Early 2011 hosted a continued downward trend for ethane frac-spread margins at both Conway and Mont Belvieu, due to large supply levels. Recently, however, these lower prices made ethane more attractive than naphtha, and petrochemical companies began to switch. As a result, the industry saw cost benefits due to large volumes of ethane in storage.
In February, an explosion at Enterprise Products Partners LP’s Mont Belvieu west storage facility limited ethane supplies temporarily, but the company was able to quickly resume operations.
Going forward, ethane margins should perform better. According to Jim Teague, Enterprise Products Partners’ executive vice president and chief commercial officer, consumption of ethane reached historic levels in the fourth quarter of 2010.
“Last quarter, I said that we expected ethane consumption to top a million barrels per day by 2015,” he says. “The industry topped that shortly before Christmas. Frankly, that jump in consumption exceeded our optimistic view at that time. However, remember what we said last quarter—never underestimate the U.S. chemical industry’s ability to consume more ethane.”
Meanwhile, isobutane and pentanes-plus (C5+) continue to benefit from strong relationships with gasoline. Isobutane demand is up as refiners continue to make winter-grade gasoline. Propane margins were a mixed bag during the past four weeks, with Conway’s margin down but Mont Belvieu’s margin slightly higher.
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