INEOS to buy US NGLs from Rex Energy to feed European crackers

INEOS and Rex Energy have reached a new natural gas liquids (NGL) sale and purchase agreement covering ethane, propane and butane, the companies announced on Monday.

The NGLs will be transported through the Mariner East infrastructure and exported by sea to INEOS' European cracker complexes.

The transportation of ethane supplies commenced in April 2016, while propane and butane supplies will start with the completion of Mariner East 2 pipeline in 2017.

"This contract adds to our supply portfolio providing for long-term sourcing of advantageously priced US natural gas liquids for our European crackers.  We are excited about our new business relationship with Rex Energy and look forward to future opportunities between our companies," said David Thompson, CEO of INEOS Trading and Shipping.

"We are excited to begin this new relationship with INEOS," added Tom Stabley, CEO of Rex Energy. "With the new sales agreement, we will now have three different outlets to deliver our natural gas liquids volumes, both domestic and international. The new outlets will enhance the economics of our wells in the Butler Operated Area and our overall resource potential."

On March 23, INEOS confirmed that its vessel, the INEOS Intrepid, had arrived at its petrochemicals plant at Rafnes in Norway, carrying 27.500-m3 of US shale gas ethane. This was the very first time that ethane from US shale gas had ever been exported from the US, and the first time it has been imported into Europe. 

INEOS says this plan gives the European continent the chance to benefit from US shale gas economics, which has helped to revitalize manufacturing in the US.

The project has been complex. It involves the design and long-term charter of all eight Dragon class ships (which collectively create a virtual pipeline across the Atlantic), connection of the new 300-mile Mariner East pipeline from the Marcellus shale in Western Pennsylvania to the Marcus Hook deepwater terminal near Philadelphia, and the creation of new export facilities and storage tanks.

In total, INEOS has invested about $2 billion in its plans to bring US shale gas to Europe.

"Shale gas economics have revitalized US manufacturing, and it has the potential to do the same for European manufacturing," said Jim Ratcliffe, chairman and founder of INEOS.

INEOS says it is the first company to establish seaborne intercontinental ethane transportation, having earlier announced the completion of agreements with Sunoco Logistics for capacity in the Mariner East pipeline and terminal system, with Range Resources for the purchase of ethane, with Evergas for the construction of new customized vessels and with TGE Engineering for the construction of a new tank at its Rafnes cracker. 

INEOS is currently constructing an ethane terminal in Grangemouth, Scotland.