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T W I C E M O N T H L Y NEWS, PRICES AND ANALYSIS VOLUME XVIII, ISSUE 17, 5 SEPTEMBER 2012

LPG World

© Argus Media Ltd www.argusmedia.com

Editorial: Mind the gap 2

News/inventories

Iran targets gas, LPG output rise 3

Inergy develops NGL storage 3

Japan’s household demand declines 4

US stocks near record 4

Asian prices reflects supply tightness 5

Japanese stocks fall 5

Agriculture could provide LPG opportunities 6

Features

‘Cooking for Life’ nears official launch 7

Alaska rules on BP propane re-injection use 7

WLPGA Statistical review

An industry in transition 8-9

Q&A: WLPGA’s Tyler reviews statistics 10

Data

Shipping 11

Market review — Europe 12

Market review — Asia 13

Market review — Americas 14

Prices 16

Inside

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The wave of extra US NGL production from shale gas extraction and the lack of extra export facilities have led to full storage and concerns of over-supply

US propane supplies are forecast to increase to 12bn USG/yr (2.6mn t/yr) by 2020, outstripping projected domes-tic demand by more than 2bn USG/yr, according to the Propane Supply Sources and Trends report released by the US National Propane Gas Association.

Shale gas drilling and the associated natural gas liquids (NGL) production is likely to boost propane production by 3.6bn USG/yr by 2020, according to the 31 August report, which was prepared by US consultancy ICF International. “Growth in domestic propane supply is expected to outpace potential growth in propane demand, leading to continued growth in propane exports,” the report says. “The major impact of any growth in propane demand will be to reduce exports of domestically produced propane.”

The report adds a further level of analysis to help address a key concern for the LPG industry — the true extent of US NGL output and LPG exports over the rest of the decade.

The US market is already dealing with some of the fallout caused by a disconnect between extra supply and available export infrastructure.

The timing of expansions to the LPG export terminal on the Houston Ship Channel is particularly important for US fundamentals at present. The expan-sion project by terminal operator US midstream Enterprise Products Partners will roughly double US export capacity

at the facility to 10,000 bl/hour and is expected to be completed by the end of the year. (LPGW, 18 May 2011, p8). Enterprise has confirmed it will meet its end of year target.

Many US traders anticipated an eas-ing of NGL storage, especially in the fourth quarter, but this has yet to happen. US inventories remain around 20pc over the five-year average. And market activ-ity in the outer months of the price curve suggest the market now assumes US oversupply with little relief from exports is likely to persist in 2013.

Full storage Propane in primary storage in the US could reach full capacity of 75mn bl during the first two weeks of September, according to a report released at the end of August by US bank Jefferies.

US propane inventories tradition-ally reach their peak in the first week of October before the heating season begins in earnest.

“A lot of people are asking if we have extra storage room to roll barrels,” a US retailer says. Because of the tight storage situation, traders have rolled volumes from August into the forward months in an effort to avoid taking out new, more expensive storage contracts ahead of the winter heating season, market insiders say. “Leasing for only one to three months is about double the monthly cost of long-term storage,” one trader says.

US deals with supply overhang

‘The big challenge for our industry is to make sure this exceptional energy is used in the most deserving manner’ — WLPGA director David Tyler (see p10)

© 2012 Argus Media Ltd www.argusmedia.com

5 September 2012Argus LPG World

The World LP Gas Association and Argus have launched the latest annual Statistical Review of LP Gas, which reveals the full production and demand figures for 2011.

This is the first such annual collabo-ration between Argus and the WLPGA — and a useful one. The statistics have proved to be, over many previous years of publication, a necessary tool for the industry. They show how LPG is a high-value fuel with a broad variety of applications — and not just as a petrochemical feedstock.

The statistics reveal new growth mar-kets as well as mature and contracting markets. Above all, the statistics help give the industry a sense of itself as a sector with a vital role to play in the global energy mix — and with real strength in depth and range of application.

The biggest change to the overall fundamental supply and demand bal-ance in 2011 came from Qatar’s leap in production and exports. This expected change was anticipated years ago. But 2011 was really the year when the effects of Qatar’s output rise became

apparent. In just a decade, Qatar’s pro-duction has grown to 13.5mn t/yr from 1.6mn t/yr — and more than doubled between 2010 and 2011.

Such major changes would normally have a gradual knock-on effect across the international LPG market. But more major change on the production side is on the way in the form of US shale gas natural gas liquids extraction. The

beginnings of US production growth looked modest in

2011, but further strong rises are ahead.The Statistical Review of LP Gas

shows the gap between production and consumption widening to 9.8mn t/yr in 2011 from 5.26mn t/yr in 2010. A decade previously, the gap was around 4,000t.

This significant sea-change in the supply-demand balance could be the key concern for the industry over the next few years because it raises the issue of where the production excess will ulti-mately head. The industry’s swing con-sumer remains the petrochemical sector and its share of overall consumption has begun to grow steadily.

