Canada must overcome steep barriers to export ethane

Canadian ethane exporters could benefit from the dent in US producers' reputation if they overcome infrastructure issues, writes Amy Strahan

Ethylene producers in Asia-Pacific are eyeing Canada's ethane after a temporary hiatus on US ethane shipments to China in June left buyers seeking ways to diversify their supply sources. But obstacles to moving the feedstock from gas processing facilities in Alberta to export terminals in British Columbia are substantial and would require years of investment.

The US remains the only exporter of ethane given an abundance of natural gas and natural gas liquids (NGL) supply, underground storage and export terminal capacity. The country shipped 492,000 b/d (10.1mn t) of ethane last year, of which 227,000 b/d went to China, data from the EIA show. A US Commerce Department directive in late May ordering terminal operators Energy Transfer and Enterprise to obtain licences to export ethane to China as part of trade talks stopped shipments in June. Shipments have resumed after the department lifted the demand, but the damage to trust could be significant. US exporters' reputation with customers have been dealt a "black eye", Energy Transfer's co-chief executive, Mackie McCrea, says.

Canadian midstream firm and LPG exporter AltaGas is an obvious choice to begin ethane exports from its two, and soon to be three, Pacific coast LPG terminals. The company has already been approached by prospective Asian customers "looking to diversify their long-term feedstock sources", chief executive Vern Yu says. "To unlock the ethane opportunity, we need to solve a few technical hurdles and ensure ethane exports can comfortably co-exist with strong petrochemical demand in western Canada."

But those technical hurdles are substantial. Canada, like the US, has large natural gas and NGL reserves and plans to ramp up LNG exports in the years ahead. Yet the ethane yielded would be far smaller in volume and it lacks the storage or pipeline infrastructure needed to get it to shore. Ethane production in Alberta is forecast to rise to 305,700 b/d (6.3mn t/yr) by 2034 from 237,400 b/d last year, according to the Alberta Energy Regulator — US ethane output stood at 2.8mn b/d in 2024. Alberta's petrochemical sector consumed 270,700 b/d, with the shortfall coming from imports from the northern US' Bakken shale through the 40,000 b/d Vantage pipeline.

Canada's ethane market is relatively balanced. Any excess supply is "rejected" back into the gas stream — around 169,000 b/d was left in gas in 2019. But rising domestic output in line with natural gas output is poised to lengthen supplies. US chemical firm Dow was due to absorb as much as 113,000 b/d of this from its Path to Zero ethane-polyethylene plant in the province, but the project was delayed because of weak polyethylene margins. Dow says it will revisit the plans later this year.

Pipe dreams

Alberta could be net long around 200,000 b/d by 2034 should Dow's project not materialise and gas processing plants (GPPs) extract maximum ethane — enough to rival present exports from Energy Transfer's exports from its recently expanded 730,000 b/d Nederland LPG and ethane terminal on Texas' Gulf coast. But getting the supply to the Pacific coast will be challenging. No ethane, let alone propane, pipelines straddle GPPs in Alberta and export terminals in British Columbia.

The cost of developing a pipeline would be restrictive, according to midstream firm and fellow LPG exporter Pembina's chief executive, Scott Burrows. "The economics [for a pipeline] just aren't there yet." Pipeline permitting in Canada is also problematic. The 590,000 b/d Trans Mountain Expansion crude pipeline started up in May 2024 after 11 years of regulatory delays and environmental opposition since its first proposal.

But the industry is hopeful that Canada will remove barriers to investment in export infrastructure as a result of US tariffs. The country introduced the One Canadian Economy Act this year to remove restrictions on trade within Canada and boost investment that helps it diversify its trade partners. In Ontario, which relies on US and Albertan LPG for heating, the government recently sought feasibility studies exploring the establishment of oil and gas pipelines from Alberta.

In the meantime, the only way to get ethane to west coast terminals would be by rail, similarly to LPG, which has its own barriers. Shipping ethane by rail is more expensive than LPG as it has to be refrigerated, and the volumes carried would be far smaller — about 7,751 USG (10.5t) per railcar compared with 32,928 USG for LPG, according to Gas Innovations, which ships US ethane by rail to customers in the southeastern US. Judging by these figures, it would take 1,000 railcars of ethane to fill a single Handysized carrier.

Alberta ethane production