Ethane Rejection and Its Consequences

With the shale gas boom going on in the US, we have to remember that it’s not just methane coming up those fracked wells.  Along with heavier natural gas liquids (NGLs) including propane and butane, there is also a great deal of ethane coming up in the mix.  Generally, ethane is separated from the methane and used for petrochemical feedstocks – it’s usually sent to a steam cracking unit to be converted into ethylene (or ethene, for the IUPAC formalists), and then to polyethylene, the most common household plastic.

However, like pretty much every other hydrocarbon, ethane can be burned as a fuel.  There really isn’t a rule against this, but there are more efficient sources of energy, and ethane is on a short list of chemicals that we can polymerize easily to make into plastic.  It’s the same reason we don’t burn cotton: it’s worth more as a consumer product than it would be heating our houses.

At least until recently.

With ethane prices dropping and lagging behind the price of other NGLs, we are dangerously close to the point at which ethane becomes more lucrative burned than as a petrochemical.  This is called ethane rejection, where instead of recovering the ethane, it is “rejected,” and sent out with the methane to be burned as fuel.

Let’s take an example natural gas stream – say around 88% methane and 5% ethane, with the remainder other hydrocarbons and impurities.  If we take a basis of 100 MMSCF of this stream, we can calculate some back-of-the-envelope economics using February 2013 futures prices.  For the first case, we completely separate out the ethane:

Volume
(MMSCF)
Moles Liquid Volume
(US Gallon)
Energy Content
(MMBTU)
Profit
Natural Gas 88 105,427,520 - 88,834 $295,551
Ethane Liquid 5 5,990,200 145,900 - $32,147
$327,699

Now, what happens if we send half of the ethane to the gas stream (burn it) instead?

Volume
(MMSCF)
Moles Liquid Volume
(US Gallon)
Energy Content
(MMBTU)
Profit
Natural Gas 88 105,427,520 - 88,834 $295,551
Ethane 2.5 2,995,100 - 4,429 $14,733
Ethane Liquid 2.5 2,995,100 72,950 - $16,073
$326,359

At these prices, we lose a little money (~$1,340) by rejecting the ethane.  But that’s with ethane at $0.22/gallon.  Just an 8% drop in the price of ethane to around $0.20/gallon, and the economics flip, and that’s even ignoring points such as the energy savings from not separating the ethane out.  The point is, it’s really close at today’s prices, closer than it has been in a long time.  And if you make slightly different assumptions, you can end up with ethane rejection being favorable at today’s prices.

“So what?” you may ask.  Well, there are two problems with ethane rejection.  The first, and more obvious problem, is that natural gas pipelines have specifications on their heating values.  Too much ethane, and you maybe lose your eyebrows when lighting your kitchen stove or your pilot lights.  Pipeline operators will have to put their foot down on how much ethane is allowed in their pipelines, leaving the gas processors with an excess of ethane that they have to sell as a feedstock.

The other problem with ethane rejection is more insidious.  Methane is the cleanest burning fuel from a CO2 perspective.  You get 889 kJ of energy for every mole of CO2 you put into the atmosphere, which is a really good bargain.  The larger the hydrocarbon is, the more CO2 you emit for every unit of energy.  Ethane is the second cleanest burning hydrocarbon, coming it at about 780 kJ of energy for every mole of CO2.

While that’s not a huge difference (889 kJ/mol CO2 versus 780 kJ/mol CO2), that’s still carbon that could instead be trapped into plastic products.  And at a time when our CO2 emissions are at 20 year lows, we don’t want to be taking steps backward, especially when we’re looking at exporting our surplus methane.

What’s the solution?  How can we keep from burning ethane instead of methane?  The first and perhaps quickest solution would be to export the ethane.  The economics in the US are so unfavorable because we are flooded with this newly found and abundant natural gas.  Domestic demand for ethane has yet to catch up, but foreign demand may be a great way to allow the US chemicals and manufacturing industries to catch up.

But for the long term, what we need is to start using the ethane.  Without domestic demand, ethane rejection may become and stay favorable if natural gas prices start to rise and ethane prices stay flat.  Projections point to both commodities rising in price in tandem, but we’ll just have to see.  But with ethane crackers being built around the country, using the ethane as a chemical feedstock is bound to become easier.  And as the overall economy slowly recovers, domestic manufacturing will likely start using more and more of that ethane for plastic products – good news all around.

In short, ethane prices being as low as they are is good news for petrochemical companies and plastics manufacturers.  But if they don’t act quickly, their primary feedstock might be sent off to be burned for fuel.  While not a significant contributor, burning ethane instead of using it for plastics produces more CO2 than only using methane, which does not bode well for the environment.  There are too many opportunities to take advantage of regarding ethane than to simply burn it to heat our houses, we just have to build the infrastructure for it before it’s too late.

Comments

  1. Scott,
    First my english isn’t the best. And maybe a late reaction on your article.
    I am very interested in NG or LNG and specific the ethane value of it.
    I work at Ineos and our site in Rafness Denmark is building a ethane tank which will be completed and
    fully used for the steam cracker in 2015. I think there wil be more interest in producing ethylene with steam cracking of ethane which comes from NG/LNG.
    Is it possible to explane to me (i know the fracking system to pump up NG) in general which are the steps taken to seperate ethane from the NG mix and the steps after to transport it (i suppose liquified) on land and between continets.

    Your article was interested.

    Thanks.

    Fred

  2. Dear Scott,
    Your essay is thought-provoking. Ethane only offers an 8% reduction in carbon emissions (compared with diesel or kerosene) which is about half that offered by LNG (typically 90%+ liquid methane). However, liquid ethane is much easier to store than LNG: it is much more dense than LNG and/or can be stored at a lower pressure at the saturation (boiling) condition – resulting in reduced tank mass. Therefore there could be a sensible engineering argument for using liquid ethane (for engine combustion) instead of LNG in some applications (pending relative price). In particular, the use of liquid ethane as an aircraft fuel might be worth pursuing, since the saturation pressure at stratospheric ambient temperature is only about 5 bar (suggesting near conventional wing box storage is feasible).
    Regards,
    Graham Dorrington

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