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Energy Transfer: US ethane restrictions will make it harder to contract with China

Energy Transfer, a U.S. exporter, said that despite the fact that U.S. ethane restrictions have been lifted, it will be more difficult for Chinese companies to enter into contracts, even though these restrictions were already lifted.

In late May and early in June, the U.S. imposed restrictions on exports to China including ethane. They did this after Beijing was accused of limiting shipments of rare Earths essential to automakers and many other industries.

Last month, the restrictions were lifted. However, they caused disruptions in ethane flows and significant delays for shipments.

Marshall McCrea said, "That's a bit of a black-eye on us, our industry and our country ...,", in a conference call following the earnings report.

The company is a top exporter of ethane (a natural gas liquid) in the United States.

McCrea said, "We think they will be more reluctant to sign contracts with Chinese crackers.

Around half of the ethane extracted from shale gases in the United States is shipped to China, where it's run through crackers, producing ethylene, an important building block for plastics. Chinese petrochemical companies use ethane to feed their crackers because it's cheaper than naphtha. Meanwhile, U.S. producers of oil and gas rely on China to purchase their natural gas liquids since domestic demand exceeds supply. Last week, Enterprise Products Partners, a rival company in the oil and gas industry, warned that export restrictions compromised the US brand of reliable supply and energy safety. Enterprise Products CEO Jim Teague said that these actions often hurt their intended target, but also hurt our industry.

Enterprise reported that at least one non Chinese company with whom it had been in talks about contracting naphtha decided to contract ethane instead.

Energy Transfer reported an 11.5% drop in its net income, which was $1.16 billion or 32 cents per share, for the three-month period ended June 30. LSEG data shows that revenue of $19.24bn was well below the estimated $22bn. Reporting by Arathy S. Somasekhar, Houston; editing by Ni Williams

(source: Reuters)