In late 2025, Energy Transfer’s ongoing expansion at its Marcus Hook NGL export terminal is becoming increasingly relevant for Appalachian gas producers. The initial optimization phase, announced in April 2024, is designed to boost ethane refrigeration and storage capacity, with the ultimate goal of increasing exports from the region. The project is a significant development that includes constructing a 900,000 Bbls refrigerated ethane storage tank and approximately 20,000 Bbls/d of incremental ethane chilling capacity, which could reshape the market dynamics for Appalachian ethane.

This expansion is expected to spark competition among existing pipeline operators for long-term contracts and among buyers for future sales. It could also open up new global markets, intensifying the search for competitively priced ethane within the Appalachian basin.

The State of Appalachian Ethane in 2025

The economics of producing NGL-rich gas in the Appalachian basin continue to favor it over dry gas, a trend that has held strong for most of the last decade. This has driven a significant increase in wet gas production, which by the end of 2Q 2025 accounted for about 28% of the basin’s total gas output. With ethane making up a large portion of the NGL barrel, this has created a substantial supply of potential ethane.

Appalachia’s rising wet gas production has led to an expanding supply of potential ethane. Ethane potential refers to the maximum volume of ethane that can be extracted from the gas stream, considering the technical limits of each processing plant. By the end of 1Q  2025, the region’s ethane potential reached approximately 730 thousand barrels per day (MBPD).

However, only 52% of this potential was actually extracted. This extracted ethane either had to be recovered to meet specific gas quality standards and contractual commitments (“must-recover”) or was extracted at the discretion of operators to fulfill sales obligations (“discretionary extraction”). The remaining 48% of the potential ethane was not recovered and was left in the natural gas stream.

Since 2012, a practice known as ethane rejection has been a key way for producers to monetize ethane. This involves selling the ethane based on its heating value (BTU), and it became common when the region lacked sufficient pipeline capacity or market access. There are, however, strict limits on how much ethane can be rejected due to pipeline quality specifications. Without strong price signals for ethane, it’s expected that producers will continue to maximize rejection. Data suggests there is still room for more rejection, meaning a significant amount of ethane that is currently considered “must-recover” or “distressed” will likely remain unavailable to potential buyers.

The Marcus Hook Expansion and Market Competition

As of mid 2025, Appalachian ethane has four primary destinations: pipelines to Canada (Mariner West and Utopia), the ATEX pipeline to the U.S. Gulf Coast, the Mariner East 2X pipeline to Marcus Hook for export, and the Falcon pipeline to the Shell cracker in Pennsylvania.

The Shell cracker has faced operational challenges and reports as of mid-2025 suggest it is still working to reach full utilization. If the cracker eventually reaches full capacity, it could pull ethane away from other pipelines like ATEX, further affecting pipeline utilization.

Historically, ethane netbacks on the ATEX pipeline have often been less favorable for producers compared to rejection economics. The original contracts for the ATEX pipeline are expected to expire around 2027-2028, which is when Energy Transfer’s Marcus Hook expansion is projected to come online. This timing is critical. As producers begin to weigh their options for new contracts, the Marcus Hook expansion could present a compelling alternative to shipping ethane to the Gulf Coast.

This sets up a fascinating commercial dynamic. If the Marcus Hook project can offer more lucrative netbacks, it could put pressure on Enterprise to adjust tariffs on the ATEX pipeline to stay competitive. The outcome of this competition will have a major impact on ethane flow patterns and market pricing for years to come.

-Kush Thakkar

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Enkon Energy Advisors is a boutique consulting firm specializing in oil & gas, and energy transition since 2012. We bring deep expertise in a range of markets including natural gas, NGLs, Oil, LNG, and Energy Transition where we provide commercial and market advisory to investors, energy companies, and project developers with consulting services, subscription reports, and analytics, with the goal of delivering commercially actionable outcomes to our client.