Enterprise Products Partners said on June 4 it received notice that the U.S. Commerce Department intends to deny its requests to export three proposed cargoes of ethane, totaling around 2.2 MMbbl, to China.

The move could pressure U.S. ethane exports, and force producers to seek alternate buyers and raise costs for Chinese petrochemical firms, which rely almost exclusively on U.S. producers for ethane imports.

The Bureau of Industry and Security (BIS), an agency of the Department of Commerce, informed pipeline and terminal operator Enterprise in a letter two weeks ago that exports of ethane and butane pose an unacceptable risk of military end-use in China, according to a company filing.

Enterprise said last week that its ethane and butane exports could be hurt by a Department of Commerce requirement that it apply for a license to export to China. The company is one of the top U.S. handlers of ethane and butane through its port terminals.

The U.S. last week ordered a broad swath of companies to stop shipping goods, including ethane and butane, to China without a license and revoked licenses already granted to certain suppliers.

Exports of ethane to China account for about half of the total U.S. exports of the shale gas. The U.S. and China are locked in an ongoing trade war after U.S. President Donald Trump imposed sweeping tariffs in early April.

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Enterprise said it has up to 20 days to respond to the BIS' notice about the denied export cargoes with any comments or rebuttals. Unless the company is advised otherwise by the BIS by the 45th day after the original notification, the denials will become final.

Enterprise shares closed 2.1% lower at $30.82 on June 4.

The BIS did not immediately respond to a request for comment.

"Today's announcement calls into question whether the new ethane export license requirement is merely a short-term disruption," said Samantha Hartke, Vortexa’s head of Americas analysis.

"Near-term cargo reshuffles or resales could be necessary, as would a greater dependence on domestic storage," she said, adding that short positions in ethane were piling up on June 4 with prompt-month trading down 3 cents per gallon on the day due to the Enterprise announcement.

Ethane and butane, liquids separated from natural gas, are used to make plastics and chemicals and also for heating and cooking.

Chinese petrochemical firms use ethane as a feedstock because it is a cheaper alternative than naphtha, while U.S. oil and gas producers need China to buy their natural gas liquids as domestic supply exceeds demand.

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