E d i t o r i a l

Argus LPG World is published by Argus Media Ltd

Main offices:London (head office): Argus House, 175 St John Street, London EC1V 4LWTel: +44 20 7780 4200 Fax: +44 870 868 [email protected], [email protected] office: 22 Malacca Street, #08-02 Royal Brothers Building, Singapore 048980Tel: +65 6496 9966 Fax: +65 6533 4181Tokyo office: Burex Kyobashi #513, Kyobashi 2-7-14, Chuo-Ku,Tokyo 104-0031, JapanTel: +81 3 3561 1805/+81 3 3561 1806 Fax: +81 3 3561 1807Houston office: 3040 Post Oak Blvd,Suite 550, Houston, Texas 77056Tel: +1 713 968 0000 Fax: +1 713 622 2991Washington office: 1012 Fourteenth Street NW, Suite 1500, Washington, DC 20005Tel: +1 202 775 0240 Fax: +1 202 872 8045Moscow office: 12-1 Krivokolennyi pereulok, floor 5, Moscow, Russia 101990Tel: +7 495 933 75 71 Fax: +7 495 933 7572Founder: JA NasmythPublisher: Adrian BinksChief operating officer: Neil BradfordGlobal compliance officer: Jeffrey AmosBusiness development: Anu Agarwal, Alejandro Barbajosa, Peter Caddy, Barbara Kalu, Jim Nicholson, Peter Ramsay, Fiona Poynter (Europe, Middle East, Asia-Pacific), Josefine Ahlstrom (downstream Europe), Ross Allen, Caroline Gentry, Daniel Massey, Vanessa Viola (Americas), Charles Davis, Heather Killough (downstream US), Mikhail Perfilov, Vyacheslav Mischenko (CIS) Commercial manager: Jo LoudiadisEditor in chief: Ian BourneExecutive editors: Euan Craik, Jason FeerManaging editor: Cindy GalvinEditor Argus LPG World: Nick Black

EditorialLondon: Denise Albrighton, Christine Ancker, Gavin Attridge, Edward Bentley, Louisa Blair, Charlotte Blum, Virginia Bridgewater, James Burgess, Neil Campbell, Michael Carolan, Richard Child, Naomi Christie, Karen Chur, Nick Coleman, Sean Cronin, Courtney Daniel, Jessica Dell, Matt Drinkwater, Simon Ferrie, John Gawthrop, Libby George, Ahmad Ghaddar, Siobhan Gilmartin, James Gooder, Brodie Govan, Eleanor Green, Daniel Hayes, Keyvan Hedvat, Laura Hurst, Jack Jordan, Chris Judge, Samira Kawar, James Keates, Sabrina Kernbichler, Dmitry Kleshchevnikov, Anastasia Krasinskaya, Jeff Kuntz, Elaine Mills, Matthew Monteverde, Amandeep Parmar, Kelly Paul, Julia Payne, Stuart Penson, Tom Reed, Emma Reiss, Alan Richards, Euan Sadden, Alex Sands, Ayca Sera Rodop, Matt Scotland, Ruth Sharpe, Toby Shelley, Matthew Sotherton, Katherine St Lawrence, Eva Stepniewska, Matt Stone, Ewan Thomson, Jack Tunstall, Saket Vemprala, Kathleen Wainwright, Adam Waise, Juliet Walsh, Jonathan Weston, Nicole Willing, Tom Young Singapore: Richard Davies (bureau chief), Azlin Ahmad, Jeremiah Chan, Serene Cheong, Yvette Choo, Nurul Darni, Kevin Foster, Frances Goh, Abdul Hadhi, Andrew Jones, Camille Klass, Kyra Lim, Ng Hun Wei, Charles Ong, Esther Phua, Iain Pocock, Serena Seng, Seah Siew Hua, Sunita Sharma, Annie Tan, Denis Varaksin, Melanie Wee, Wong Kit Ling, Kitty Xie Beijing: Gao Hua, Lucy Huang, Oliver Lough, Ma Xiu Mei, Kate Rosow, William Wang, Zenobia Zhao Houston: Jim Kennett (bureau chief), Mark Babineck, Nicole Berg, Laura Blewitt, Robert Brelsford, Elliott Blackburn, Lynn Cook, Tony Cox, Anusha de Silva, Andrew Echlin, Julie Edwards, Aaron Harris, Ganze Hayden, Ben Hobratsch, Mike Jeffers, Kyle Kearns, Matthew Keever, Daniel Kilgore, Iris Kuo, Emily Lewis, David Love, Anthony Macaluso, Al Pollard, Amanda Hillman Smith, Amy Strahan, Andrew Sutton, Daphne Tan, Maryellen Tighe, Gustavo Vasquez, Sarita Williams, Markus Wimmer, Jason Womack, Chunzi Xu Washington: Claire Pickard-Cambridge (bureau chief), Alex Alexandrov, Mike Ball, Abby Caplan, Molly Christian, Ed Epstein, Will Fischer, David Givens, Haik Gugarats, David Ivanovich, Ben Kaldunski, Celia Lamb, Joanna Marsh, Lauren Masterson, Christopher Newman, Bill Peters, Courtney Schlisserman, Carrie Sisto, Todd Tranausky, Daniel Wackerow, Zachary Warmbrodt, Robert Willis Moscow: Mikhail Gulyaev (bureau chief), Teymuraz Arkhangelskiy, Ekaterina Bedash, Julia Buneeva, Grigory Chugunov, Elvira Chukmarova, Tatyana Demidova, Julia Gapeeva, Dmitry Goncharenko, Anastasia Goreva, Maxim Grebennikov, Dmitry Grigolaya, Rauf Guseinov, Maria Ivanina, Alexander Izotov, Oleg Kirsanov, Irina Krasnova, Yagmur Kurbanov, Vladislav Kurshakov, Alexei Morshchagin, Sergei Nacharov, Svetlana Novolodskaya, Victor Parno, Natalia Perevertaylo, Sergey Ryzhkin, Pavel Scheglov, Sergei

