Sunoco Logistics eyes market gains from Northeast pipeline, terminal expansions

Controlling logistics costs and transit times will be key to the competitiveness of U.S. producers of NGLs, petroleum products, olefins and polyolefins, especially since their products are manufactured to similar specifications, Joseph Colella, senior vice president Business Development at Sunoco Logistics, said during the Northeast U.S. & Canada Petrochemical conference on June 28.

Sunoco is expanding its pipeline network and its Marcus Hook Industrial Complex in Pennsylvania to capture the growing market opportunities for both exports and domestic polyolefin demand in the U.S. Northeast and Mid-Atlantic, he said.

Getting more NGL storage and other infrastructure built in the region is critical as shale development continues to unfold in the Appalachian region and since Royal Dutch Shell decided to build an ethane cracker and derivatives complex in Western Pennsylvania. 

In March, Sunoco Logistics launched the first export (27,500 cubic meters) shipment of ethane from the Marcus Hook terminal to INEOS’s complex in Rafnes, Norway. Shipments are also scheduled to begin to INEOS’s facility in Scotland.

Market outlook

U.S. Gulf Coast LPG exports are hitting all-time records and propane exports are supporting higher propane prices, as well as driving up ethane and butane prices, despite the plunge in the price of oil, Colella said.

Over the next 2-3 years, with the completion of the first wave of new ethane-only crackers and ethane export facilities in North America, the ethane supply-demand balance could tighten significantly, driving prices much higher, according to Colella.

Higher ethane prices would encourage flexible crackers to use more propane at the same time propane dehydrogenation (PDH) demand is increasing and new East Coast propane export capacity is coming online. As a result, far fewer propane barrels would be available for export from Gulf Coast terminals.

At the same time, NGL prices are likely to increase relative to the rest of the hydrocarbon complex, which is good news for feedstock suppliers and mid-stream companies, but will push up feedstock costs for petrochemical producers, Colella said.

Mariner East expansion

Sunoco is expanding its Mariner pipeline network to bring production more competitively to market and help repurpose the Marcus Hook Industrial Complex as the Northeast hub for distribution of NGLs to commercial markets domestically and globally.

In 2015, Sunoco began propane deliveries and in March this year it started ethane deliveries to Marcus Hook for export via the 70,000 b/d Mariner East 1 pipeline, which is designed to carry ethane and propane from Houston, Pennsylvania to the Marcus Hook complex along the Delaware river south of Philadelphia.

Sunoco is also currently building the Mariner East 2 pipeline, designed for 275,000 b/d of initial propane and butane capacity expandable to up to 400,000 b/d. When that pipeline is commissioned in the second quarter of 2017, the propane that is currently flowing on the Mariner East 1 will be rerouted to Mariner East 2.

The Mariner East lines aim to lower the capital costs and shorten the transit times for shippers compared to the U.S. Gulf Coast, Colella said.

As part of the project, Sunoco is also gauging interest and demand for a Mariner East 2 Expansion project - a third ethane-only pipeline that will use the existing Mariner East 1 line from Houston, Pennsylvania to Delmont, add a new line from Delmont to Montello and use existing infrastructure from Montello to Marcus Hook.

Sunoco expects that the Mariner East 1, Mariner East 2 and Mariner East 2 Expansion lines could have a combined pipeline capacity of up to 745,000 b/d, Colella said.

Marcus Hook expansion

As part of its strategy to offer an efficient export and processing option in the Northeast, Sunoco has also been repurposing Marcus Hook as an NGL hub to receive Marcellus/Utica shale NGLs for distribution and further processing to access international, local and regional markets.

The 800-acre Marcus Hook facility has 900,000 barrels of overground NGL storage – 300,000 of refrigerated ethane and 600,000 of refrigerated propane – but when the Mariner East 2 is completed, that would increase to 5 million barrels of combined pressurized and refrigerated storage, Colella said.

The complex has four docks with deep-water draft accommodating fully laden Very Large Gas Carriers (VLGCs), as well as a 30,000 b/d rail facility. Sunoco is considering building a large unit trained facility to supplement supplies from the pipe, for example by railing products from Canada for export. This will give access to the sea to producers that are not on the Mariner system.

Sunoco is also considering a potential PDH plant project at Marcus Hook to meet the 1 mtpa of polypropylene demand within a 600-mile radius of Philadelphia, Colella said. A PDH plant at Marcus Hook combined with Shell’s Pennsylvania ethane project could satisfy the Northeast region’s demand for polyolefins, thus limiting polyolefin imports from the Gulf Coast, he added.

Moreover, Colella expects that the expanded Panama Canal will boost the East Coast's competitive advantage for NGLs, crude and derivative products, and containerized freight as larger ships start transiting through the Panama to discharge or load on the East Coast rather than discharge on the West Coast, from where the product is transported east via rail.

The VLGC market is overbuilt, putting downward pressure on freight rates and encouraging exports. VLGC (550 MBBLS) exports from Marcus Hook to Europe are currently 4.3 cents/gallon compared to 10.5 cents/gallon on Semi Ref ships (140 MBBLS).

Another advantage will be the ability to load split cargos – for example, propane and butane – on the same vessel, which enhances the economics of butane significantly, Colella said.