Dinh Co LPG Processing Plant, Vietnam
Silent Warrior LPG
Despite the global Liquefied Petroleum Gas (LPG) market being 30% larger than the worldwide Liquefied Natural Gas (LNG) market and despite liquefaction of LPG being simpler than that of LNG, LPG does not quite hog the limelight as its publicity prone cousin LNG does.
Numerous reports conclude that the expanded global production and export of LPG have altered the demand-supply equation in favor of supply and boosted consumption. An expected shale gas revolution in China and the opening of a widened Panama Canal will radically alter the global LPG industry during 2014-20.
Developments in the global LPG sector reflect this optimistic sentiment. Major LPG shipping companies are forging alliances, raising capital, and expanding fleets helped as they are by surging profits and trebled operational cash flows on account of rising time charter rates and spot shipping rates.
Technicalities & Applications
LPG comprises of a mixture of propane (C3H8), butane (C4H10), propene (C3H6), and butene (C4H8). Most commonly, it is a mixture of propane and butane. It contains greater percentage of propane in winter and larger percentage of butane in summer. LNG contains 95% methane (CH4).
Also known as wet gas or natural gas liquids (NGLs), LPG liquefies more easily than LNG thereby eliminating the need for expensive liquefaction facilities. Furthermore, it is conveniently transported in light-pressure containers. And it does so with its inherent merits that are fairly similar to that of LNG viz. green, clean, and efficient.
LPG Ship Design
LPG is produced in:
- Refineries accounted for 41% of global LPG production in 2013. With refineries in Europe shutting down, those in Russia and Asia-Pacific will expand rapidly during 2014-20
- Non-Associated Gas is natural gas not in contact with crude oil in reservoirs. This segment is likely to register highest growth in 2014-20 as LPG production from shale gas picks up
- Associated Gas is natural gas in crude oil reservoirs either as un-dissolved in oil or dissolved
Since the Sydney Olympics of 2000, LPG has powered the Olympic Torch. Regarded as the world’s most multi-purpose energy, LPG drives welding machines for German car makers, automobiles in Tokyo, home heaters in North America, and cooking burners in South Africa and India.
Sector-wise LPG applications:
Residential applications viz. heating & cooking gobbled 60% of the total global LPG in 2013. For 2014-20, the Autogas, Petroleum, and Refinery segments are expected to grow rapidly.
Trends & Findings
According to the Liquefied Petroleum Gas (LPG) Market: Global Industry Analysis, Size, Share, Growth, Trends, and Forecast report by Transparency Market Research, the 2013 global LPG Market was valued at $233.83 billion and is estimated to register a 3.4% CAGR during 2014-20 to hit $299.05 billion by 2020.
A Statistical Review of Global LP Gas by World LP Gas Association and Argus Media for the year 2013 placed global LPG:
• production at 280 million tons (mn-t), a 2.3% annual rise
• consumption at 265mn-t, a 2.8% annual hike
• exports at 94.6mn-t, an annual increase of almost 10mn-t
Trends and findings for the global LPG industry include:
• Middle East was the largest producer in 2013 with 33% global market share
• Asia-Pacific was the largest consumer in 2013 with 35% global market share
• Consumption for 2014-20 will be driven by:
– Residential and Commercial demand from Asia-Pacific, Latin America, and Africa
– Petrochemical Complexes in Middle East
– Autogas in Asia-Pacific and Europe
• Chemical sector in the US and Saudi Arabia alone consumed 40mn t in 2013 as a troubled Russian chemical industry demanded less LPG
Most US LPG exports go to Central-South America followed by Europe-Netherlands and Asia. The boom and positive sentiment means Asian importers view US LPG favorably over Middle East LPG even before a wider Panama Canal further reduces shipping costs.
Panama Canal expansion is expected to bring down the voyage time between US Gulf Coast and Asia by two weeks and overall shipping costs by 50% thereby boosting US LPG exports to Asia.
Impact of Panama Canal Expansion
US is already exporting 500,000 barrels per day (bpd). Presently, US LPG cost-at-loading at the Gulf Coast is $600 a ton vis-à-vis $760/$780 per ton of Middle East LPG. Thirteen new facilities along the Gulf Coast may further bring down this cost and triple US exports to 1,500,000 bpd by 2016.
China will complete nine Propane Dehydration (PDH) Plants by 2017. PDH plants convert propane-LPG into propylene, a base material for multiple high-end plastics. Most US LPG exports will therefore be directed to China that will need about 6 million tons of LPG a year or 200,000 bpd.
With all its inherent merits, it is not surprising that LPG will soon expand its share in global trade and, in a way, bring east and west closer.