Ethane traders Satellite Chemical USA and Vinmar International have received US government letters allowing them to load ethane on vessels destined for China but prohibiting unloading ethane in China without authorisation, sources familiar with the matter said.
The letters received Wednesday from the US Department of Commerce follow a licensing requirement imposed several weeks ago on ethane exports to China, stalling shipments and leading vessels to drift or anchor around the US Gulf Coast.
The letter could be perceived as the administration preparing to lift the restriction, industry sources and analysts said.
Even so, there would likely still be some reluctance to load ethane – which is extracted from US shale gas and primarily used as a petrochemical feedstock – as China-bound vessels could be stuck in limbo depending on how long the full-path restriction plays out, said AJ O’Donnell, an analyst at Tudor Pickering Holt & Co.
The US also sent similar letters to Enterprise Products Partners and Energy Transfer on Wednesday, Reuters reported exclusively.
China’s Satellite Chemical Co Ltd, the parent of Satellite Chemical USA, and Vinmar declined to comment.
Around half of all US ethane exports head to China, and the halt in flows has pushed ethane prices lower on worries of domestic oversupply. The restrictions are likely to cut into profits of top ethane producers.
Supertanker Gas Bluebonnet loaded for China’s Satellite Chemicals at Energy Transfer’s Nederland facility in Texas on June 12 and was near the Panama Canal on Thursday, ship tracking data on LSEG and Kpler showed. At least nine other tankers were drifting or anchored along the US Gulf, while two were moored at loading docks.
In the near term, export terminal operators such as Energy Transfer and Enterprise could benefit as they can push their buyers to load at the docks, industry sources said.
Still, Enterprises Morgan Point dock near Houston could see lower volumes as a result of the ethane restrictions, Tudor Pickering Holt & Co’s O’Donnell said.
Chinese petrochemical firms use ethane, extracted from natural gas, as a feedstock because it is a cheaper alternative than naphtha, while US oil and gas producers need China to buy their natural gas liquids as domestic supply exceeds demand.
