New US ethylene export terminal contracted to 95% of capacity: Navigator

Houston — Enterprise Products Partners' new ethylene export terminal in Texas has signed contracts for 95% of its eventual 1 million mt/year capacity, the company's 50% partner in the venture said Friday.

"Our Morgan's Point joint venture is now 95% sold out with another take-or-pay offtake agreement we signed in April," London-based Navigator Gas CEO Henry Deans said during the company's first-quarter 2020 earnings call. "The terminal is now fully functional and the throughput agreements are ramping up."

Chief Financial Officer Niall Nolan also said that in January the partners were discussing an expansion of the terminal's capacity, but the spread of the global coronavirus pandemic and related shutdowns squashed those discussions for the time being.

The facility is expected to operate at a capacity of 600,000 mt/year pro-rata until a cryogenic storage tank under construction at the terminal along the Houston Ship Channel comes online in the fourth quarter of 2020, bringing the operation to its full 1 million mt/year capacity, the company said.

Navigator reported an $8.517 million net loss for the most recent quarter, shifting further into the red compared with a $3.257 net loss in Q1 2019.

The Q1 loss includes $3 million associated with initial start-up operations of the new ethylene terminal, Nolan said.

"The results of the terminal will improve during the second quarter as throughput volumes through the terminal ramp up," he said.

US-TO-ASIA ETHYLENE ARBITRAGE OPEN

Chief Commercial Officer Oeyvind Lindeman noted that many US and European petrochemical producers reduced their run rates in response to lower demand amid pandemic-related shutdowns that curbed manufacturing and consumption.

However, he said Navigator has, in May, seen higher butadiene exports from Europe to Asia and more flows of ethylene and propane from the US to Asia on Handysize vessels.

"Price arbitrage of ethylene, for example, was at an all-time low in Asia during the month of April at $300 a ton delivered. But today, has now more than doubled, reaching $700 a ton deliveries" with US prices at about $267/mt (12.125 cents/lb) FD Mont Belvieu.

"This is encouraging tons for exports, and this ties well in with the ramping up of the Morgan's Point ethylene terminal exports," Lindeman said.

Nolan said a customer signed a long-term contract to export 200,000 mt/year through the new terminal "right smack in the middle of a shutdown globally."

He said the partners in January had been discussing not when, but how to expand the operation and in what configuration, the need to expand and how quickly it could be done.

"Of course, three weeks later, we're in the midst of this pandemic and all that conversation was off the table," Nolan said. "But the attractiveness of the expansion is still outstanding because the cost to double that size is a fraction of what the original costs were, simply because you don't need a lot of the extra equipment there. You don't need additional storage because the storage being built right now can accommodate significant expansion."

If the pandemic is resolved, he said those expansion talks would resume.

Lindeman added that Asian demand was pulling in propylene from the US, with two Navigator vessels handling those flows currently.

"It is the first time that this trade has taken place in more than a decade, and showing some green shoots," Lindeman said. "As a result of petrochemical demand slowly picking up, our utilization, as you heard, is regaining lost ground, and we expect to reach the 90% level during the month of May."

While the company sees that promise in terms of ramping up deepsea petrochemical trade, particularly with ethylene, he noted the pandemic and its impact on such markets "remains uncertain as to how it will affect the near term."