EPD Denied Export License for Three Ethane Cargoes

Executive Summary: 

Infrastructure: The Trump administration has denied export licenses for three ethane cargoes to China. 

Rigs: The total US rig count remained flat during the week of May 18 at 541. Liquids-driven basins decreased by 5 W-o-W from 432 to 427.  

Flows: US natural gas volumes averaged 69.6 Bcf/d in pipeline samples for the week ending June 1, down 0.5% W-o-W. 

Calendar: Bakken SD & Northeast Energy Path  

Infrastructure:

The Trump administration has intensified restrictions on US ethane exports to China, with the Department of Commerce’s Bureau of Industry and Security (BIS) moving to formally deny licenses for three cargoes totaling 2.2 MMbbl. The notice, issued to Enterprise Products (EPD) on June 3, gives the company 20 days to respond, after which the denials will become final unless reversed. 

This policy follows a May 23 BIS determination that high-purity ethane (≥95%) exports to China pose a national security risk. The agency warned that ethane could be diverted to military end-users, requiring exporters to apply for special licenses under 15 CFR § 744.21. Though butane was initially included in the BIS rulemaking, EPD said this restriction was later dropped.  

Ethane remains under scrutiny, and with China absorbing nearly half of all US ethane exports in 2024 (~227 Mb/d), the impact on trade flows could be severe. Notably, Energy Transfer (ET) confirmed it also received a BIS letter indicating its ethane cargoes to China fall under the same export control framework, placing further pressure on the US–China NGL trade. 

With the China market now effectively off-limits, the key question becomes: Is rejection a realistic outlet for displaced volumes? 

Rejecting the ~250 Mb/d of ethane that previously flowed to China would equate to roughly 360 MMcf/d of additional volume injected into the US gas stream. Assuming an average current pipeline gas energy content of 1,037 Btu/cf, and a national average spec limit of 1,094 Btu/cf, operators can increase heat content by up to 57 Btu per cubic foot. 

That margin allows for ~7.8% of each cubic foot of gas to be replaced with ethane. East Daley estimates ~5 Bcf/d of gas would need to be reblended to fully absorb 250 Mb/d of rejected ethane without breaching pipeline specs. On paper, this is feasible — but not everywhere. 

Rejection is most likely to come from the Anadarko and Rockies regions, where ethane economics are more tenuous and processors have flexibility. The Permian, by contrast, remains constrained on gas takeaway, limiting its rejection capability in the near term. However, some Permian recovery could still occur if operators opt to blend ethane downstream of the bottlenecks, easing egress pressures. Petrochemical buyers in the US or Europe may also emerge opportunistically, either to burn cheap ethane in spot markets or store it in Mont Belvieu if forward curves support contango strategies.  

This is more than a trade hiccup — it’s a structural threat to the fastest-growing leg of US NGL exports. With 100% of China’s ethane imports sourced from the US, the new BIS policy could stall petrochemical expansions, create feedstock shortfalls, and leave billions in Chinese infrastructure bets hanging. Meanwhile, US midstream must now find a home for ~250 Mb/d of displaced ethane — either through rejection, burn or blend. The race is on. 

Rigs:  

The total US rig count remained flat during the week of May 18 at 541. Liquids-driven basins decreased by 5 W-o-W from 432 to 427.  

• Permian (-3):  

• • Midland (-2): Double Eagle, Crownquest Operating 

• • Delaware (-1): Devon Energy 

• DJ (-1): Creek Road Miners 

Liquids-driven basins decreased 1.2% to 18.1 Bcf/d. The Permian Basin sample decreased 3.3% W-o-W to average 5.7 Bcf/d, while the Eagle Ford gained 1.0% to 1.7 Bcf/d. 

Gas-driven basins rose 0.4% W-o-W, averaging 44.2 Bcf/d. The Haynesville sample increased 0.9% to 10.5 Bcf/d. The Marcellus+Utica was relatively flat at 32.8 Bcf/d. 

Looking ahead, the Appalachia and Haynesville basins will be pivotal to monitor. With increased demand on the horizon, we expect increased production from these regions will be critical to maintain a balanced market. 

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