Increased volumes and prices lie ahead for liquefied petroleum gas traded on world markets, Poten & Partners Inc. forecasts.
The New York company predicts world trade will increase to 25 million tons in 1995 and 28 million tons in 2000 from 20.4 million tons in 1989.
With that growth will come sizable increases in LPG prices.
"This growth reflects the change in status of LPG from a specialty product to a fuel and feedstock commodity with mature traditional market outlets," the consulting firm said.
Poten's forecast assumes moderate economic growth through 2000, with a short term drop in crude prices from current levels in the event of a speedy resolution of the Middle East crisis. Oil prices will begin to increase in real terms in 1992-93, rising to $39/bbl in current dollars for Arab light by 2000, the forecast assumes.
The Far East and Latin America, traditional exporting areas, will become net importers of about 1 million tons/year by 1993, and their requirements will keep rising.
IMPORT MARKETS
By 2000, the Poten report says, Japan's LPG imports will rise to 17.8 million tons/year, but the share of those imports from the Middle East is expected to remain stable. Imports by chemical and utility companies could grow faster if more working storage capacity is made available at marine terminals.
U.S. net seaborne LPG imports will increase to 6 million tons/year in the late 1990s from 2 million tons in 1989. The rising volume will reflect added world supplies available for imports projected in the mid-1990s, along with declining U.S. production.
Following 2 years of decreases, Europe's long haul imports will rise to 4.1 million tons/year by 2000. As with the U.S., petrochemical plants in Europe will absorb most of the increased LPG imports, if propane and butane are competitive with naphtha on a cif basis.
The link of Saudi LPG to crude prices ensures that world LPG is competitive with other fuels and feedstocks on an fob basis. Any remaining LPG can be sold on a cif delivered basis to price sensitive markets.
MIDDLE EAST EXPORTS
To keep its supply sources diverse, the Poten report says, Japan will limit its imports of Middle East LPG to 75% of the country's total volume and increase Far East supplies.
Algeria also may hike its exports to Japan in the mid-1990s. But Europe, with growing volumes from the North Sea and Algeria, probably will not greatly boost long haul imports from the Middle East, Poten predicts.
New Middle East supplies will have to be priced so they can be absorbed in various price sensitive markets, meaning producers will become more flexible toward buyers. Producers also will expand their involvement in shipping and in LPG consuming projects in their own countries.
Buyers will tend to favor shorter term and more flexible contracts, with the preferred term 3-5 years. Traders will find it more difficult to compete and will focus on shipping.
Japan will continue to offer the highest net return to Middle East propane sellers. But Japan's LPG imports growth will be moderate.
BUTANE RETURNS
By 1993, net returns on Middle East butane sales to the U.S. are expected to exceed netbacks from Japan and Europe.
Returns for Algerian and North Sea butane will remain greatest on sales to Northwest Europe.
Butane sales from Algeria to the U.S. Gulf Coast, however, will offer netbacks almost as high as those to Europe.
LPG sales to Japan will offer the highest returns for Far East exporters. Exports of Australian butane to the U.S., however, will be a temporary exception in the mid-1990s.
Mexico and Venezuela will reap the greatest net return on exports to the U.S.
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