Sokolov, Anna Sokolova, Dmitry Vorobiev, Oksana Yablokova, Olga Yagova, Valery Zavyazkin, Elena Zotova, Alexandr Zubanov Astana: Sandugash Akhmetulina, Timur Ilyasov Brussels: Dafydd ab Iago Calgary: Jeff Kralowetz Dubai: Elshan Aliyev, Reza Amanat, Onur Ant, Shibu Itty Kuttickal Hanover: Chloe Jardine Johannesburg: Steven Swindells Kiev: Sergiy Fedorenko, Yulia Golub, Dmitry Gorulko, Yuri Nemov New York: John Demopoulos, Maggie King, Ian Stewart, Nasreen Tasker Portland: Kim Moore, Robert Mullin, Karen Teo, Jessica Zahnow Santiago: Patricia Garip Sydney: Jo Clarke, Kevin Morrison Tokyo: Motoko Higashida, Masaki Mita, Rieko Suda, Kaori Takahashi Chief sub-editor: David Townsend Sub-editors: Gordon Beveridge, James Claro, Justin Colley, Wayne Judd, Ian Shine, Mark Stephens Production manager: Chris Rockett Production: Julian Giddings, Ravin Khurtoo, JC Lanoë, Clive Roberts Sales and marketing: Mahide Altun, Christo Barthel, Will Collins, Richard Cretollier, Zuzi Durica, Jane Faulkner, Jacob Henriksson, Sam Johnson, Mervyn Labrosse, Seana Lanigan, Lindsey Lehmann, Bruno Linder, Nik Mallottides, Laura McAulay, Emma Munro, Wilfried Nkolo, Tristan Parkes, Julia Pennington, Jeff Regnard, Samuel Roberts, Mathias Schneider, Giulia Vangelov, Anastasia Vengerova, Amber Ward, Lois Wilson (London), Elena Aleschenko, Tatyana Belova, Alexander Berent, Anna Fedko, Yulia Gorovaya, Valentin Kin, Liliya Maksymtsiv, Yana Mashina, Alexandra Maricheva, Natalia Mironova, Dmitry Pokhlebaev, Ekaterina Sablina, Elena Schelkunova, Alexey Semenchuk, Yelena Timofeeva, Tatyana Zatsepilo (Moscow), Ellen Chan, Elsie Chen, Winnie Chua, Raymond Dias, Ng Han Wei, Tomoko Hashimoto, Pauline Lai, Erlin Liang, Darren Lo, Zulkhamian Noor, Peggy Phor, Rhalain Pipo, Feisal Sham, Ginny Teo, Roland Yeo (Singapore), Maya Okamoto, Yumi Saito (Tokyo), Gabriela Alocer, Chloe Bazille, Chris Bozell, Bryan Brinley, Peter Brown, Todd Christlieb, Ashli George, Brooklyn Guillory, Mike Horvith, Constanza Hoyos, Antonette Iorio, Karen Johnson, John Lecky, Christie Parker, Umer Qureshi, Ryan Russell, Diego Secaira, Carrie Shapiro, Tammy Tiedt, Susan Teves, Chris Valentino, Christina Vassil, Howard Walper, Miles Weigel (US), Jercy Chen (Beijing) Lana Bustami, Elias Naoum, Mina Rezvan (Dubai)ISSN 1476-6396 Published twice monthly. Copyright © 2012 Argus Media Ltd. All rights reservedNotice: By reading this publication you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of the publisher.

Mind the gap

Statistical Review of Global LP Gas

2011 Argus Consulting Services is proud to announce the launch of the Statistical Review of Global LP Gas, in association with the World LP Gas Association (WLPGA) and the European LPG Association (AEGPL).

This is the first annual collaboration between Argus, the WLPGA and AEGPL. The report is an annual must-have for the industry, and provides a valuable statistical insight into the global LPG industry, both from the point of view of production and consumption, as well as market devel-opments. Fundamentals, analysis, pricing and market commentary are all covered in detail, making this a vital tool for LPG industry market participants.

For further information, to purchase a copy or to discuss other LPG requirements please visit us at:

WLPGA Forum in Bali from 11-13 September (Stand 92, Level 2)

or alternatively please contact:

[email protected]

www.argusmedia.com/consulting


5 September 2012Argus LPG World — In brief

Middle East

Iran targets gas, LPG output rise Iran’s gas exports are expected to rise to 60bn m³/yr by the end of its five-year development plan in 2015, according to Iranian state-owned gas firm NIGC managing director Javad Oji. Boosting processing capacity and dehydration to 1.1bn m³/yr, production of 9.45mn t/yr of LPG, 8mn t/yr of ethane and 3mn t/yr of sulphur are among the other targets NIGC has earmarked under its fifth five-year development plan.

Asia-PacificVietnam imports riseVietnam imported 75,611t of LPG in July, an increase of around 30pc from the 57,991t imported in June, according to statistics released by the country’s ministry of finance. The rise in imports reflected supply disruptions because of a scheduled maintenance shutdown at the 145,000 b/d Dung Quat refinery, which is operated by state-owned PetroVietnam and produces around 25,000 t/month of LPG. The refinery halted operations from 15 May to 9 July. The July imports brought overall imports for the first seven months of the year to 377,609t, 18.6pc lower than the 464,500t bought during the same period in 2011. Hanoi-based consultancy Vietnam Petroleum Institute estimates that Vietnam is expected to consume around 1.2mn-1.3mn t of LPG this year, with domestic production at the Dinh Co Gas processing plant and Dung Quat refinery totalling up to 580,000t. Total imports into Vietnam this year are expected to total 620,000-740,000t.

