US ethane recovery eases as industry awaits new Gulf Coast export capacity in 2025

US ethane recovery has eased in recent months amid record high storage inventories, but midstream companies see opportunities for further recovery next year when new export capacity start service.

Ethane production in 2024 has averaged 2.78 million b/d in 2024, up 5% year on year despite falling natural gas production, data from S&P Global Commodity Insights showed. But ethane recovery eased in recent months, averaging 2.69 million b/d so far in November, down from a record high of 2.95 million b/d in in May, the data showed.

Negative natural gas prices in the Permian have encouraged strong ethane recovery this year.

"I think pretty much most of the industry is in full recovery wherever they can, predominantly in the Permian Basin," said Scott Pryor, president of logistics and transportation at Targa Resources, on a Nov. 5 investor call. "I think some of the outlying areas outside of the Permian will probably be in rejection mode just based upon where prices are. But for us, it's pretty much full tilt."

But even Permian recovery seems to have eased in recent months. Ethane recovery in the Gulf Coast averaged 1.86 million b/d over Nov. 1-15, down from the August peak of 1.99 million b/d, Commodity Insights data showed.

Unusually high storage levels may be reducing ethane production. The Energy Information Administration reported record inventory levels of 80.9 million barrels at the end of July. This eased to 79.5 million barrels at the end of August, the second highest on record. It was 55% higher year over year and 39% above the five-year average, EIA data showed.

New facilities

Rising exports could help to reduce storage levels and incentivize further ethane recovery next year.

"We do have some export facilities that are coming up here in a year or so that will bring more demand to ethane," Sheridan Swords, executive vice president at Oneok, said at a Nov. 13 investor event.

Energy Transfer is adding 250,000 b/d of flexible export capacity, which can be utilized to export ethane or other NGLs, at its Nederland terminal in the Gulf Coast. The project is on track to start in the third quarter of 2025, co-CEO Marshall McCrea said Nov. 6 on an investor call.

"The international demand for ethane and LPG continues to grow through the roof," McCrea said. "We're very bullish on what we're doing at Nederland, and we will definitely be expanding beyond what we're doing today."

Enterprise Products is also adding ethane export capacity next year, which it expects to fill quickly. The first phase of its Neches River Terminal will add 120,000 b/d of ethane export capacity and is expected in service in the third quarter of 2025. A second phase, due online in the first half of 2026, will add capacity to export another 180,000 b/d of ethane or 360,000 b/d of LPG propane, or a combination of the two. Because of strong ethane demand, the company expects it to be close to 100% dedicated to ethane exports. It announced July 30 a separate LPG expansion at its Enterprise Hydrocarbons Terminal in the Houston Ship Channel, to keep space free at Neches River for ethane exports.