US ethane supply is booming, and international petrochemical companies are chomping at the bit for the cheap feedstock to fuel new ethylene crackers. Who will be the next to sign? East Daley recently made the case for INEOS, but GAIL (India) is also a contender.
State-owned GAIL plans to invest $7.2B (600B Indian rupees) to build an ethane cracker and its derivative plants in Madhya Pradesh. The cracker will have nameplate capacity of 1.5MM tons per year, which we estimate will require 85 Mb/d of ethane supply to run at capacity. The Madhya Pradesh state government has approved the project, and land will be allotted soon.
GAIL’s management board must still approve and fund the project. In a recent earnings call, GAIL confirmed the cracker has not yet reached a final investment decision (FID). At the same time, India Times reports that GAIL is considering building very large ethane carriers (VLECs) to replace its current feedstock with internationally sourced ethane.
GAIL wouldn’t be the first Indian company to source US ethane for its petrochemical complex. Reliance Industries (RIL) first began importing ethane in 2016 via Enterprise Products’ (EPD) Morgan’s Point terminal, which has been operating near capacity since late 2021 (see figure). Reliance imports about 1.6MM metric tons per year, or about 90 Mb/d of ethane from Morgan’s Point. The cargoes replace natural gas and naphtha as a feedstock in RIL’s petchem plants.
Now RIL is adding 3 VLECs to its current fleet of 6, according to the company’s recent earnings call. These new ships could be headed for EPD’s Neches River facility once Phase 1 is online in 3Q25. RIL noted several catalysts for the growing appetite for ethane, including 8-10% per year demand growth for petchem end-products and a $300 per ton cost advantage over naphtha as a feedstock.
As shown in Energy Data Studio, most ethane growth in the US will come from the Permian Basin because of oil-targeted producer growth and a growing share of the rich-gas stream being owned by integrated midstream companies. As EDA has also discussed in prior webinars, there is significant latent supply in basins like the Bakken and Northeast that could deliver more ethane if the economics can support capital growth projects. – Rob Wilson, CFA Tickers: EPD.
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