Indian tanker explodes An LPG road tanker overturned and exploded on 27 August at the town of Chala in Kerala, India, killing 19 and injuring as many as 30 bystanders. Six houses, 15 shops and nearby vehicles were destroyed by the explosion, accord-ing to local media. The tanker, owned by

state-owned Indian Oil, was carrying LPG from Mangalore.

Former Soviet UnionRussian LPG production growsRussian LPG production reached 7.64mn t in January-July, around 6pc or 421,000t higher compared with the same period one year ago, according to ministry of energy data. July pro-duction alone increased by 4.2pc, or 41,500t year on year to 1.01mn t. The figures do not include LPG output of around 60,000t from the new Russian plants in the Khanty-Mansiysk district in western Siberia owned by Russian firm Monolit. The increase in produc-tion was the result of output at the NNK refinery — bought by Russian conglom-erate Samaranefteorgsintez from Sibur Holding in May 2011 — which only began producing LPG in July 2011. In the first seven months of this year it pro-duced 252,000t compared with 17,000t in January-July 2011. Russia’s biggest LPG producer Sibur Holding increased LPG output in the first seven months of the year by 5.5pc, or 113,920t on the year to 2.17mn t. Russian LPG exports, including ShFlu, was up in January-July by 8pc, or 178,100t on the year, to 2.39mn t, according to rail forwarders data. In July, exports rose by 19pc, or 54,400t compared with the same month one year earlier to 334,500t.

Ukrainian LPG output falls LPG production in Ukraine fell to 341,710t in January-July, or around 7pc lower compared with 366,380t in the same period a year earlier. The reduction in output came after the shutdown of the largest LPG producer in Ukraine — TNK-BP’s 160,000 b/d Lisichansk refinery — in March because of heavy losses in 2010 and 2011. But the reduction was partially offset by UK independent JKX Oil and Gas subsidiary Poltava Petroleum — which launched LPG production in July last year — and an increase in LPG pro-duction at Ukraine’s Ukrtatnafta 372,000

b/d Kremenchug refinery.

North AmericaEnterprise offers Atex additional slotsUS midstream Enterprise Products Partners will offer additional capacity on its 1,230-mile (1,979km) Appalachia-to-Texas (Atex) Express natural gas liquids (NGL) pipeline for producers who may need the pipeline to transport their NGLs. The Atex pipeline is designed to carry an initial 125,000 b/d of ethane out of the Utica and Marcellus shale region to Mont Belvieu, Texas, when it is completed in 2014. But the line could be expanded to a capacity of 190,000 b/d. Enterprise is considering expanding capacity on the line to possibly include unfractionated NGLs, or y-grade, in addition to ethane. This is at least the second additional open commitment period for the project. The Atex project is anchored by a previ-ously announced 75,000 b/d transporta-tion agreement from Chesapeake Energy (LPGW, 17 January, p4).

Inergy develops NGL storage US midstream operator Inergy is develop-ing around 10mn bl of storage for natural gas liquids (NGL) at its Tres Palacios salt cavern site to handle increasing NGL volumes coming out of the Eagle Ford shale. Inergy also says it could have NGL storage facilities at the site ready in 12-18 months, given sufficient commercial inter-est. Tres Palacios is located around 75 miles (121km) southwest of Houston, and about 13 miles inland of Matagorda Bay on the Texas Gulf coast. The site is cur-rently in natural gas service, with 38.5bn ft³ (1.09bn m³) of storage capacity in operation and another 9.5bn ft³ of addi-tional capacity expected to come on line by 2014. The NGL storage under devel-opment includes more than 5mn bl for y-grade — or unfractionated NGLs — and approximately 1mn bl of capacity each for propane, normal butane, isobutane and natural gasoline. The caverns will have flexibility and optionality, and could handle ethylene or ethane:propane mix in


5 September 2012Argus LPG World —

Japan’s LPG industry is continuing to reap the benefits of rising demand from the rival town gas sector and turmoil in the country’s power industry. But LPG sales to the residential sector continue to decline.

LPG sales in April-June, the first quar-ter of Japan’s 2012-13 fiscal year, rose by 4.3pc to 3.8mn t from 3.6mn t in the same period a year earlier, according to the Japan LP Gas Association. Sales of LPG to the town-gas sector increased by 18.7pc to 252,309t, while demand

from the power sector rose by 247.8pc to 385,741t in the same period. But sales to the household sector, by far the largest consuming market for LPG, fell by 4.2pc to 1.9mn t. The household sector’s share of consumption fell by 4 percentage points to 50pc. Demand from Japan’s autogas and petrochemical sectors also declined (see table).

Japan’s LPG industry is struggling to maintain its share of household sector demand, which has lost major market share to cheaper town gas.

In brief

US inventories of propane in primary storage increased by 716,000 bl to 71.7mn bl during the week ended 24 August. Inventories remain unsea-sonably large, having last breached 71mn bl in late October 2009, according to the Energy Information Administration.

US propane inventories are fast-approaching the record level of 77.2mn bl set in October 1998.

US stocks near record

US petrochemical plants consumed 498,000bl of ethane in June, leaving inventories for the month at 35mn bl, slightly under the record highs seen in May, according to the latest US Energy Information Administration data.

Ethane inventories in the US reached 35.5mn bl in May, the highest since records began in 1967, accord-ing to the EIA. The June data is the latest available.

The restart of several ethylene crackers after maintenance may be slow to draw down US ethane sup-plies, as natural gas liquids production from shale gas drilling and associated crude production continues to boost ethane production.

