US NGL exporters eye firming Chinese demand in 2023

Midstream firms are hopeful of a boost in propane and ethane imports as China's economy begins to bounce back, writes Abby Downing-Beaver

US midstream companies expect natural gas liquid (NGL) exports to rise this year as China's economy reopens, increasing demand for propane and ethane as a petrochemical feedstock.

The three main midstream firms that export propane, butane and ethane — Enterprise Products, Targa Resources and Energy Transfer — are hopeful of Chinese import demand growth after the country relaxed its Covid-19 restrictions in the fourth quarter last year. This should in turn support downstream petrochemical demand, boosting the need for propane and ethane imports for China's growing fleet of propane dehydrogenation (PDH) plants and ethylene crackers.

At least five new PDH units in China are scheduled to come on line this year, according to Houston-based Enterprise. This could be as high as 12 new plants requiring 9mn t/yr of propane demand, although if they all came on stream they would be unlikely to operate at capacity, according to Argus Consulting. The company's NGL exports from its 835,000 b/d (26mn-30mn t/yr) Baytown terminal on the Houston Ship Channel rose to 751,000 b/d during the fourth quarter from 651,000 b/d in 2021. Its NGL exports over the whole of 2022 rose to 723,000 b/d from 658,000 b/d in 2021.

US propane prices this year will be driven by fluctuations in international values, according to Enterprise's chief executive Jim Teague. "Propane is going to price itself to go, so at the end of the day, international markets will decide that," Teague says, suggesting that US propane may increase as a percentage of Nymex WTI crude as Chinese demand recovers. Abundant US propane supplies have pressured prices relative to crude to only 48pc of Nymex WTI by 2 March compared with 59.3pc a year earlier. US propane stocks were nearly two-thirds higher than a year earlier at 60.6mn bl (4.89mn t) by 24 February, EIA data show.

Targa, also based in Houston, posted a drop in its NGL exports to 299,400 b/d in the fourth quarter compared with 350,300 b/d a year earlier. But this was up from 276,100 b/d in July-September 2022 owing to weaker Chinese demand, which improved when the country axed its zero-Covid policy in December. The reopening will support further export growth this year to meet rising demand at PDH units, Targa says.The company's exports over the whole of 2022 fell slightly to 314,500 b/d from 316,900 b/d in 2021. The firms' upbeat outlook for propane does not marry with current operating rates for China's PDH fleet, which has dropped owing to negative petrochemical margins and an inventory backlog. This should delay any resurgence in demand to later this year, providing margins improve, as the total fleet list simultaneously expands.

Dallas-based Energy Transfer exported record volumes of ethane in the fourth quarter, as it met its term contract with China's Satellite Petrochemical. The company shipped more than 40mn bl of ethane from the 700,000 b/d Nederland NGL terminal on the Gulf coast last year, and contracted ethane exports for 2023 rose to more than 60mn bl. International demand for US ethane as a low-cost petrochemical feedstock is expected by all three companies to continue growing this year. Energy Transfer plans to add 70,000 b/d to either its Nederland facility or its 260,000 b/d Marcus Hook terminal on the US east coast as early as the second quarter. The company's long-term goal is to expand both terminals, co-chief executive Mackie McCrea says, who suggests both projects may be carried out at once because "the world has an insatiable desire" for NGLs. The work would add both increased refrigeration and tank capacity at either dock.

Energy Transfer has taken steps to increase its capacity since the fourth quarter, when dredging near the Marcus Hook dock increased its depth to 42ft (13m) to allow for very large ethane carrier loadings. A front-end engineering study to determine the feasibility of further Nederland expansions was completed at the end of 2022.