[Source/Observer Network, Wang Yi] According to reports by Bloomberg of the United States and Reuters of the United Kingdom, the US government notified energy companies last month to apply for licenses for exporting ethane to China, which must be approved before exportation. However, on June 4th, an American company issued a statement saying that the Ministry of Commerce had rejected their export request.
Foreign media believe that amid widespread trade frictions between the two countries, the US move to restrict the sale of ethane to China may be a response to China's rare earth export control measures, but it also brings adverse effects to the US ethane export industry. Analysts told The Wall Street Journal that there is no military use for the ethane purchased by China as claimed by the US government. The US export ban not only affects the interests of US enterprises but may also end a successful case of US energy exports.
Enterprise Products Partners LP's natural gas processing plant, US media
In a statement, Enterprise Products Partners LP (Enterprise), an American energy service company, said that the Bureau of Industry and Security (BIS) of the US Department of Commerce issued a notice on June 3rd rejecting the urgent authorization requests for three batches totaling 2.2 million barrels of ethane goods from the company.
According to the notice, starting from the date of issuance, Enterprise has 20 days to present rebuttals to BIS, and BIS will make a decision within 45 days. If Enterprise does not receive any further notices by then, it means the rebuttal is invalid, and the company will not be able to export these goods to China.
The company's statement also mentioned that on May 23rd, BIS informed a group of American companies that new licensing requirements would be implemented for exporting "ethane and butane with a purity of 95% or higher" to China, requiring special federal approval before exportation due to potential "military purposes" and "unacceptable risks." However, BIS subsequently withdrew the new licensing requirement for butane.
According to Reuters, another American energy company, Energy Transfer LP, also stated on June 3rd that they received notification from the US government requiring them to obtain an export license for ethane, stating that exporters must apply for emergency authorization to export to China.
Samantha Hartke, head of Americas market analysis at cargo tracking and analytics company Vortexa, said that the rejection of urgent applications raises questions about whether this is just a short-term interruption. She added that last-minute cargo adjustments could have significant impacts, increasing domestic storage needs as well.
Reuters reported that Energy Transfer LP and Enterprise are among the largest ethane exporters in the United States, and they are assessing the impact of US export permits on their businesses. Energy Transfer LP expressed its intention to apply for a permit, and if authorization cannot be obtained, their export business may be affected.
Ethane, one of the main components of natural gas, can be used to produce ethylene, which is a major raw material for plastics. Thanks to technological breakthroughs brought by the shale gas revolution, ethane has become a major US export product in recent years. Data from the US Energy Information Administration (EIA) shows that the average daily ethane export volume in the US was 492,000 barrels in 2024, with approximately 227,000 barrels per day exported to China, accounting for 46%.
Major destinations for US ethane exports in 2024, chart by Reuters
Reuters analysis states that China is a major buyer of US ethane, and US oil and gas producers need China to purchase supplies that the domestic market cannot digest. This move by BIS will force oil and gas producers to find alternative buyers, increasing their costs. Fortune Magazine reported that US producers cannot easily resell these ethanes to other countries, and US ethane exports may experience a temporary halt.
"BIS's decision may disrupt the US ethane market and disturb global flows," said Kristen Holmquist, managing director of RBN Energy's analysis division. The specific requirements of the US new regulations are currently unclear, and in the short term, it may cause some chaos in the export market. However, if permits are not granted or granted slowly, it may have lasting impacts on the industry.
Analysts told The Wall Street Journal that China's large-scale purchases of energy do not appear to have any other obvious purpose. The US export ban not only affects the interests of US enterprises but may also end a successful case of US energy exports.
China's reliance on US ethane is indeed high, but in the face of the US' increasingly aggressive stance in trade, China has already laid out countermeasures.
China is in contact with Middle Eastern countries to explore diversified import channels. In terms of domestic alternatives, the Yanting Natural Gas Processing Plant of China National Petroleum Corporation Southwest Oil and Gas Field Company is preparing for commissioning, which can extract ethane from natural gas. Although current production is limited, it is an important step towards domestic substitution.
On April 9th, the State Council Information Office of China released a white paper titled "China's Position on Certain Issues in Sino-US Economic and Trade Relations," systematically explaining China's core concerns and policy positions regarding Sino-US economic and trade frictions. The white paper stated that in recent years, the US has generalized national security, abused long-arm jurisdiction, continuously politicized, weaponized, and toolized export controls, imposed sanctions and suppression on industries and enterprises of other countries, seriously obstructed normal economic and trade exchanges worldwide, and disrupted the stability of the global industrial chain and supply chain. "The US measures harm others without benefiting itself."
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