Friday, December 15, 2017
(December 15, 2017) — Global trade of LPG, and more specifically propane, will change significantly over the next four years due to a supply surge, an export infrastructure buildout in North America, a growing surplus in the Middle East, and growing demand in Asia, forecasts ESAI Energy. The consultancy maintains that a snapshot of U.S. LPG exports by destination highlights that, until now, increased exports have owed predominantly to Asia, especially China. However, it argues in a new analysis that the era of easy growth for U.S. exports to Asia will come to an end.
In the period to 2020, ESAI predicts that Asia’s LPG deficit will increase more than North America’s surplus export capacity. In addition, over the forecast timeframe greater plant LPG supply in Saudi Arabia and Iran and higher refinery LPG supply will cause the Middle East’s surplus to increase as well.
Further, the end is in sight for the run on global LPG stocks. In 2018, the geographically wide-spread growth of LPG production from fractionation will gradually begin to pull the market out of deficit. Year-on-year declines in global stocks have continued into the fourth quarter of this year, driving up propane and butane prices relative to naphtha. These price shifts have priced some petrochemical demand for LPG, including propane use for propane dehydro-genation (PDH) units, out of the market.
ESAI Energy sees growth of LPG supply from fractionation accelerating, bringing supply and demand back into alignment. Iran’s South Pars, Qatar’s Barzan, and Australia’s LNG projects will contribute to growth next year. In 2017, global supply from fractionation increased by only 60,000 bbld. Supported by widespread growth outside North America, supply from fractionation will grow 300,000 bbld next year. As supply growth accelerates, bullish propane and butane prices will tame petrochemical demand. According to ESAI Energy’s global LPG balance, the year-on-year declines in global LPG inventories will slow or come to a halt by the end of 2018.
“Outside North America there have been no bright spots for LPG supply growth in 2017,” explains Andrew Reed of ESAI Energy. “Even South Pars, the one place outside North America where we anticipated new supply, failed to deliver. At the end of 2017 and in early 2018, new supply from South Pars and other projects will begin to have an impact. Between continued growth in North America and renewed growth elsewhere, the market will gradually rebalance.”
(SOURCE: The Weekly Propane Newsletter, December 18, 2017)
In the period to 2020, ESAI predicts that Asia’s LPG deficit will increase more than North America’s surplus export capacity. In addition, over the forecast timeframe greater plant LPG supply in Saudi Arabia and Iran and higher refinery LPG supply will cause the Middle East’s surplus to increase as well.
Further, the end is in sight for the run on global LPG stocks. In 2018, the geographically wide-spread growth of LPG production from fractionation will gradually begin to pull the market out of deficit. Year-on-year declines in global stocks have continued into the fourth quarter of this year, driving up propane and butane prices relative to naphtha. These price shifts have priced some petrochemical demand for LPG, including propane use for propane dehydro-genation (PDH) units, out of the market.
ESAI Energy sees growth of LPG supply from fractionation accelerating, bringing supply and demand back into alignment. Iran’s South Pars, Qatar’s Barzan, and Australia’s LNG projects will contribute to growth next year. In 2017, global supply from fractionation increased by only 60,000 bbld. Supported by widespread growth outside North America, supply from fractionation will grow 300,000 bbld next year. As supply growth accelerates, bullish propane and butane prices will tame petrochemical demand. According to ESAI Energy’s global LPG balance, the year-on-year declines in global LPG inventories will slow or come to a halt by the end of 2018.
“Outside North America there have been no bright spots for LPG supply growth in 2017,” explains Andrew Reed of ESAI Energy. “Even South Pars, the one place outside North America where we anticipated new supply, failed to deliver. At the end of 2017 and in early 2018, new supply from South Pars and other projects will begin to have an impact. Between continued growth in North America and renewed growth elsewhere, the market will gradually rebalance.”
(SOURCE: The Weekly Propane Newsletter, December 18, 2017)
