US ethane curbs will make contracting to China harder, Energy Transfer says

Recent US restrictions on ethane exports to China will likely make it more difficult to contract with Chinese companies, even though they have already been lifted, US exporter Energy Transfer said on Wednesday.

The US placed restrictions on shipping ethane - and a wide swathe of other exports - to China in late May and early June after accusing Beijing of slowing shipments of rare earths vital to automakers and other industries.

The restrictions were rescinded last month, but they disrupted flows of ethane and caused significant delays to shipments.

"That, you know, put a little bit of a black eye on us, on our industry, on our country...," Marshall McCrea, co-CEO of Energy Transfer, said in a post-earnings conference call.

The company is one of the top US exporters of ethane, a natural gas liquid.

"We think it's going to be probably a little bit more difficult to contract with Chinese crackers, good or bad, we think that they're probably going to be a little bit more hesitant," McCrea added.

About half of US ethane, which is extracted from shale gas, heads to China where it is run through crackers to produce ethylene, a building block for plastics.

Chinese petrochemical firms use ethane as a feedstock because it is cheaper than naphtha, while US oil and gas producers need China to buy their natural gas liquids as domestic supply exceeds demand.

Rival Enterprise Products Partners also warned last week that the export curbs compromised the US brand for reliable supply and energy security. "These kind of actions rarely hurt the intended target and often backfire hurting our own industry more," said Jim Teague, CEO of Enterprise Products.

Enterprise said at least one non-Chinese company that it was in discussions with about contracting ethane decided to contract naphtha instead.

Energy Transfer reported an 11.5 per cent decline in net income to $1.16 billion, or 32 cents per unit, in the three months ended June 30. Revenue of $19.24 billion came in well below estimates of about $22 billion, according to LSEG data.

(Reporting by Arathy Somasekhar in Houston; Editing by Nia Williams)