The federal government has asked Energy Transfer to secure a license in order to continue exporting ethane in the latest shot in the trade war with China.
The conflict has seen ethane and propane trade between the United States and China suffer significant disruption, of which the federal government’s demand for an export license is the latest demonstration.
Reuters reported that Energy Transfer’s peer Enterprise Products Partners had also said it was asked to secure a license to keep exporting petrochemical feedstock. Both companies have requested emergency authorization for their continued exports, the publication said.
Last year, propane exports from the United States hit a record high since records began back in 1973. These exports had been rising for 17 years straight, the Energy Information Administration reported last month, as natural gas production boomed—and as demand for petrochemicals from Asia increased, especially from China.
Indeed, China is a major buyer of U.S. ethane and propane—it is the largest buyer of U.S. ethane and the second-largest buyer of U.S. propane. According to data from the EIA cited by Fortune, China takes in almost half of the U.S.’ global ethane exports. In propane, it accounts for about 360,000 bpd in imports, while the rest of the world takes in 1.5 million bpd.
Now, the Commerce Department has informed ethane exporters that sending ethane to Chinese buyers is unacceptable because it may be used to produce goods for military use, hence the requirement for a license. To thicken the plot further, the Commerce Department denied Enterprise Products Partners’ emergency request to authorize three ethane cargoes of a total 2.2 million tons, intended for Chinese buyers.
This is problematic not only for China. China is the biggest buyer of the petrochemical commodities, there are no comparable alternative buyers in terms of size for the U.S. producers of these commodities.
By Charles Kennedy for Oilprice.com
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