The lingering oversupply of ethane produced from U.S. unconventional shales may right itself—but it will take a few years and strong exports.

A new report by Tudor, Pickering, Holt & Co. projects that ethane supply and demand will come into balance in the second-half of 2020 as exports to Canada and the European Union surge and newbuild domestic cracking capacity, some of it already under construction, comes online.

“Production continues to outpace demand from project newbuilds in near-term with market equilibrium pushed to the end of decade,” the report said. “Foreign petchems are optimizing to allow for use of U.S.-advantaged ethane to compete with higher margins experienced by domestic industry.”

The report projected the ethane oversupply peak will occur in early 2016 before starting a slow decline as new demand comes on. It added ethane supply from all sources will reach 1 million barrels per day (bbl/d) during 2020, balancing total domestic and foreign demand that will equal or slightly exceed that volume at that time.

The low price of ethane, currently hovering well below 30 cents per gallon, has placed foreign petrochemical firms relying on more costly, crude oil-based naphtha, at a significant price disadvantage. But high plant conversion costs create a chicken-or-the-egg problem: Spend the serious money required to convert cracking capacity and enjoy cheaper feedstocks, or save that pricey investment and stick with higher-cost naphtha.

NOVA Chemicals Corp. was the first foreign buyer of ethane coming out of the Marcellus and Utica unconventional plays in the Northeast. It converted its Sarnia, Ontario, ethylene plant to ethane feedstock in late 2013. Vantage Pipeline and Sunoco Logistics’ Mariner West Pipeline supply the complex on Lake Huron.

Sunoco Logistics Partners’ Mariner East system is nearing completion and soon will ship up to 70,000 bbl/d per day of propane and ethane from a new Marcus Hook, Pa., terminal to Europe and other foreign markets. The line connects Marcus Hook with MarkWest Energy Partners’ Houston, Pa., gas processing plant and NGL hub outside Pittsburgh.

Increasingly, it looks like European ethylene crackers are opting to switch.

Saudi Basic Industries Corp. (SABIC) announced earlier this month it will modify its Teesside, England, ethylene cracker. Completion of the plant modification is expected in 2016. Initial work on a new cryogenic storage tank has started.

Yousef Al-Benyan, SABIC’s executive vice president-chemicals told British media, “'This project reflects SABIC’s strong determination to take advantage of cutting-edge technology in creating new sources of competitive feedstock and energy that will allow the company to continue to build a sustainable business and deliver on its long-term vision. Our long-term focus is to have a business that stays profitable not only in the European region but across our global markets.”

The announcement brought cheers locally following concerns that the plant—a keystone of Britain’s sprawling refining and petrochemical complex on the North Sea coast—might close. The plant employs 1,000 at Teesside and supports an estimated 4,000 related jobs.

Mike Ducker, SABIC’s Teesside site director, told local media that the project will “secure a sustainable, competitive future for SABIC on Teesside for many, many years. It is great news for Teesside because it provides SABIC with the basis for a competitive, long-term operation of our Teesside assets.

“We had been fighting against the tide for some years, during which we’ve undergone a series of restructurings,” he added “There does come a time when you need to do something big and transformational. This is it. Clearly we have been through a difficult environment for many years but this transforms that situation and without it we would have faced an uncertain future.”

Earlier, INEOS announced plans to buy U.S.-produced ethane to supply its cracker at Rafnes, Norway, southwest of Oslo. Storage facilities are scheduled for completion in the first-half of 2015. In Britain, INEOS recently signed a long-term contract with CONSOL Energy to supply its Grangemouth, Scotland, cracker. Some £230 million ($381.5 million) in modifications will be financed through a British government loan guarantee. Ethane-based cracking at Grangemouth could start up in 2016.

New midstream infrastructure to move ethane to customers—and new cracking capacity to use it—has been brisk. ExxonMobil is among the plastics producers investing in new, ethane-based cracking capacity. Steve Pryor, president of ExxonMobil Chemical Co., recently observed that the shale plays have provided U.S. producers a double benefit.

“Shale development has provided U.S. chemical producers a double benefit as an energy source and as a key raw material to make plastics and other essential products, creating jobs and economic activity across the value chain,” Pryor said.