The Newer World Oil Order

The rise of U.S. oil and gas production continues to reshape the globe, driving new energy alliances to try to compete in this radically different energy world. A report by the Wall Street Journal that OPEC is considering formalizing its relationship with Russia, creating a much more formidable foe to stand up against the U.S., who is going to be the world’s largest oil producer. This comes to the dismay of some of the more marginal producers in the OPEC cartel that now feel like they are only pawns in a cartel that will mainly be run by Saudi Arabia and Russia. That new Russia-Saudi collusion relationship is one reason that Qatar left the OPEC cartel this year, not to mention their focus on natural gas production. Still, that does not mean that Qatar won’t be working with someone. They will be working with U.S. energy and shale oil and gas powerhouse Exxon Mobil to work together on natural gas as Exxon Mobil gets ready to build new capacity to grow its valuable U.S. shale oil and gas assets.

Not only is the U.S. a major exporter of natural gas and oil products but also ethane. The EIA reports that U.S. exports of ethane have increased from nearly nothing in 2013 to an average of 260,000 barrels per day (b/d) through the first 10 months of 2018, accounting for about one-sixth of U.S. hydrocarbon gas liquids exports. Ethane is a key feedstock for petrochemical manufacturing. The United States became the world’s top exporter of ethane in 2015, surpassing Norway, the only other country to ship ethane internationally. In 2014 and 2015, all U.S. ethane shipments went to Canada, but in 2018 the United States sent ethane to 10 countries.

U.S. production of ethane, which is separated from raw natural gas at processing plants, increased along with the development of U.S. natural gas shale resources. U.S. ethane production grew 74%, from an average of 1.0 million b/d in 2012 to 1.7 million b/d in the 10-month period from January to October 2018. During the same period, ethane consumed in the United States increased from 0.9 million to 1.5 million b/d, primarily because of new sources of demand and new infrastructure that allows ethane to reach consumers. The U.S. petrochemical industry, responding to greater feedstock availability and consequently lower prices of ethane on the domestic market, added capacity at existing plants and built new petrochemical steam crackers, resulting in an estimated $200 billion dollars of new investment across the country.

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