Page 123 - CW E-Magazine (19-8-2025)

Point of View

Ethane’s role as a preferred petrochemical feedstock

is rising, but a single country source is a new

vulnerability for India

Natural gas liquids (NGLs) – processed from natural, associated & shale gas – and naphtha, distilled from crude oil during refining, are two
of the most widely used petrochemical feedstocks. The discovery of shale gas (and oil) in the US in the early part of the 2010s significantly
enhanced the role of NGLs, in general, and ethane, which accounts for ~40% of the total volume of NGLs, in particular.

Before NGLs are used to make petrochemicals, they are separated into their main constituents – ethane, propane and butanes. Wet gas
is also occasionally contaminated with impurities such as trace amounts of mercury and sometimes hydrogen sulphide & carbon dioxide,
and these must be almost completely removed before the ethane and propane can be fed to an olefin plant.

NGL and gas production
While NGL and gas production are interlinked, the relationship is not always linear. Gas processing to recover NGLs only takes place if
the prices of individual NGLs are high enough to cover the costs involved. This is not always the case. Supply and demand for the
ethane produced must also be closely matched because demand for ethane is almost entirely in the petrochemical sector and the product
is difficult to transport by any mode other than in dedicated pipelines or cryogenic ocean carriers. In the US, the world’s top supplier
of ethane, whenever ethane supply is expected to be higher than demand, some natural gas processors choose not to recover ethane and
opt to leave it in the gas that enters the inter-state natural gas pipeline system. This process is referred to as ethane rejection. In recent
years, US exports of ethane to petrochemical producers across the world have come to augment ethane demand for domestic use by steam
crackers, reducing the incentive to reject ethane.

Drivers for ethane demand
Once considered a secondary byproduct of natural gas production, ethane has today evolved into a globally traded commodity, and a
preferred feedstock for ethylene producers. This is so not just where ethane is produced, but globally thanks to an efficient supply chain to
ferry it across the high seas.

The driver for this interest in ethane is, simply put, better economics, compared to other feedstocks. Cracking ethane gives a product
stream composed primarily of ethylene, with minor amounts of co-products (mostly higher olefins). This is in contrast to cracking naphtha,
which gives a broader product slate including olefins and aromatics. While the yield of ethylene from cracking naphtha, typically ranges
between 29-34%, cracking ethane yields between 80-84%. For companies eyeing maximisation of ethylene production to make derivatives
like polyethylene and monoethylene glycol, ethane is a clear winner.

Petrochemical producers elsewhere in the world have jealously eyed the cost advantage enjoyed by ethane-crackers operating in the
US and the Middle East but could do little to benefit. That is now changing thanks to sizeable exports from the US.

US ethane production, consumption and exports on the rise
According to the US Energy Information Administration (EIA), US ethane production, consumption, and exports all reached record highs in
2024. Production rose 7% to average a record 2.8-mbpd (million barrels per day) in 2024, driven by increased ethane recovery in the Permian
Basin. The Texas Inland and New Mexico refining districts, which span the Permian Basin, accounted for 63% of all US ethane production
in 2024, up from 61% in 2023. Production in those districts averaged 1.8-mbpd, up 9% from 2023. The Appalachian No. 1 Refining District,
which straddles most of the Appalachian Basin in Pennsylvania and West Virginia, produced a record 0.327-mbpd in 2024, up 13% from
2023, and accounting for 12% of the US total.
Domestic ethane consumption, supplied to steam crackers, rose 8% in 2024 to a record 2.3-mbpd. The rise came from higher cracker
operating rates in 2024 compared with 2023, as no new crackers came online in the country in 2024. Ethane consumption on the US Gulf
Coast rose 5% to 2.1-mbpd in 2024, while on the East Coast, consumption nearly tripled to 0.103-mbpd in 2024 as Shell’s cracker in Monaca,
Pennsylvania, continued to ramp up its production after starting up in late 2022.
Ethane exports from the US have increased almost every year since 2014, except in 2020, when muted global demand related to the

Chemical Weekly August 19, 2025 123

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