Purvin & Gertz: world LPG supply headed for surplus

World LPG prices, boosted by high oil and natural gas prices, have pushed up supply but depressed demand in developing markets, according to Craig Whitley of Houston-based consultancy Purvin & Gertz Inc. in opening remarks Mar. 6 to the firm's 20th Annual International LPG Seminar in Houston.

Warren R. True
Chief Technology Editor-LNG/Gas Processing

HOUSTON, Mar. 7 -- World LPG prices, boosted by high oil and natural gas prices, have pushed up supply but depressed demand in developing markets, according to Craig Whitley of Houston-based consultancy Purvin & Gertz Inc. in opening remarks Mar. 6 to the firm's 20th Annual International LPG Seminar in Houston.

Especially in China and India have high prices halted LPG demand that had seen several years of steady growth as those countries' economies have expanded.

On the other hand, higher oil production rates have pushed up LPG production, especially in the Middle East. The region, led by Saudi Arabia, historically leads the world in LPG produced for export. Adding to the growing supply is a spate of new LPG production projects around the world, including many associated with new LNG production.

In 3 years' time, said Whitley, world LPG trade has moved from being demand-driven to supply-driven, building toward a global surplus and beginning to affect "price relationships."

Mideast charge
Global LPG production during 2006-12 will rise to 273 million tonnes from 227 million tonnes last year. This growth in fact will exceed growth by all other petroleum supplies, said Whitley.

Middle East LPG production—rising the fastest—will surpass North American production about 2010, taking over as world leader. North American production in that period will remain flat.

Middle East production, according to Whitley, will expand by more than 60% through 2016, as oil production continues strong and the region ensures ample feedstock for rapidly growing petrochemical capacity.

Following relatively flat growth in the 1990s, Middle East production expanded by 18% during 2003-06, increasing by 6.6 million tonnes/year.

With projects virtually all over the Arabian Gulf, especially Saudi Arabia, the UAE, Qatar, and Iran, regional production will grown by 6.3%/year to reach 62 million tonnes/year by 2012, said Whitley.

Asian push
Demand has been especially strong in developing nations of Asia, primarily China and India, but Middle Eastern petchem demand has also begun to attract larger volumes, he said.

Sometime shortly after 2000, Asia surpassed North America as the world's leading consuming center, and in 2006 reached 66.5 million tonnes in demand, compared with North America's 61.8 million tonnes.

With rapid expansion in the Middle East's petchem sector, LPG demand growth there is also being driven up by continued growth in the residential and commercial sector.

Demand in the developed world, primarily Europe and North America, has been relatively flat. Both regions' petchem industries remain markets for price-sensitive supplies of LPG.

Worldwide, residential and commercial markets continue to dominate LPG demand and will reach close to 150 million tonnes in 2012.

Contact Warren R. True at warrent@ogjonline.com.

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