Ethane prices at Mont Belvieu declined in August amid ongoing over-supply, driving values to 13pc of WTI, the lowest values relative to crude in more than 10 years. Outright prices for ethane fell from 36.75¢/USG to as low as 30¢/USG in August.

Ethane stocks off highJapan’s household demand declines

US propane inventories mn blRegion 17 Aug 24 Aug 26 Aug 11

East coast 5.909 6.060 4.359

Midcontinent 27.153 27.213 24.739

US Gulf coast 35.400 35.787 22.642

Rocky Mts, west coast 2.480 2.480 1.849

Propylene* 5.190 5.194 2.347

Total 70.942 71.658 53.590

*included in US Gulf coast total — EIA

Japanese LPG sales by Sector ’000tSector Apr-Jun 2012 Apr-Jun 2011 ±%

Household 1,875 1,957 -4.2

Industry 690.2 673.1 2.5

Transport 251.2 274.9 -8.7

Town gas 252.3 212.6 18.7

Petrochemical 326.7 397.3 -17.8

Power 385.7 110.9 247.8

Total 3,781 3,626 4.3

— JLPGA

Greek LPG shipping firm Stealthgas says tighter EU fuel specifications will have little major impact on its busi-ness operations.

Under EU law, vessels operating in the Baltic, North Sea and English Channel will have to use fuel with a sulphur content of no more than 0.1pc in 2015. In other EU waters, the limit will be 0.5pc. Some analysts forecast that the new law could cost both the shipping and refinery industry billions of dollars of lost revenue, with ships having to pay for more expensive low-sulphur fuel or to fit exhaust filters capable of scrubbing out the sulphur. “Our LPG ships consume low-sul-phur fuel already, so prices may only increase by as little as 5pc in order to meet these new rules,” Stealthgas chief financial officer Konstantinos Sistovaris says.

Stealthgas calm on sulphur An explosion and fire at state-owned oil company PdV’s 635,000 b/d Amuay refinery on 25 August caused 42 fatali-ties and 135 injuries. The explosion caused structural damage to 1,213 nearby homes, destroying 219.

The most lethal refinery accident in the 98-year history of Venezuela’s oil industry appears to have been caused by leaking propane that spread into the refinery’s olefins production area, sparking an explosion that destroyed two propane storage tanks and struc-turally damaged at least seven more fuel storage tanks. PdV confirms that more than 600,000 bl of gasoline and naphtha were lost in the fire that raged for 83 hours before it was finally extin-guished on 28 August.

The refinery, located in Falcon state, resumed operations at 41pc capacity on 4 September.

Propane causes explosion


5 September 2012Argus LPG World — Asia-Pacific

A sharp rise in Saudi Aramco’s latest monthly contract price (CP) reflects a continuing surge in Asia-Pacific LPG prices since the month of June, with the high demand winter season fast approaching.

Saudi Aramco announced the September CP for propane at $970/t, up a strong $195/t from August. The butane CP was set at $930/t, $155/t higher month on month. The CP touched record highs in March of $1,230/t for propane and $1,180/t for butane.

Asia-Pacific refrigerated spot prices have risen steadily since the lows of the year in June. Tightening supply funda-mentals, which coincided with crude oil’s surge, have since sent Asia-Pacific spot prices 67pc higher over a mere two months. By contrast, Brent prices rose around 25pc during the same period.

Inventory surpriseThe market’s underlying sentiment remains bullish, with winter stockbuilding in northeast Asia just around the corner. And recent inventory data released from Japan sent the market briefly into a buying frenzy at the end of August (see box). Japanese LPG stocks stood at an unexpected 1.84mn t at the end of July, 14pc lower from the same period last year. Propane stocks, in particular, registered a 25pc year-on-year drop. The drawdown in stocks of east Asia’s top importing nation Japan quickly placed Asian propane at a $50/t premium to butane on the spot market, in view of the impending winter season where propane should be in higher demand as a domestic heating fuel.

A dearth of spot availability from the Middle East has added to the bullish market sentiment. Saudi Aramco looks

to have only two spot 44,000t cargoes on offer for September loading. Aramco offered a late-September loading mixed propane-heavy 44,000t cargo at $1,000/t on a fob Yanbu basis after selling a full 44,000t spot propane cargo at $930/t on a fob Ras Tanura basis. Higher consumption from the kingdom’s domestic petrochemical industry kept exports home-bound, according to regional market participants.

Meanwhile, planned maintenance at one of Qatar’s larg-est gas processing plants could remove 100,000t of supply in September. Nigeria has also reduced its spot availabilities to just one 44,000t cargo in September, compared with 2-3 parcels of between 88,000-132,000t normally every month.

The threat of a supply squeeze as the high demand season approaches have propelled regional market prices substantially higher. But this in turn has deterred price-sensi-tive east Asian buyers from stepping into the market unless absolutely necessary.

Indian demand also has faltered because of the high import prices. “Indian demand is very low now because of the high fixed price,” one western trader says.

Asia-Pacific price surge reflects supply tightness

Stronger demand and lower imports in July reduced Japan’s LPG stocks on the month by 4.6pc to 1.8mn t, according to Japan LPG Association data.

Demand from Japan’s power industry has risen since the March 2011 earth-quake and tsunami, helping reduce pro-

pane stocks in July by 25.4pc compared with one year earlier. Propane stocks also dipped by 4pc compared with June.

Japan’s LPG consumption in July rose on the month to 1.3mn t, despite warmer weather. Propane and butane demand also rose to 849,000t and 420,000t, respectively.

