Published January 2017
This report covers supply and demand for ethane. Nearly all of the ethane produced on purpose is consumed in the production of ethylene. Only the United States and Canada have other, minor applications. The United States and the CIS/Baltic States are forecast to show the largest growth in the use of ethane for the production of ethylene. Much of the growth in the consumption of ethane, liquefied petroleum gas, and natural gasoline will come from continued growth in shale gas and tight oil production, particularly in the United States.
Shale gas and tight oil extraction in the United States has a competitive advantage over the rest of the world because of the geographic features of the assessed plays, more evolved pipeline infrastructure, versatility of the drilling assets in switching from oil to gas and back, private mineral rights ownership that incentivizes property owners to allow production development, and the availability of water. Combined, these give the United States an advantage over other regions; however, other regions are also beginning to produce shale gas and tight oil through newer extraction techniques. The increased ethane supply has prompted investment in downstream ethylene capacity.
The following pie chart shows world consumption of ethane:
The United States, Western Europe, and India are the leading manufacturers of new ethylene plants that use ethane as the feedstock, although Mexico, Brazil, and Russia will also be using it. Braskem-Idesa in Mexico began using ethane for ethylene in 2016, while most countries will not begin operations until 2017 or later. In addition to the new ethylene facilities, nearly the same number of plants are expanding capacity based on ethane, although on a smaller scale.
With the exception of "Other," which includes methanol and coal to olefins, ethane has been the fastest-growing feedstock for ethylene production. In 2016, ethane accounted for 36% of the total, while naphtha accounted for 42.5%. However, by 2021, ethane will account for almost 40.5%; naphtha will decline to 37%. Use of ethane will grow at an average rate of about 6% per year, while use of naphtha will grow at only 0.9% annually during 2016–21. Development of China's methanol- and coal-to-olefins technologies will experience the strongest gains, as new plants begin operation over the next five years.
The Middle East and the United States are the leading ethane-consuming regions, at 36% and 33%, respectively, in 2016 because of abundant natural resources and considerable investment in gas processing and ethylene capacity.
In the United States, there have been a number of projects to allow for feedstock changes, new construction, or capacity expansion to use ethane in ethylene-producing plants. Most of this new capacity was from expansion projects that came on line in late 2015, but that did not impact feedstock demand until early 2016. Five new ethylene steam crackers (Dow, Formosa, ExxonMobil, Chevron Philips, and OxyChem/Mexichem), and two expansion projects (LyondellBasell and Westlake) are under construction and expected to begin operating in 2017. In addition, Indorama Ventures recently acquired a mothballed plant and has proposed restarting the plant by late 2017. Consumption of ethane in the United States is forecast to grow at an average annual rate of about 10.5% during 2016–21.
The only application for ethane in the Middle East is as a feedstock in the production of ethylene. Growth in the consumption of ethane in the Middle East to produce ethylene is forecast at almost 4% annually during 2016–21. The Middle East boasts the lowest price for ethane in the world and as a result it remains the primary choice of feedstock for Middle Eastern ethylene production. Over the past decade, roughly 70% of all ethylene capacity in the Middle East has been based on ethane feedstock. Consumption of ethane in the Middle East grew at an average annual rate of 11% from 2002 to 2014. During 2009–11, significant new ethylene capacity came onstream, mainly from ethane feed, resulting in a significant increase in consumption.
Global ethane demand will increase at an average annual rate of approximately 6.5% through 2021. Consumption in the CIS/Baltic States is forecast to grow at an average annual rate of about 15.5%, and Western Europe will have a rate of growth similar to that in the United States. Africa will have strong growth, but from a small base. Ethane production is expanding rapidly in the United States as a result of the development of shale gas and tight oil. The US ethane supply expansion has led to a surge in new ethane-based ethylene plants, both in the United States and elsewhere, particularly in Western Europe.