Range Resources will price 85pc of its ethane off natural gas or oil-linked contracts instead of a Mont Belvieu-based NGL indices for the second half of 2015, reducing risk by tying the price to more liquid hedging contracts.
Range has also tied its 20,000 b/d ethane export contract with European petrochemical buyer INEOS to a naphtha-Brent crude sliding scale formula, the company said during its first quarter earnings call.
Ethane is often priced on a naphtha-minus basis in Europe where the commodities are competing cracker feedstocks. INEOS has historically bought ethane on a naphtha-minus basis accordingly, market sources told Argus.
Ethane is often contracted on a natural gas-plus basis in the US.
Range's shipments for its 15-year contract with INEOS are slated begin later this year once Sunoco Logistics' Mariner East I pipeline ethane shipments come online.
Range Resources produced an estimated 29,774 b/d of ethane in its Marcellus and Utica operations in the first quarter, making it one of a few companies not rejecting ethane from the NGL stream. Range is able to market its ethane thanks to its favorable contract terms.
Range's first quarter NGL production was at 59,548 b/d, comprised 50pc of ethane and 28pc of propane.
The company also has propane contracts on Sunoco's Mariner East I project and anticipates using to increase its savings on propane transportation costs once the project comes online later this year.
Range began shipping on the first phase of the Mariner East I pipeline in December 2014.
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