Executive Summary: Rigs: The total rig count increased by 2 for the November 17 week, up to 564 from 562. Flows: The Thanksgiving holiday in 2024 was marked by widespread cold temperatures from an Arctic blast, with highs struggling to reach above freezing in many areas. Infrastructure: Braskem Idesa is short ethane supply at its petrochemical complex in Coatzacoalcos, Mexico.
Rigs:
The total rig count increased by 2 for the November 17 week, up to 564 from 562. Liquids-driven basins declined by 2 rigs W-o-W.
- Permian (-4):
- Midland (--3): Exxon (-1), Diamondback Energy (-1), Chevron (-1)
- Delaware (-1): EOG Resources (+1), Exxon (-2)
- Eagle Ford (+2): Escondido Resources, Dahco Operating, LLC
- Anadarko (-1): Berexco, LLC
- Uinta (+1): WEM Operating, LLC
Flows:
- The Thanksgiving holiday in 2024 was marked by widespread cold temperatures from an Arctic blast, with highs struggling to reach above freezing in many areas. The cold air mass caused significant temperature drops, particularly in the northern Plains and Midwest. The Bakken sample averaged 2.3 Bcf/d, decreasing 4% W-o-W, likely as a result of the freeze-off event. Declines were spread across three interstate pipelines in the basin (NBPL, Alliance and WBI).
- The Permian sample is up W-o-W by 3% to 6.1 Bcf/d. On November 20, Permian Highway Pipeline (PHP) brought back online 489 MMcf/d of capacity, restoring the pipe’s full capacity of 2.65 Bcf/d. Matterhorn volumes continue to level up at around 1.3 Bcf/d.
- The ArkLaTex sample decreased again, settling at 10.2 Bcf/d. This lines up with our latest ArkLaTex production forecast, with a slower production ramp.
*W-o-W change is for the two most recent weeks.
Infrastructure:
Braskem Idesa is short ethane supply at its petrochemical complex in Coatzacoalcos, Mexico. Fortunately for the company, new expansions at Gulf Coast terminals are timed well to fill the gap.
In EDA’s 2Q24 webinar on ethane supply and demand, we pointed out that some ethane exports from the Gulf Coast end up in Mexico at the Braskem Idesa facility. The plant plans to begin operations in June ’25 on a new ethane import terminal, around when Enterprise Products (EPD) plans to start its Neches River terminal expansion in 3Q25. At least 15 Mb/d of additional ethane is needed at the Braskem plant to operate at capacity.
The US energy market is flush with ethane. The average Mont Belvieu ethane price was $0.14/gal in August ‘24, the lowest price since April ’20, when the price fell to $0.13/gal during the throes of COVID. Since then, US ethane supply has grown by almost 50% (see below graph, which includes ethane currently rejected into the gas stream in orange). Permian producers targeting liquids have led the growth, supported by newer processing plants more effective at extracting ethane from the associated rich gas stream.
Meanwhile, the Braskem Idesa plant in Veracruz has a shortage crisis. The Braskem/Idesa JV (75%/25% ownership split) operates the largest petrochemical complex in Latin America that produces ethylene and polyethylene. The facility requires 66 Mb/d of ethane to operate at capacity, and therein lies the problem. An ethane shortage in Mexico has prevented it from operating above 78% since 2017.
Petroleos Mexicanos (Pemex) has historically supplied most of the plant’s ethane, but its ability to maintain feed to the facility has diminished over time, as shown in the below figure (gray-shaded bar chart).
Ethane production in Mexico has suffered for several reasons. 1) The country’s oil production is in decline, and with it associated wet gas (i.e. ethane) 2) an increase in nitrogen contamination has also led to more gas flaring 3) high nitrogen content reduces operational efficiency at low-recovery plants and 4) inadequate maintenance has impaired production. Sergio Taborga explains the dynamics in more detail here: : Mexico’s Petrochemical Industry Battles Ethane Supply Issues.
To solve for the ethane shortage, Braskem Idesa has partnered with Dutch company Advario to build an 80 Mb/d ethane import terminal. The terminal will include two cryogenic storage tanks with a capacity of 314 Mbbl (12 days of inventory), and is expected to start operations in June ’25. Furthermore, Braskem Idesa has two high-capacity ethane vessels built in China that will allow for scaled ethane transportation. The first vessel in the water is undergoing testing for delivery in January ’25.
While Pemex has a 30 Mb/d ethane commitment to Braskem Idesa’s plant, the rest of the 15 Mb/d or more of ethane required to operate the Mexico plant at capacity will likely be sourced by EPD’s Neches River or Energy Transfer’s (ET) Nederland export facilities.
