Exec Summary:
Market Movers: New restrictions on US ethane and butane exports to China create material risk for midstream operators.
Rigs: Operators are returning to KMI systems in the Bakken.
Flows: DTM has seen reduced rigs and flows in the Haynesville owing to its exposure to Expand Energy.
Calendar: EDA will be in NYC June 17-19 and July 29-31. Please reach out if you would like to schedule a market update while we are in town.
Market Movers:
New US export restrictions on ethane and butane to China create material risk for midstream operators, especially Enterprise (EPD) and Energy Transfer (ET). With ~40% of EPD’s ethane exports and nearly all of ET’s Orbit volumes destined for China, these companies face up to $168MM in EBITDA exposure.
Background: The Department of Commerce on May 23 notified Enterprise that it has elevated ethane/butane exports to China to the level of a national security risk, EPD disclosed in an 8-K filing. The Bureau of Industry and Security determined the commodities could be diverted to end-users in China’s military, and will require companies apply for a license for further exports to the country.
EBITDA at Risk: East Daley Analytics estimates the EBITDA at risk from ethane exports to China to be $103MM to EPD and $65MM to ET for the trailing twelve months (TTM). The estimates are disclosed in EDA’s company Blueprint Financial Models.
Morgan’s Point: EPD disclosed in its 8-K that 40% of its ethane exports go to China, or about 92 Mb/d. We know the facility also supplies Reliance Industries in India and INEOS at its Rafnes facility. It’s quite possible that EPD supplies ethane to Braskem via its ethane import terminal in Veracruz, Mexico as well.
The big question mark for Enterprise is how much Chinese contractual exposure EPD has related to its Neches River expansion project. Phase 1 (ISD 3Q25) adds 120 Mb/d of ethane export capacity and Phase 2 (ISD 1H26) brings another 180 Mb/d of capacity. EPD has said the terminal is 100% contracted already. Likely counterparties include INEOS (for its new Project One facility in Antwerp, Belgium), and Reliance (ordered three new VLECs). If another 40% is going to China, that equals 120 Mb/d of capacity, assuming the new facility ships ethane to China in the same proportion as the existing Morgan’s Point dock.
Orbit: EDA believes almost all the ethane exported from ET’s Orbit facility is headed to China. China’s Satellite Chemical is an anchor shipper for the dock and owns 41.9% of the Orbit ethane pipeline feeding the dock. Presumably, the ownership interest in the export facility is the same. ET realizes ethane export diversification via its Marcus Hook dock, as well as its Mariner West pipeline. The dock near Philadelphia, PA ships to INEOS and likely to Borealis as well, whereas Mariner West feeds NOVA’s Corunna steam cracker.
Bottom Line: Ethane demand has been burgeoning and is likely to continue growing. To mitigate risk, US ethane suppliers will look to diversify their counterparties away from China and towards nations that the US has friendly relations like India, Europe, and other Southeast Asian countries.
One Last Thought: Pinching China’s ethane supply will stifle its ability to produce ethylene since its petrochemical sector is 100% reliant on the US for feedstock. This move could make US petchem producers more competitive by lowering the cost of ethane (more stays in the US) and supporting a higher-priced end product (by reducing China’s output).
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