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At least 7 ships are anchored or hovering in US Gulf

waters

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One vessel docks near Houston after heading away from Gulf

Coast

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No immediate alternative markets for US ethane exports,

consultant says

By Arathy Somasekhar, Georgina McCartney and Trixie Yap

HOUSTON/SINGAPORE, June 6 (Reuters) - Over half a dozen

U.S.-loaded ethane vessels, originally bound for China, have

stalled around the U.S. Gulf Coast after Washington requested

U.S. exporters seek licenses to ship the shale gas to the top

buyer, according to trade sources and ship tracking data on

Friday.

Around half of all U.S. ethane exports head to China, and

the halt in flows has pushed ethane prices lower on worries of

domestic oversupply and is likely to cut into profits of top

ethane producers.

Energy Transfer ( ET ) and Enterprise Products Partners ( EPD ),

two of the largest ethane producers and exporters, have warned

the disruptions could impact their exports. The U.S. Commerce

Department has also denied some vessels emergency authorization

requests to export to China.

Liberia-flagged STL Qianjiang, which loaded at Energy

Transfer's ( ET ) Nederland terminal for China's Satellite Chemical

, was anchored off the coast on Friday in the Gulf,

according to LSEG and Kpler ship tracking data.

Energy Transfer ( ET ), which produces ethane by extracting it from

natural gas and then exports it from terminals along the Gulf

Coast, said it received a letter from the U.S. Commerce

Department on June 3 requiring the company to apply for a

license to ship ethane to China.

The company and Satellite Chemical did not reply to requests

for comments on the vessel.

Three other vessels, which were set to load in early June,

were anchored in the U.S. Gulf near Houston and Port Arthur,

Texas, while three others hovered further south in the water

after having slowed down.

Meanwhile, Liberia-flagged very large ethane carrier (VLEC)

Pacific Ineos Grenadier, which loaded at Enterprise Products

Partners' ( EPD ) terminal in Morgan's Point, Texas, and had

been originally destined for China, was anchored at an

Enterprise dock along the Houston Ship Channel on Friday after

heading away from the Gulf Coast on Thursday.

The ship had not discharged on Friday afternoon and it was not

immediately clear if it would. Enterprise has natural gas

liquids storage facilities along the ship channel.

The vessel, a part of British petrochemical firm Ineos' fleet,

has been used by the company exclusively for transit between the

United States and China since August 2023, according to Kpler

data.

Enterprise Products Partners ( EPD ) received the license

requirement letter in late May, and on Wednesday said it

received a notice from the U.S. government of its intent to deny

emergency requests for three proposed export cargoes of ethane

totaling around 2.2 million barrels to China.

Enterprise has 20 days to respond to the denial, it said on

Wednesday. Unless otherwise notified by the government by the

45th day after receiving the notification, the denials will

become final.

Enterprise and Ineos declined to comment.

"With the curbs on U.S. ethane (exports), these ships are now

struggling to move any cargo. So they are either just drifting

out at sea or in a neutral direction hoping things resolve

themselves with the recent meeting between U.S. and China," an

executive at a ship brokering firm said.

'NO IMMEDIATE ALTERNATIVE MARKETS'

U.S. ethane production touched a record 2.8 million barrels

per day (bpd) in 2024, according to the Energy Information

Administration, and was expected to rise to 3.1 million bpd by

next year. Most of the output growth was expected to be exported

to meet international demand as domestic consumption will likely

hold steady.

Exports also climbed to a record 492,000 bpd last year, of

which about 227,000 bpd, or 46%, headed to China.

"These are distressed cargoes at this point. I would expect

these to have been sold at significant discounts," said Uday

Turaga, founder of energy research and consulting firm ADI

Analytics.

"Without China, there are no immediate alternative markets

for vast U.S. ethane exports, directly impacting prices and

profit for major U.S. producers due to specialized trade

contracts," he said.

The letters from the Bureau of Industry and Security, an

agency of the U.S. Commerce Department, said exports of ethane

pose an unacceptable risk of military end-use in China,

according to both companies' filings.

Chinese petrochemical firms use ethane as a feedstock

because it is a cheaper alternative than naphtha, while U.S. oil

and gas producers need China to buy their natural gas liquids as

domestic supply exceeds demand.