Japanese stocks fall

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Propane Saudi CP $/tSaudi CP $/t

Japanese LPG stocks ’000tPropane Butane Total

Jul 12 Jun 12 Jul 11 Jul 12 Jun 12 Jul 11 Jul 12 Jun 12 Jul 11Production 122 104 134 105 113 100 227 217 234Imports 684 713 828 270 297 266 954 1,010 1,094Consumption 849 744 691 420 333 288 1,269 1,077 979Total stocks 1,020 1,063 1,367 824 869 781 1,844 1,932 2,148Consumable stocks 91 148 389 98 146 261 189 294 650Mandated stocks 929 915 978 726 723 520 1,655 1,638 1,498 — Japan LPG association

South Korean LPG balance ’000tJul 12 Jun 12 Jul 11 ±% Jul/Jun

Production 160.5 155.48 145.77 3.30

Propane 66.3 65.03 59.84 2.00

Butane 94.23 90.46 85.94 4.20

Imports 448.58 450.03 519.02 -0.30

Propane 168.08 187.78 197.03 -10.50

Butane 280.50 262.24 321.99 7.00

Consumption 690.20 684.88 762.30 0.80

Propane 225.65 262.38 259.30 -14.00

Butane 464.55 422.50 503.0 10.00

Exports 335.0 162.0 162.0 106.90

Stocks 261.42 262.20 162.12 -0.30

— KNOC


5 September 2012Argus LPG World — Sectors

Agricultural LPG use could be set for expansion, with the com-mercial availability of improved propane weed burners — and the development of markets outside the developed world.

LPG in the agricultural sector has traditionally been confined to use in mobile equipment such as grass cutters, tractors and harvesters as well as in stationary crop drying heaters and in irrigation pump systems.

The agricultural sector — with demand of around 4.3mn t/yr — accounts for less than 2pc of global LPG demand. Around two-thirds of this demand comes from the US, but growth is showing up in India and Morocco.

The development of LPG as an agricultural fuel in devel-oped economies has focused on ever-more inventive technolo-gies applied to key equipment. LPG in developing economies could see growth in a wide variety of applications, especially in Morocco as one such relatively untapped market. The Moroccan LPG industry sees opportunity in using LPG as a replacement fuel for irrigation systems currently powered by conventional fuels.

The rise in organic farming and the harvesting of more expensive crops in the US has led to an increase in the use of propane-fuelled weed burners towed by tractors along fields.

The benefits of LPG-fuelled weed burners are that they negate the need for insecticides and noxious weed killing chem-icals that pollute the soil and waterways. For organic farms, such weed burners also avoid the need to use less effective tillage or expensive and laborious hand weeding.

Changing useBut the use of weed burners has not been replicated outside the US, mainly because of inefficiencies of the systems and the costs involved. This may be set to change, according to World LP Gas Association (WLPGA) director David Tyler.

“Using LPG for weed control has a lot of potential but I do not think much of the world knows about it,” Tyler says. “Although it has been around for many years it is not com-monly used, and with a sharp rise in organic farming this surprises me, particularly when you consider the tonnes of insecticides and chemicals that are being applied with scant regards to the consequences.”

The US Propane Education and Research Council (Perc) and the University of Nebraska collaborated together last year on the development of a new hooded burner — essentially a containerised channel to direct the flame — that has proven to be more effective. Crucially, Perc has found the hooded system, which is then driven through the fields by a tractor, consumed

around half the amount of propane than used in the more tradi-tional open-flaming methods.

Perc director Mark Leitman admits that the relatively high cost of weed burners has meant most organic farmers have stuck to tillage of the soil. “But this old-fashioned method is, overall, less effective than using modern flame-weed control and contributes to soil moisture loss and soil erosion,” he says.

Leitman believes that the new hooded equipment is more efficient and less expensive than its predecessors and will make it possible “for a wider audience of farmers to justify the cost of adopting flame weed control”. Interest is starting to pick up among organic farmers in the US, he says.

Perc’s optimistic views are echoed by Tyler, who now believes more should be done in Europe and the rest of the world to promote the use of LPG for such applications. “If it is beneficial and proven to work, then word of mouth in the farming community should lead to growth,” he says. At the World LP Gas Forum in Bali this September, Perc will collect the runners-up award for innovation for its work on weed burners, something that should no doubt bring greater publicity to the new equipment’s appeal.

LPG-fuelled burners could also be used as an alternative to chemicals to sanitise poultry farm floors, according to UK LPG dis-tributor Calor’s commercial marketing manager Keith Higginson. “Operationally, it is cheaper to use LPG than a chemical sterilising agent and LPG leaves no chemical trace elements that would otherwise seep into the concrete over time,” Higginson says. He thinks there is “substantial potential for sanitising poultry shed floors using LPG burners. “It is simply a case of adopting new practices — which may take time,” Higginson says.

Agriculture could provide growth opportunities

Key agricultural LPG consumers ’000 t/yrCountry Sector consumption 2011

Canada 153

France 369

India 1,068

Italy 62

Mexico 81

Morocco 182

Poland 86

Russia 300

UK 101

US 1,746

— Argus, WLPGA

The agricultural sector uses LPG in a variety of ways, but mostly in the developed economies of North America and Europe. The rise in organic farming brings new opportunity for LPG as a “clean” weed burner



The World LP Gas Association (WLPGA) will officially launch its latest campaign, Cooking for Life, at its latest World LPG Forum in Bali, Indonesia, on 11-13 September.

