U.S. LPG Entrenched as India's Propane Supply Source

(November 11, 2019) — U.S. LPG is being shipped to India this month, establishing the country as a regular supplier to Asia’s second-largest importer. Stepped up flows commenced in April 2019 and accelerated after traders widened their sources to meet spot or term commitments after the September attacks on Saudi Arabia’s oil facilities disrupted supply, market sources tell S&P Global Platts.

In contrast, as trade tensions persist, China continues to diversify away from U.S. LPG, instead taking more from the North Sea, traders report. Up to five very large gas carriers (VLGCs) from the U.S. and North Sea are reported to be on their way to India and China. Among the buyers are state-run Bharat Petroleum Corp. Ltd. and Indian Oil Corp.

“Anything is possible. Indian buyers have done spot tenders on a CFR [cost and freight] basis and it’s up to the sellers to source the cargos from the Arabian Gulf, the U.S., or anywhere else,” one source said. Among the traders said to be moving western cargos to India are Equinor and Trafigura, who have term contracts with Indian buyers.

Transiting VLGCs include the Crystal Sunrise, which sailed from Houston Oct. 13 and is due to reach Dahej on India’s west coast on Nov. 21, according to S&P Global Platts. The Sakura Gas and Pampero, both carrying U.S. cargos, are heading to India, a western trader said. Pampero is a vessel owned by Avance Gas that is fixed on a spot basis to Equinor, a ship broker said. It was reported to be due in Dahej Nov. 22. The trader added that Equinor is working on bringing one more western cargo to India this month.

The Breeze is bound for China with a North Sea Cargo. Breeze is also an Avance vessel fixed to Equinor on spot business duty. Further, the BW Gemini loaded in Northwest Europe and could head for India, a ship broker said. “Until vessels load and sail, as you know, there is no certainty where they will end up,” noted another broker. “I believe up to September from early this year, India probably has imported from the U.S. about 500,000 metric tons.” Observed was that there are delays at Indian ports, and until Saudi Arabia sorts out its production disruptions, some proposed western LPG shipments will not be finalized.

Some VLGCs were loading more butane that normal, a U.S.-based source said. “Sometimes, instead of loading all propane, they will load one tank of butane, but we have seen some in the past month or so loading up two tanks of butane.” He added that in September and October “we see 25% to 30% of all LPG exported from the U.S. being butane. At the very start of the year it was 15% to 17%, then around 20% during summer.” The source commented that the butane arbitrage to Asia has widened despite rising freight costs on worries about Saudi production constraints, which lifted Asian prices.

VLGC moves to North America and Europe for long journeys to Asia have boosted global freight, with Persian Gulf-to-Japan rates at more than four-year highs at about $81 a metric ton (MT). Houston-to- Japan rates are at the highest in nearly four years at $125/MT. S&P Global Platts assessed CFR Japan pro- pane at $435/MT Oct. 16 after hitting a five-month high of $456/MT on Oct. 11, while CFR Japan butane was assessed at $453/MT after reaching a six-month high of $473/MT on Oct. 11. Since flipping to a premium against propane in early August, butane has been $8/MT and $20/MT above propane, Platts data show.

Bharat Petroleum Corp. Ltd. and Indian Oil Corp. turned to buying evenly split LPG cargos via spot tenders for October and November deliveries after their October-loading Saudi term cargos were delayed or deferred after the attacks. Indian lifters are wait- ing for acceptances of November-lifting nominations before deciding on alternative supply for the year-end.

Industry sources said an incident at Saudi Aramco’s 305,000-bbld SASREF refinery during a turnaround have added to supply uncertainties,
although there were no reports of disruptions as maintenance continues. Sources said even if LPG from the refinery is affected, the volume is small and is mainly targeted for the domestic retail market.

India’s first lifting of U.S. cargos early this year was prompted by pre-election stockpiling in April and May. China’s rising imports of Middle Eastern LPG as the country halted U.S. shipments led to higher costs for Indian buyers, forcing them to seek cheaper alternatives. India traditionally sources about 98% of its LPG from the Middle East, comprising 45% propane and 55% butane, market sources said.

(SOURCE: The Weekly Propane Newsletter, November 11, 2019. Available by subscription)