Authors: Arathy Somasekhar and Georgina McCartney
HOUSTON (Reuters) - Energy Transfer said on Wednesday it received a letter from the U.S. government asking for the export of Eseneen to China, adding that U.S. export terminal operators will submit an emergency authorization to continue exports.
Amid a wider trade struggle between the United States and China, including Beijing’s containment of rare earth exports, a move that has added pressure to U.S. ethane exports.
It forces producers of natural gas by-products to seek alternative buyers and raise costs for Sinopec, which rely almost exclusively on U.S. producers for ethane imports, which are used to make plastics and chemicals as well as heating and cooking.
Another U.S. ethane exporter said it received a notice Wednesday that the U.S. Department of Commerce intends to deny its urgent request to export three proposed ethane shipments, totaling about 2.2 million barrels to China, the corporate product partner said.
The company filed an emergency authorization request after receiving a letter requiring a license on May 23. Energy Transfer said it received the letter on June 3.
After-sales trading corporate shares fell 1.2%, while energy transfer stocks fell 2%.
According to the filings of the two companies, letters from the Industry and Security Bureau of the Ministry of Commerce agency said Ethi's exports pose an unacceptable risk of military end use in China. BIS did not immediately respond to requests to comment on both companies.
Samantha Hartke, head of American analysis at Vortexa, said denied urgent business requests would question whether it was just short-term damage.
"Recent modifications or resale of goods may be a greater reliance on domestic storage," she said, adding that short positions in Ethane piled up on Wednesday.
trade war
The United States and China were trapped in a persistent trade war after U.S. President Donald Trump imposed a large amount of tariffs in early April.
The Commerce Department said last week it was reviewing exports to China’s strategic significance, while noting that “in some cases, commerce has suspended existing export licenses or imposed additional licensing requirements when reviewing the review.”
The Chinese Foreign Ministry said last week that such American practices undermine the stability of global supply chains and that Washington is weaponizing technology and trade issues to close and persecute China.
Energy Transfer says it intends to apply for a license, and the business has not commented on its licensing program. These companies are one of the top exporters of ethane in the United States
Ethane exports to China account for about half of the total shale gas exports. Sinopec uses ethane as a feedstock because it is cheaper than naphtha, while U.S. oil and gas producers need China to buy its natural gas liquids when domestic supplies exceed demand.
Energy transfers at marine export terminals that own and operate natural gas liquids, such as ethane, said it is evaluating the scope of transactions involving products that meet the licensing requirements that could affect its exports if a company is unable to obtain an authorization or license.
The company added that it was not possible to determine whether these potential restrictions would have any significant impact on the company's financial condition, operating results and cash flows.
The company said last week that its ethane and butane exports could be harmed by licensing requirements, adding that it is evaluating its procedures and internal controls. Thereafter, the restrictions on butane have been removed.
Enterprise said on Wednesday that there is a maximum of 20 days to respond to notifications about emergency authorization for rejecting exports of goods and any comments or rebuttals.
Unless the government further advises the company before the 45th day after the original notice, the denial will be final.
(Reported by Arathy Somasekhar and Georgina McCartney in Houston; Editors by Liz Hampton, Matthew Lewis and Jamie Freed)