Backed by UK celebrity chef Jamie Oliver, the WLPGA campaign aims to promote LPG as a clean cooking fuel, in an effort to improve the health and quality of life for millions of people (LPGW, 26 June, p1).

WLPGA director of market development and deputy man-aging director Michael Kelly outlined the goals of the five-year worldwide campaign, during a global webinar on 28 August.

“The purpose of the project is to improve the quality of life for people in developing countries who still cook with biomass such as wood inside the home,” Kelly says. “Not only does deforestation harm the environment, but the harmful effect of the particulates produced when the wood is burnt is damag-ing to health and shortens lives. Anyone who has sat round a campfire for an evening can imagine what it is like to do that three times a day, every day of your life.”

Quality of lifeKelly points out that the burning of wood “affects the lungs, burns the eyes and takes up hours in the day of women as they search for fire wood, during which time they face daily dangers of being attacked, raped or bitten by snakes”.

The positive effect of using LPG as a cooking fuel is imme-diate, Kelly says. As soon as it is introduced into a community the quality of life goes up immediately. “It is clean, there is no health impact and it is ideal for communities with no access to the grid or to sustainable energy,” he says. Indoor air pol-

lution causes more deaths than HIV, malaria and tuberculosis combined, according to Kelly.

The World Health Organisation estimates burning biomass as cooking fuel accounts for more than 2mn deaths and 41mn serious illnesses every year. “This had been ignored for centuries,” Kelly says. He admits that during his research for the campaign he was surprised how little was known about the benefits of LPG. “The prevention potential is enormous,” World Health Organisation assistant director-general Susanne Weber-Mosdorf says. “Solutions are available and it is our international responsibility to promote the health and wellbeing of those affected, who are mostly women and children.”

Safety education“We often face the issue of people being scared of having an LPG cylinder in the home because they think it will blow up — which is the only time you hear about LPG in the news — so we need to educate people more about safety”, Kelly says.

The campaign aligns with UN secretary-general Ban ki-Moon’s global initiative on Sustainable Energy for All, with three key interlinked objectives to be achieved by 2030: providing universal access to modern energy services; doubling the global rate of improvement in energy efficiency; and doubling the share of renewable energy in the global energy mix.

“We have a product that is extremely effective that can pro-mote sustainable development and help improve the quality of life for millions of people,” Kelly says. “LPG is not the only solu-tion, but it is one of the best in terms of dealing with problems of deforestation, the environment and day to day quality of life.”

WLPGA’s ‘Cooking for Life’ nears official launch

Sectors

Alaska’s Oil and Gas Conservation Commission ruled in August that BP is not wasting the propane that the company re-injects into its Prudhoe Bay fields to boost oil production.

The state’s former commissioner of natural resources Harold Heinze, and a petroleum engineer involved in the development of Prudhoe Bay, had petitioned the conservation commission to require BP to sell more Prudhoe Bay propane into the local market.

Heinze argued that local propane demand could be supplied by an exist-ing propane recovery facility at Prudhoe Bay and that re-injecting it into the for-mation is wasteful. But based on hear-ings and submitted comments from

BP and other sources, the commission decided that requiring BP to capture more of the propane than required for re-injection would necessitate substan-tial investments that could shutter the gas plant for six to eight months.

“Selling one barrel of oil equivalent (boe) of propane now would result in a net loss of 0.93 boe of crude oil and miscible injectant (MI) in the future,” the commission concluded after more than nine months of investigations and hear-ings on the matter. MI can be a combi-nation of hydrocarbon and other gases used to enhance oil recovery — around 85pc of the injected propane and other gases will ultimately be recaptured, according to the ruling.

Retail propane in Alaska is expen-sive as the market relies almost exclu-sively on Canadian imports.

Alaska’s retail propane mar-ket accounts for around 29,000 t/yr of demand, the bulk of which arrives by railcar from Edmonton, in Alberta, Canada, according to US propane retailer AmeriGas.

Additional volumes arrive via cargo ship from Washington state. US refiner Tesoro’s 72,000 b/d Kenai refinery is the only in-state source of propane.

Although BP is the opera-tor at Prudhoe Bay, ExxonMobil and ConocoPhillips also have large stakes in the field, which is one of the largest oil and gas fields in the US.

Alaska rules on BP propane re-injection use



The latest set of global annual LPG statistics will be released at the World LP Gas Forum in Bali, Indonesia, on 11-13 September. The statistics provide a detailed breakdown of production and consumption trends in 2011.

Global LPG production in 2011 rose by 4.6pc to 269mn t. Production growth was dominated by the much-anticipated leap in output from Qatar, which saw production double to around 13.5mn t in 2011 from 6.62mn t in 2010 — pushing Qatari exports higher to 10mn t/yr. Most of the exports headed to northeast Asian markets.

Middle East supply continued to be the key source of LPG for Asia-Pacific importers. Supply also rose from Iran and Saudi Arabia. Meanwhile, major north African producer Algeria saw a further significant jump in production, rising by 12pc to around 9.14mn t. And the Arab Spring did not devastate Libyan produc-tion, which only fell by 2.6pc year on year to 805,000 t.

But the year saw little change so far in US LPG production, which was higher by around 1pc to 49.9mn t. The coming wave of US shale gas natural gas liquids (NGL) output should begin to show up in the 2012 annual statistics and was the subject of intense scrutiny at the various LPG conferences held last year. But US exports in the period did rise, totalling around 4.6mn t compared with 3.36mn t in 2010.

