INEOS Insight
Ineos Insight, one of the eight “dragon ships” that have been carrying ethane to Europe. (A ninth has been dedicated to carrying ethane to China. Photo: Ineos)

A recent article in Chemical Week describes the problem petrochemical firms are having with historically low ethane prices, and even lower crude oil prices. The article singles out Ineos in particular as a company that is suffering from the ethane situation. For those who are interested in the Dragonpipe (Mariner East pipeline system), this is of interest. The ME1 pipeline in particular is dedicated to ethane transport, most of it for Ineos, so this situation could result in ME1 running far below its capacity.

Ineos has been involved with Mariner East from the start. As the initial lead customer, its involvement removed much of the financial risk from the project.

Several different factors are contributing to Ineos’ problems. They have been compounded by the global economic slowdown due to Covid-19, but there were problems in the making long before the virus appeared.

According to the Chemical Week article, Ineos accounts for “a large share” of the ethane shipped out of the US. The two main export points are Marcus Hook and Houston, and Ineos is prominent in both ports. It ships most of the ethane to its cracker plants in Scotland and Norway, for conversion to ethylene.

Right now is a bad time to be in the ethane-cracking business, for two reasons. First, the market for ethylene (the product of cracking ethane) is weak, making cracking unprofitable for Ineos. Second, the glut of crude oil (because of increased OPEC and Russian production) means there is an abundance of low-cost naphtha, which is produced by oil refineries. Like ethane, naphtha can be used as a feedstock for ethylene production, but only if you have the right kind of cracker. The Ineos plants are designed for ethane, not naphtha, so Ineos is not able to take advantage of the low naphtha prices, while its competitors can.

That leaves Ineos with a choice between using ethane to produce ethylene at a loss, or just stopping ethylene production entirely. “Ineos may find it more optimal to simply stay sidelined,” is how the article puts the situation. If Ineos chooses to idle its crackers, shipments out of Marcus Hook will presumably slow.

What’s happening with the “dragon ship” fleet? The movements of the Ineos shipping fleet provide some hints as to what is happening. Of the nine ethane-carrying “dragon ships” in the fleet, two are currently at anchor. Based on the information on shipping websites, one of them is at anchor off  Skagen, Denmark (a commonly-used “parking lot” for ships awaiting orders); and another is at anchor off the New Jersey coast. A third is moored at Vlissingen (the Netherlands), and a fourth is underway from Finland to Portsmouth, NH. None of those four is participating in the “normal” ethane-to-Europe trade that Ineos has typically conducted. Yet another Ineos ship has been in Jamaica since last September. (I don’t know why. Repairs, maybe?)

That leaves four other ships. One of these is the huge, new Ineos Marlin, which has begun ferrying ethane between Houston and China. According to the shipping sites, it has just left a Chinese port after unloading. The Marlin’s actions are not important for our Mariner East discussion. It won’t be coming to Marcus Hook much, if at all, because when it is fully loaded, it is too deep for the Delaware River.

One ship, the Ineos Intuition, recently took on a load of ethane at Marcus Hook and is headed for Scotland. Another ship, the Ineos Innovation, is loading ethane at Marcus Hook as this is written (April 6, 2020).

Clearly, based on ship movements, the flow of ethane to Ineos’ European cracker plants has been significantly curtailed, but apparently not stopped.

A slowdown at Marcus Hook? It’s not so simple. It would be oversimplifying to say that ethane exports from Marcus Hook are slowing. The Chemical Week article, published March 27, incorrectly implied that no Ineos ship was on its way to Marcus Hook. (As noted, the Ineos Intuition was just here, on March 29-30, and the Ineos Innovation is here right now. The Ineos Ingenuity is at anchor, empty, off the New Jersey coast. Might it take on ethane at Marcus Hook? We don’t know.)

More significantly, various non-Ineos ships have been taking on cargo, presumably ethane, at the Marcus Hook ethane docks. That has been happening to a limited degree for at least a year. (There are four docks at Sunoco’s Marcus Hook facility, two of which are specialized for ethane. My assumption is that ships moored at the ethane docks are taking on ethane, even if they are not Ineos ships.) Just in March, there have been six of these ships, destined for ports in the UK, Spain, Morocco, the Netherlands, Norway, and Brazil. (Ineos itself had four of its fleet in port at Marcus Hook at various times during March, all at the ethane docks.)

To summarize: Ineos is probably hurting financially, and its ethane shipping is slowing. The markets for ethane and for ethylene are in trouble. The situation for Ineos is unquestionably bad.

Still, it is too soon to know what any of that may mean for Marcus Hook or for Mariner East. So far, ships are still arriving frequently at Marcus Hook and leaving with a cargo that is probably ethane. But things could change quickly in today’s economic climate.