By ADRIENNE BLUME
DALLAS -- At the GPA's Tuesday morning NGL business forum,
analyst Marissa Anderson of Bentek Energy spoke to an
overflowing room about the long-term outlook for global and
US liquefied petroleum gas (LPG)i.e., propane, butane
and isobutenemarkets and exports.
She explained how impressive growth over the last few years
in natural gas liquids (NGL) production from US gas plants
and refineries has resulted in total US NGL supply growth of
22% between 2010 and the present, from 2 million barrels per
day (MMbpd) to 2.6 MMbpd. LPG makes up approximately 50% of
the US NGL supply. Since 2010, LPG supply from US gas plants
has increased by 36% to 1.26 MMbpd in 2013.
US transitions to net LPG exporter. These
significant increases in domestic supply mean that US imports
of LPGsuch as propane sourced from Canadahave
been declining, and, as of 2011, the US has become a net
exporter of LPG. A near-doubling of propane exports occurred
from 2012 to 2013, and butane is being sent to Canada for use
in oil sands operations. Bentek expects this paradigm shift
to continue over the long term.
A significant shift in the US propane market has been seen
over the past few months, Ms. Anderson explained.
Weather-related demand and infrastructure expansion
s pushed up US propane
prices to record levels in January 2014 at Conway of
$4.35/gal, or $180/bbl of crude oil equivalent.
This spike in US prices contributed to the collapse of the
price spread between US and global LPG, and six export
cargoes from the US Gulf Coast (about 3 MMbbl of product)
were canceled. Imports came from overseas to the US
Northeast, helping the market to correct itself.
Long-term US LPG outlook is robust. Over the
long term, the US LPG market is still structurally long and
requires exports. Bentek anticipates US LPG supply from gas
plants to reach 2 MMbpd by 2019.
There will be NGL growth in several key areas, namely the
Marcellus/Utica, Williston, Permian and Eagle Ford regions.
LPG supply growth of 800 thousand barrels per day (Mbpd) from
the Marcellus/Utica shale is possible by 2019, and growth of
1 MMbpd from the Eagle Ford play is likely by the same year.
At least 77 project
s to build or expand LPG
processing capacity are in the works, Ms. Anderson said.
These projects will bring online 13 billion cubic feet per
day (Bcfd) of additional capacity in US by the end of 2015.
Also, approximately 30 project
s to build or expand
fractionation capacity, especially along the Gulf Coast and
in the Northeast, are planned or in progress. US
fractionation capacity is presently at approximately 4 MMbpd
and is expected to expand by 40% by the end of 2015, to 5.7
US propane exports to grow.
approximately five on-purpose propane dehydrogenation (PDH)
to be announced for the
US, increasing propane demand from 2015 to 2016 and
temporarily taking some product away from export capacity.
After 2016, propane exports will pick up rapidly as new
capacity enters the market. Butane is oversupplied in the US,
so export availability for this NGL will also continue to
The total volume of LPG available to export by 2019 is
forecast to rise to over 800 Mbpd as announced capacity comes
online. The majority of this capacity will be located on the
Gulf Coast, which is the heart of US petrochemical
production and the
location of most of the US' existing LPG export terminals.
However, some ethane exports will be seen from the East
Coast, and butane may be exported from Virginia. On the
whole, however, the majority of LPG production will be sent
from production regions around the US to the Gulf Coast for
Global LPG outlook brightened by US exports.
The US' main competitors for LPG exports are Qatar, the UAE,
Saudi Arabia and Algeria. The global LPG market is roughly
8.5 MMbpd, with global maritime trade pegged at approximately
2 MMbpd, Ms. Anderson said.
LPG from the US can be exported to Europe
in 15 days, with a freight
cost of around 15 cents/gallon (gal). LPG prices in Europe
are at approximately
$1.40/gal and US prices are around $1.10/gal at present, so
an arbitrage opportunity exists.
To export LPG from the US to Japan, carriers must travel 40
days, with a freight cost of 40 cents/gal. However, the
Panama Canal expansion
will cut this time to 25
days and reduce freight costs.
However, the majority of US LPG exports are destined for
Latin America. In fact, more than half of the increase in
exports from 2012 to 2013 went to South America, particularly
Brazil. US exports of LPG to Asia and Western Europe
are also growing.
Growth opportunities expand worldwide.
Japan, a large importer of LPG, is looking to diversify away
from Middle East exports to feed its growing residential,
commercial and petrochemical
Korea's demand for LPG is also growing in these three
sectors. Meanwhile, in emerging economies such as India
, China, Brazil and
Indonesia, increased imports are expected to meet rapidly
rising demand for residential and commercial use.
An opportunity for incremental petrochemical
demand also exists
in Asia. China is planning 17 PDH project
s, which will result in 200
Mbpd of incremental propane demand by 2015.
From a pricing standpoint, Bentek anticipates continued
upward pressure on US LPG prices as they reconnect with
international prices over the next few years. Domestically,
US LPG production will continue to surpass domestic demand.
LPG supply from US gas plants is expected to grow by 60% to 2
MMbpd as new infrastructure comes online, while US demand
will remain fairly flat. This scenario will require the
export of 850 Mbpd of LPG to balance the market.
Of course, Ms. Anderson noted, these forecast trends will
largely depend on the global market's capacity to absorb
these additional exports. However, recent market trends
suggest that US LPG export capacity and global LPG demand
growth will continue on an upward path.