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June 14, 2021 [S&P Global] -Navigator Gas expects ethylene exports from its joint-venture terminal along the Houston Ship Channel to reach its nameplate capacity of 1 million mt/year through the rest of 2021 after operational issues and fallout from a deep freeze in February hindered outflows, Executive Chairman David Butters said June 11.
The terminal, operated by 50% partner Enterprise Products Partners, reached that top capacity in December upon completion of an on-site refrigerated storage tank. The terminal shipped out its first cargo in January 2020, and had operated at a lesser level until the tank was completed.
However, Enterprise in early February had to shut a pipeline that moves ethylene from its Mont Belvieu, Texas, underground storage cavern to the terminal, forcing an operational shutdown and a declaration of force majeure, Deans said.
“Our tightly scheduled ethylene vessels experienced complete disruption,” Butters said during Navigator’s fiscal Q1 2021 earnings call.
In addition, sustained subfreezing temperatures hit the US Gulf Coast in mid-February, forcing weeks-long shutdowns of more than 71% of US ethylene capacity. US ethylene prices spiked as producers slowly brought crackers back online, closing arbitrage opportunities for exports.
Prompt FD Mont Belvieu and FD Choctaw prices hit a 2021 high of 64.25 cents/lb and 68 cents/lb, respectively, on April 16, S&P Global Platts data showed. Prices have since declined and were assessed June 10 at 26.375 cents/lb FD Mont Belvieu and 27 cents/lb FD Choctaw. The FOB USG ethylene price reached 53.797 cents/lb on June 1, but was assessed at 47.718 cents/lb on June 10, Platts data showed.
“Since the end of March, conditions have gradually improved, suggesting that we may still be entering into an environment more characteristic of those prevailing at the end of last year and the beginning of this year,” Butters said.
Terminal ramping up after pipeline fix and after freeze
CEO Henry Deans said the pipeline outage-related force majeure and subsequent deep freeze in February pressured export volumes on ethylene arbitrage. However, plentiful US supply of cheap ethane feedstock, “coupled with overcapacity and the efficient ethylene market” has ensured product is “placed to move,” he said, noting arbitrage to Europe and Asia has reopened.
“Our Morgan’s Point ethylene terminal has now restarted and is ramping up throughput,” Deans said. ‘We expect June’s export volumes to be close to those of January 2021. And we anticipate exports for the remainder of the year to be at nameplate capacity of 1 million tons per annum.”
The partners were “looking forward” to running the terminal at full rates to see if they can push output past the 10% of additional incremental capacity already deemed reachable, he added.
However, Deans said the partners want to push the terminal’s output to its full nameplate capacity first.
‘The best debottleneck is a free one,” he said. “We’re constantly in discussions about plans for the future for that terminal. But what we need to do now is actually sweat the asset and see it run reliably.”
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