Global LPG trade, generally supply-driven in the past and likely to continue to be, is nonetheless seeing sharp changes in its dynamics, according to a report recently compiled by FACTS Global Energy, Honolulu.
The Middle East has been the focus of LPG supply attention (OGJ, Mar. 19, 2012, p. 23). A major LPG supply expansion out of the Middle East was being forecast 5 years ago, creating a potentially large LPG surplus on world markets. This was to be driven by byproduct LPG from giant offshore gas reserves in the region: North field in Qatar, South Pars in Iran, and from new gas and LPG projects in Abu Dhabi and Saudi Arabia.
The report says, however, that that scenario has not in fact occurred. Only Qatar has produced LPG volumes it said it would. For various reasons, others have not.
Now the focus is on the US, where shale gas has "changed the game, for both gas and gas liquids." Thanks to shale gas, the US will become a net exporter of both, the opposite of what had been thought a few years ago. In the case of LPG, terminals on the US Gulf Coast have already converted to exporting from importing LPG.
FGE figures exports from the US gulf reached 3.3 million tons in 2011 and will expand as investments in NGL pipelines, fractionators, and LPG export capacities are completed. FGE projects LPG exports, mainly propane, will double by 2015 and approach 10 million tons or higher by 2020.
Latin America has to date received most of these exports, but larger export volumes will need outlets in Europe and, via the soon-to-be expanded the Panama Canal, Asia.
Asian markets
Asian growth in LPG sales for household use is over in Japan, Korea, and China, says the FGE report. But that's not true elsewhere.
Governments subsidize LPG cylinder prices—in India, Indonesia, Thailand, as well as in Egypt—and these subsidized markets are now the "LPG import growth markets in Asia and the drivers of international LPG trade." They are primarily butane outlets.
Propane arriving from the US gulf could be in oversupply, but the continuing disconnect between US gas prices and Asian gas prices will help the cause of propane exports from the US gulf to Asia.
Shipping
The very large gas carrier (VLGC) fleet has recently been in surplus because of over-ordering, the study says. But now, fleet demand is beginning to catch up with supply. FGE has seen a large improvement over 2010-12 in utilization, to 90% from 82%.
The current newbuilding delivery program may prevent it from improving for a while, but the VLGC balance and market rates should improve by 2015, says the study, as longer-haul LPG exports to Asia from the US gulf increase.
