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Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--As the trade wars continue between the U.S. and China, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) fired a new round last week--one that could have deep ramifications for the oil and gas industry.
On May 23, the BIS told Enterprise Products Partners LP (Houston, Texas) that it would begin requiring a license for the export, reexport, or transfer (in-country) of ethane and butane where a party to the transaction is located in China or is a Chinese "military end user" in any location, the company said in a filing on Thursday with the Securities Exchange Commission. The BIS said it had determined that such exports pose an unacceptable risk of being diverted to military use. The specific concern is around China's military-civil fusion strategy. Industrial Info's plant database includes 582 Enterprise Products plant profiles. Subscribers to Industrial Info's Global Market Intelligence (GMI) database can click here for the list.
This licensing could affect a broad sweep of U.S exporters.
Ethane, a byproduct of oil and gas production, is commonly used as a feedstock for polyethylene, a base ingredient for plastics and other products. Unlike gasoline or diesel, whose refined amounts can be varied to some extent, a well's ethane content is determined by the reservoir it comes from.
How hard it will be for Enterprise--or other companies receiving such a notice--to obtain such a license was unknown.
Enterprise is a major player in the ethane export market. It is among a long list of companies that could be greatly affected, said Industrial Info's Vice President of Energy Services Jesus Davis.
He added, "This creates a problem for the boats at the terminals right now, as they are not able to load. How long it will take to go through the application process remains to be seen."
According to the U.S. Energy Information Administration (EIA), the U.S. began exporting ethane to China during the last Trump administration, in June of 2019. The EIA also reported that 2024's U.S. ethane production was around 2.8 million barrels per day (BBL/d). About 8% went to Chinese markets.
In 2024, China imported a record 230,000 BBL/d of ethane from the U.S., peaking at 321,000 BBL/d in September--two months before the Trump administration was voted into office.
In recent months, ethane has been somewhat of a ping pong ball in the trade wars, said Shane Mullins, Industrial Info's vice president of Energy Market Solutions. "Earlier in May, China had imposed a 125% tariff on U.S. ethane imports, in retaliation for President Donald Trump's trade policies. But soon thereafter, China waived the ethane tariff, instead offering a boost for Chinese companies relying on U.S. ethane for petrochemical production."
Mullins added that the U.S. is the only exporter from whom China liquefied petroleum gas (LPG) imports have increased in recent years, so using it as a tariff pawn "didn't make sense," industry-wise.
Davis agreed, saying, "This will have an immediate impact on China's petchem industry depending on how much feedstock they have in storage." Some traders believe there is enough in storage to keep Chinese industry rolling for a short time, so an impact on that end might be delayed.
Should these restrictions move ahead, both China and the U.S. would have to find alternative trade partners for ethane, said Davis, who warned that "China has already begun the process of searching for and securing other sources of LPGs after the tariff talks began. Who would that be--Russia? Qatar?"
For the U.S., even though the ethane-to-China trade is relatively recent, its quick growth would make it virtually impossible to replace its volumes elsewhere, many experts have said.
Ripple effects could be devastating, said Davis. They could include:
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
On May 23, the BIS told Enterprise Products Partners LP (Houston, Texas) that it would begin requiring a license for the export, reexport, or transfer (in-country) of ethane and butane where a party to the transaction is located in China or is a Chinese "military end user" in any location, the company said in a filing on Thursday with the Securities Exchange Commission. The BIS said it had determined that such exports pose an unacceptable risk of being diverted to military use. The specific concern is around China's military-civil fusion strategy. Industrial Info's plant database includes 582 Enterprise Products plant profiles. Subscribers to Industrial Info's Global Market Intelligence (GMI) database can click here for the list.
This licensing could affect a broad sweep of U.S exporters.
Ethane, a byproduct of oil and gas production, is commonly used as a feedstock for polyethylene, a base ingredient for plastics and other products. Unlike gasoline or diesel, whose refined amounts can be varied to some extent, a well's ethane content is determined by the reservoir it comes from.
How hard it will be for Enterprise--or other companies receiving such a notice--to obtain such a license was unknown.
Enterprise is a major player in the ethane export market. It is among a long list of companies that could be greatly affected, said Industrial Info's Vice President of Energy Services Jesus Davis.
He added, "This creates a problem for the boats at the terminals right now, as they are not able to load. How long it will take to go through the application process remains to be seen."
According to the U.S. Energy Information Administration (EIA), the U.S. began exporting ethane to China during the last Trump administration, in June of 2019. The EIA also reported that 2024's U.S. ethane production was around 2.8 million barrels per day (BBL/d). About 8% went to Chinese markets.
In 2024, China imported a record 230,000 BBL/d of ethane from the U.S., peaking at 321,000 BBL/d in September--two months before the Trump administration was voted into office.
In recent months, ethane has been somewhat of a ping pong ball in the trade wars, said Shane Mullins, Industrial Info's vice president of Energy Market Solutions. "Earlier in May, China had imposed a 125% tariff on U.S. ethane imports, in retaliation for President Donald Trump's trade policies. But soon thereafter, China waived the ethane tariff, instead offering a boost for Chinese companies relying on U.S. ethane for petrochemical production."
Mullins added that the U.S. is the only exporter from whom China liquefied petroleum gas (LPG) imports have increased in recent years, so using it as a tariff pawn "didn't make sense," industry-wise.
Davis agreed, saying, "This will have an immediate impact on China's petchem industry depending on how much feedstock they have in storage." Some traders believe there is enough in storage to keep Chinese industry rolling for a short time, so an impact on that end might be delayed.
Should these restrictions move ahead, both China and the U.S. would have to find alternative trade partners for ethane, said Davis, who warned that "China has already begun the process of searching for and securing other sources of LPGs after the tariff talks began. Who would that be--Russia? Qatar?"
For the U.S., even though the ethane-to-China trade is relatively recent, its quick growth would make it virtually impossible to replace its volumes elsewhere, many experts have said.
Ripple effects could be devastating, said Davis. They could include:
- Upending U.S. oil and gas production
- Disrupting NGL fractionation plant utilization rates
- Filling up storage, causing domestic LPG prices to drop
- Upending Chinese petrochemical production, which has its own set of downstream ripple effects.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
