The US will have 60,000 bpd of surplus ethane in 2013, global consultancy ESAI Energy reported on Friday, citing its recently published Global Industrial Fuels Outlook.
The supply surplus results from new natural gas liquids (NGL) fractionation capacity, the group said.
Even after modifying existing ethylene plants to process more ethane, the US market will have an even bigger surplus than it did in 2012, according to the report.
This supply glut and restrictions on the amount of ethane that can be left in natural gas will significantly weaken ethane prices in 2013, helping the petrochemical industry.
In response to rising shale gas production, total NGL (natural gas liquids) fractionation capacity in the US will grow to 2.6 million bpd in 2013, increasing by 575,000 bpd from 2012.
In turn, that increased fractionation capacity and rising NGL pipeline capacity to move natural gas liquids to the Gulf Coast will enable more ethane production. Ethane production in the US is likely to grow to 1.11 million bpd in 2013, 125,000 bpd more than in 2012, according to the report.
Petrochemical demand, however, will not keep up with the flood of ethane supply, ESAI officials say.
Based on new capacity and announced modifications to existing capacity, ethane demand is projected to increase by 100,000 bpd to 1.05 million bpd, said ESAI Energy analyst Vivek Mathur. "This means there is about 60,000 bpd of surplus ethane this year. Of this, about 50,000 b/d could be left in the natural gas stream.
"But 10-15,000 bpd of ethane will struggle to find a home because of restrictions of how much ethane can be left in dry natural gas. Piped gas specifications generally allow for up to 12% of ethane in natural gas, but can vary depending on processing and commercial arrangements. This additional supply will depress US ethane prices and support petrochemical margins."
The consultancy's website can be visited by clicking here.