On March 9, 1776, the Scottish economist Adam Smith published his influential book The Wealth of Nations, which has left an indelible mark on international trade ever since. Interestingly, exactly 240 years later a pioneering liquefied natural gas (LNG) carrier departed a Philadelphia-area terminal bound for Europe and opened a new chapter in the global gas business.
Laden with more than 27,000 cubic meters of ethane, the Ineos Intrepid – a new class of LNG vessel – embarked on a nearly 4,000-mile voyage across the Atlantic Ocean to Ineos’ ethane cracker in Rafnes, Norway. As Ineos noted at the time, never before had shale gas produced in the United States been shipped to Europe. Previously ethane had only been transported in small vessels on short routes, according to ship designer Evergas. The Ineos Intrepid is one of eight “Dragon-class” vessels – the world’s largest multigas LNG-ethane carriers – that will ultimately constitute what Evergas calls Ineos’ “seaborne pipeline” linking the U.S. and Europe. In addition to the Rafnes facility, the Dragon-class carriers deliver ethane cargoes to Ineos’ cracker at Grangemouth, U.K.
Solving The ‘Ethane Problem’
“It was an incredibly creative solution to what was at one time viewed as a problem – what to do with our ethane,” recalled Jeff Ventura, Range Resources’ president and CEO. “In Texas and in Oklahoma, there was infrastructure in place in to process wet gas. When we were getting started in Pennsylvania, there wasn’t.”
When it was establishing its foothold in the Marcellus during the mid-2000s, Range needed to find a home for the natural gas liquids (NGL) produced from its acreage in Washington County, Pa., in order to justify the economics of operating there. The company considered various proposals for tackling its “ethane problem.” Given the lack of NGL pipeline takeaway capacity, the company considered shipping the ethane via rail and barge but found that approach unsatisfactory. Instead, it opted for the processing route.
“In order for that product to become profitable, the gas would need to be processed,” explained Curt Tipton, Range’s vice president of Marcellus development “There were no chemical companies (that could take the ethane and use it as a feedstock) – and no real option to separate out the ethane so that the methane (“dry gas”) could make its way to customers on the other end of natural gas-ready pipelines. Without the ability to remove ethane, you can’t produce the gas.”
Range ultimately formed a partnership with the midstream services provider MarkWest Energy Partners.
“MarkWest gathers natural gas from Range Resources’ well sites and then processes and fractionates the hydrocarbons to separate the various NGLs,” a MarkWest spokesman told Rigzone. “Ethane and other NGLs are then transported by the Mariner East pipeline to Ineos’ Marcus Hook facility.”
Coming Soon: Nearly Five-Fold Takeaway Capacity Growth
Since February 2016 Sunoco Logistics has delivered up to 70,000 barrels per day (bpd) of ethane from Washington County in southwestern Pennsylvania eastward to its Marcus Hook Industrial Complex via the Mariner East 1 pipeline. Previously a conduit for shipping refined products from east to west, Sunoco Logistics’ Mariner East 1 is being paired with a parallel pipeline – Mariner East 2 – that will raise the system’s total takeaway capacity to 345,000 bpd. According to Sunoco Logistics’ website, Mariner East 2 should go into service later this year.
After ethane reaches Marcus Hook – an oil refinery-turned-NGL storage terminal along the Delaware River near Philadelphia – Ineos cools the petrochemical fuel and feedstock to -130 degrees Fahrenheit (-90 degrees Celsius), according to the ethylene producer. Ineos loads the chilled ethane onto one of its Dragon-class carriers for the voyage to Europe.
Looking back at the progress of their company’s deal with Ineos, Range executives interviewed for this article expressed satisfaction that they’ve proven the naysayers wrong.
“There was a lot of industry skepticism, people saying ‘you can’t do it,'” recalled Chad Stephens, Range’s senior vice president of corporate development. “But we were optimistic, and we have a great partnership with Ineos. It’s been a real global collaboration.”
“We had a problem that became an opportunity,” added Tipton.
Meanwhile on The Gulf Coast
The transatlantic shipment of ethane represents a milestone, but seaborne voyages of the feedstock and fuel from the U.S. aren’t just originating in Philadelphia.
Six months after the Ineos Intrepid set sail, Enterprise Products Partners L.P. placed its Morgan’s Point Ethane Export Terminal on the Houston Ship Channel into service. Sourcing ethane from its nearby Mont Belvieu NGL fractionation and storage complex, Enterprise can load up to 10,000 barrels per hour onto tanker vessels for export, the company states on its website. Given the Mont Belvieu NGL hub’s links to the Appalachia-to-Texas Express (ATEX) pipeline, significant volumes of the ethane that reaches Morgan’s Point actually originates in the Marcellus and Utica.
The Morgan’s Point export terminal, which Enterprise says is the largest of its kind, could supply customers with more than 180,000 bpd of ethane – used to manufacture ethylene and other olefins – less than three years from now.
Much of the U.S. ethane leaving Morgan’s Point is headed farther than Europe, said Larry Schwartz, Principal at LS Consulting in Houston and former NGL fundamentals advisor with BP.
“Most of this capacity has been contracted for by Reliance Industries to go to their complex in India,” he explained. The Morgan’s Point terminal “is still in the early stages of development and barrels should continue to increase over time.”
Reliance has ordered a fleet of six specialized vessels for transporting ethane from the U.S. to India. The company took delivery of its first Very Large Ethane Carrier (VLEC)last fall. According to classification society ABS, a VLEC can carry more than twice the cargo of the next-largest ethane carrier.
Although he said the outlook is “possible but likely not probable,” Schwartz added that anticipated resumption of Eagle Ford production growth could prompt new U.S. Gulf Coast (USGC) NGL export deals from the Corpus Christi area. Also, he cautioned against viewing U.S.-sourced ethane as a “panacea” for the world’s olefins manufacturers.
“While it is true for U.S. ethylene producers, the same cannot be said for European and Asian producers,” he said. “One must always consider balances not only for ethylene but for the key byproducts as well. This can certainly skew the economics.”
Schwartz also pointed out that, despite ongoing progress in developing the Northeast’s transportation and storage infrastructure, the Gulf Coast enjoys a strong advantage on that front.
“The infrastructure within the U.S., most specifically the USGC, is the most advanced anywhere on the globe,” he said. “With significant pipeline access to both feedstocks and olefin products, deep storage capacity for them as well as connectivity to derivative producers, it is truly unparalleled.”
source: http://www.rigzone.com/news/oil_gas/a/149849/Range_Recalls_Incredibly_Creative_Solution_for_MarcellusUtica_Problem/?pgNum=1
