As ethylene production increases, storage capacity becomes a must

July 24, 2018 (BIC Magazine) – As the United States expects to add 5.2 million tons of production capacity of natural gas-derived chemicals, including ethylene, propylene and methanol, producers along the Gulf Coast are responding by investing billions of dollars in new ethane crackers. These crackers, which process ethane, the natural gas liquid that is the feedstock of choice for petrochemicals, also produce ethylene, the building block of most plastics.

According to IHS Markit, domestic ethane production is set to increase nearly 60 percent to 2 million barrels a day by 2021, up from 1.26 million barrels a day in 2016. Furthermore, by next year, crackers under construction will boost ethane consumption to 1.6 million barrels a day, up more than 30 percent from 1.2 million barrels, reports the U.S. Department of Energy.

As a result, Caliche Development Partners has developed a salt dome storage cavern facility, Caliche Coastal, atop Spindletop Dome in Beaumont, Texas. Caliche Coastal is permitted for a total of 32 million barrels of hydrocarbon storage. The first storage cavern, which is planned to begin ethylene service in Q3 2018, has a storage capacity of 600 million pounds and total deliverability of 600,000 pounds per hour. With this cavern, Caliche intends to provide additional market liquidity for Gulf Coast ethylene market participants. Caliche has recently announced the development of a second five million barrel ethane storage cavern with up to 120,000 barrels per day of deliverability, as well as a 12-mile ethane header mirroring the path of Caliche’s existing ethylene system.

In a recent interview with the Houston Business Journal, Caliche CEO Dave Marchese explained that his team and its sponsor, Energy Spectrum Capital LP, saw a need for storage capacity along the Gulf Coast for the ethane expansion.

“We didn’t believe there was enough storage capacity to support those crackers on either side,” Marchese said. “We saw an opening in the market for an independent storage provider to come in.”

Caliche, which has already executed a long-term ethylene storage services agreement with a customer for its first cavern, plans to expand Caliche Coastal that is permitted for an additional seven storage caverns, with a maximum total permitted capacity of 32 million barrels of NGL or petrochemical storage.

The additional caverns will come on line based on market demand, commented Dale Corbello, senior vice president of operations, Caliche, to BIC Magazine in a recent video interview.

“The ethylene market is growing, especially along the Gulf Coast, as well as the export market, too. Our location, close to the coast and near Mont Belvieu and Port Arthur, offers us a unique place to be.”

To hear more about Caliche and its storage cavern, please watch the video.