedstock. The US is likely rejecting less ethane than in the past. The US rejected an estimated 500,000-575,000 b/d of ethane in 2017, or at least a quarter of potential extraction at the time, to between 600,000-800,000 b/d by industry estimates which, based on the EIA's 2025 projection, equates to 16.4-20.7pc of present potential volumes.
Much of the US' liquids production has been increasingly driven by the Permian basin in west Texas and south New Mexico, the region at the center of an apparent trot towards full ethane recovery in the US.
Export expansions along the Gulf coast, growing NGL pipeline capacity and storage have created favorable conditions for Permian producers' ethane recovery. This includes the addition of 180,000 b/d of ethane loading capacity at Energy Transfer's Nederland, Texas, terminal in early 2021. Because of this, firms in the Gulf coast region, particularly integrated "well-to-water" firms like Enterprise and Energy Transfer, recover nearly all the ethane they drill, market participants say.
The US Gulf coast region accounted for 67.2pc of ethane recovery in 2024, whereas the east coast, the US' other contributor to exports, accounted for only 12.6pc. Gas processors in the Marcellus and Utica shales lack the ability to recover more ethane because of limited takeaway capacity. In March, Marcellus producer Antero Resources estimated that 45pc of potentially recoverable ethane in the east coast's Appalachian production region, or approximately 273,000 b/d, is rejected into the gas stream.
The better egress for NGLs out of the Permian basin means gas processors there typically operate closer to maximum recovery, and ethane production growth is set to more closely resemble that of natural gas.
Overall, NGL output will outpace natural gas growth, industry outlooks show. Enterprise forecasts NGL production rising by 16.7pc between 2024 and 2030 compared with 14.4pc for all natural gas, whereas Permian output of both would grow by an equal 32.4pc. If the Permian continues to constitute an increasing share of US oil and gas production, growth in ethane production is likely to slow alongside natural gas, even if NGL output does not lag.
