The question among gas processors and petrochemical buyers recently has been:  What will the price of ethane be today?  Is it better to reject ethane by leaving it in the residue gas sold into the pipeline, or is it more profitable to recover it and sell it as a petrochemical feedstock?  Normally, ethane is removed from the natural gas that feeds the grid and is instead sold to petrochemical buyers as feedstock (typically for ethylene crackers).  However, because of the decline in ethane prices over the last few years, the trend has turned to rejecting ethane.  Ethane rejection has value to gas processors because it increases the heating value of the residue gas when it is sold as fuel.  The value of the residue gas is measured in units of energy, so the higher heating value nets a higher price per unit of standard volume (or mass) than pure methane.  Furthermore, ethane rejection reduces treatment costs since it eliminates the step of stripping the ethane out of the natural gas.

Will this trend continue?

This trend has not only been increasing since 2012, but it is not looking as though it will end any time soon. In fact, there are some that suggest that spiking LNG with ethane may emerge as the next new method of ethane rejection. According to RBN Energy, “producers and gas processors are rejecting just enough ethane to stay even with petrochemical demand, so stocks stay flat – at very high levels.”  Since the trend toward ethane rejection appears likely to continue, producers and processors are realizing that they need to be prepared to be as flexible as possible so they are able to fine tune their ethane rejection rates as dictated by the economic drivers. This means that treatment units (i.e., de-methanizers) need to be more sophisticated and adaptable than ever before. Fortunately, technology has advanced to provide the controls and instrumentation that will be needed to achieve the responsiveness and efficiency that will be required.

What are your thoughts on this trend? Do you think it will continue? How does this affect your business and industry?