China Gas Holdings Expected to Import 10 Million Metric Tonnes of LPG

A single company, China Gas Holdings, is expected to import around 10 million metric tonnes of LPG over the next five years, up from the current 2.8 million tonnes annually as the Hong Kong-listed gas operator and service provider seeks to expand into the petrochemical sector, industry sources said recently and as reported by S&P Global Platts.

The group’s LPG sales totaled about 4.030 million metric tonnes, up 9% year on year, according to its 2017-2018 annual report. Of these, 2.8 million tonnes were imported and the balance were sourced from domestic suppliers such as refineries and other importers, the sources said.

The company projected its LPG sales to households to increase to 4.5 million metric tonnes in fiscal year 2018-2019 from 4.030 tonnes in 2017- 2018. This is expected to rise further to 5 million metric tonnes in fiscal year 2019-2020, and to 6 million metric tonnes in 2020-2021, its annual report showed.

To meet this higher demand, the company plans to seal fob (free on board) term contracts with Middle East producers such as Qatar and Kuwait, industry sources said. China Gas was recently awarded Kuwait Petroleum Corp.’s tender, in which it bought a 40,000-metric-tonne cargo comprising 33,000 tonnes of propane and 11,000 tonnes of butane for Sept. 5-6 loading, at a discount of $5-$8 a tonne to the Saudi Aramco Contract prices for propane and butane, fob.

Sources said it would be the first time that China Gas would load a cargo from Kuwait on a fob basis aboard a chartered BW vessel. This signaled a move by the company to load more fob cargos in the future, sources added. China Gas is currently building two very large gas carriers at a Shanghai shipyard that are due for completion in 2019, which will enable it to load additional cargos.

China Gas in January bought, via a term tender from a European trader, 528,000 metric tonnes of mixed refrigerated LPG cargos for delivery between April 1, 2018 and March 31, 2019. The deal was at a premiuim in the low teens to the average of the Saudi Aramco Contract price for propane and butane, and the Far East Index, during the month of delivery, cfr (cost and freight).

The company also hopes to meet incremental demand through imports of LPG from the U.S. in the future, provided the current trade spat between the U.S. and China is resolved soon. It now has no term contracts for U.S. LPG, sources said. China in August announced retaliatory tariffs on an additional $16 billion worth of U.S. imports, including propane, butane, and oil products in a new list of affected goods, the latest escalation in the row between the two countries after the U.S. said it would impose a 25% tariff on an additional $16 billion worth of Chinese imports from Aug. 23.

Chinese importers of U.S. LPG are mainly propane dehydrogenation (PDH) plant operators, who buy mainly via term contracts. China imported 3.54 million metric tonnes of propane and butane from the U.S. in 2017, making up 19% of the nation’s total LPG imports, customs data showed. The 25% tariff will raise the import cost of U.S. LPG by more than $146.38 a metric tonne, according to S&P Global Platts.

One industry source said China Gas is also planning to build at PDH plant in the next two years, heralding the company’s entry into the petrochemical business. He declined to provide further details on its capacity. China now has eight PDH facilities with LPG processing capacity of 5.53 million metric tonnes a year and propylene production capacity of 4.61 million metric tonnes annually, data from domestic information provider JLC shows.

With the addition of new PDH plants, excluding the China Gas project, propylene production capacity is expected to rise to 8.33 million metric tonnes a year by 2022, according to S&P Global Platts Analytics data.

China Gas’s expansion plans include building five more large LPG terminals in the coastal regions in the north, east, and south, sources said. The company currently operates seven large and four small terminals. When asked to comment on the company’s development plans as well as plans to increase imports, a company spokesman said, “As a public company, we can only discuss the public information we have already disclosed to the market. Hence, I am not in a good position to comment on your questions.”

(SOURCE: The

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