With most Gulf Coast export terminals operating near capacity, East Daley Analytics sees a near-term mismatch between ethane supply and demand. The next meaningful expansions do not occur until late ’25, so we expect larger storage builds and more price pressure in the interim.
In the latest Ethane Supply & Demand Forecast, we believe ethane storage builds will lower ethane prices vs the current forward curve (as shown in the blue squares in the storage figure), incentivizing more ethane rejection at the end of 2024 and into 2025.
On the supply side, ethane production has been trending at a record pace in 2024. The Energy Information Administration (EIA) reported record ethane production in March, April and May ’24 before settling lower at 2,862 Mb/d in June.
EDA forecasts a decline in ethane recovery in 4Q24 as more supply is rejected into the gas stream, coincident with Matterhorn pipeline becoming operational. It’s unclear why we are bullish supply vs the EIA; we expect high ethane production trends to persist along with production growth in the Permian Basin, even as some marginal ethane is rejected into new gas pipeline capacity.
On the demand side, Enterprise Products (EPD) starts the next major expansion from its Neches River export facility near Beaumont, TX. The Neches River terminal will be able to export up to 180 Mb/d and has an assumed ISD in October ’25, though we believe meaningful exports do not start until 2026. Other Gulf Coast expansions on the horizon include:
A full project list is available in the Ethane Supply & Demand Forecast, While this next project wave will move the needle on ethane demand, contributions won’t begin for at least another year. In the meantime, the supply outlook looks strong as Permian operators grow into Matterhorn and new LNG export projects stoke more natural gas development in 2025. Storage will have to absorb for imbalances until then, leading to higher seasonal ethane inventory. – Rob Wilson, CFA Tickers: EPD.
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