Chinese riseChinese LPG production also continued a strong rise, reach-ing 21.8mn t, up by 8.2pc from 2010 and reflecting the expan-sion in overall Chinese refinery capacity over the year — which grew by around 5pc in 2011. This rise in domestic production has in turn had a continued major impact on Chinese imports, which only totalled 3.4mn t in 2011, well below the peaks seen in 2005 and 2004 of around 6.5mn t.

Russia’s production growth also continued its steady momentum as a result of increases in gas processing

capacity. Output reached 12.8mn t in 2011, pushing exports sharply higher to 4.27mn t. The growth in Black Sea export volumes is another sign of changing market fundamentals, giving access to exports from Russia and Kazakhstan to the Mediterranean markets, especially Turkey. Kazakhstan produc-tion was impacted by various disruptions from its gas process-ing plants, and fell on the year by 4.4pc to around 2.1mn t/yr.

European plateauOverall LPG production in Europe, including Turkey but exclud-ing the Former Soviet Union, rose by 0.6pc year-on-year to 25.8mn t/yr in 2011. The relative plateau in European LPG output mainly reflected refinery production falls, rather than declines from the major gas processing centres of Norway and the UK. Refinery output fell in such key countries as Poland, France, Spain and Germany. This, in turn, must be placed in a wider context. Overall refinery throughputs fell for Europe and Eurasia by 0.4pc to around 19.5mn b/d according to the 2012 BP Statistical Review of World Energy. The year also saw severe financial problems hit various refineries in France and the UK.

Europe’s key LPG producer Norway saw a 3.5pc rise in output, mainly from gas processing, to just over 7mn t. Norway’s Karsto gas processing plant remains Europe’s larg-est LPG and condensate producer.

One welcome sign of industry strength in 2011 was the rise in African production, led by Algeria and Nigeria. But Angola Sudan (including South Sudan) and the relatively modest mar-kets of Kenya, the Democratic Republic of Congo and Ghana also posted gains. The region as a whole saw production rise by 7.9pc to 18.6mn t.

Asia-Pacific also saw some positive growth apart from the major regional LPG producers of China, India, Indonesia and Malaysia. Thailand in particular posted another year

An industry in transition

Statistics

Argus has just completed for the World LP Gas Association the detailed annual global LP Gas Statistical Review for 2011. The figures show an industry in transition — and new sources of supply had a powerful impact on market fundamentals in 2011

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5 September 2012Argus LPG World — Statistics

of strong output growth, reaching 5.7mn t/yr to feed its own surging domestic consumption of 6.89mn t/yr.

Pakistan saw output return to growth after contracting sharply in 2010. The country’s government in 2011 began to seriously rethink the use of LPG, as it faced continued chronic natural gas shortages. Output reached 549,000 t/yr. But Australian LPG production fell by 4pc to 2.58mn t/yr, its lowest level for over a decade.

The Indian LPG story continues to be of demand outpac-ing production, driving the need for more imports — mostly from the Middle East. Again, this is one of the key stories for a change in the global LPG flow of trade. Indian production actually dipped by 0.5pc to 9.43mn t/yr in 2011, while its con-sumption grew by a strong 7.3pc to around 15mn t/yr. Imports totalled 5mn t/yr in 2011, compared with 2.8mn t/yr in 2010. Imports were around 600,000 t/yr a decade earlier.

Japan’s LPG production shrank sharply by around 25pc to 2.47mn t/yr, its lowest for over 20 years. This reflected the tur-moil to Japan’s energy industry in the aftermath of the March 2011 earthquake and tsunami.

Demand strengthMeanwhile, global LPG consumption in 2011 rose by 2.9pc year on year to reach around 259mn t/yr — outpacing primary energy demand, which grew by around 2.2pc.

The strength in demand seems counter-intuitive given the problems faced with the continuing economic crisis in parts of the world. And if LPG relied on the residential domestic sec-tor alone, the story would have been different in 2011 — with domestic demand reaching around 116mn t, a slight drop from 117mn t in 2010.

But market pricing conditions in some parts of the world were well placed for a big boost in petrochemical consump-tion for LPG as a feedstock, with chemical demand reaching 74.3mn t/yr compared with 66mn t/yr in 2010.

Saudi Arabian petrochemical consumption reached 18.4mn t/yr in 2011, a massive 63pc rise from its chemical use of 11.3mn t/yr in 2010 — and further evidence that the king-dom has diverted much of its LPG to this sector rather than for exports. Qatar has also increased its petrochemical LPG consumption, consuming 2.93mn t/yr in 2011 compared with just 668,000 t/yr in 2010.

The US remained the world’s largest petrochemical consumer of LPG in 2011, using 21.6mn t/yr — but this was

nearly 25pc lower than in 2010.The key part of Europe’s overall consumption rise came

from a surge in use from the big chemical plants in the Netherlands, France and the UK. Demand rose to 8.7mn t, a year on year rise of around 9pc. This reflected greater strength from the EU chemicals sector than anticipated.

Overall EU chemicals production actually rose by 1.1pc last year, according to the European Chemical Industry Council — despite dire warnings from analysts that the sector would strongly contract.

The key consumer base of the residential sector experi-enced mixed fortunes across the globe. Residential demand contracted in the US, China, Japan, Brazil, Mexico, Spain, Germany and France.

But momentum continued in 2011 in the residential sec-tors of India, which saw a 7.3pc rise in overall consumption. Indonesia also showed gains, where the government’s fuel substitution programme continued to offer LPG cooking kits in return for discontinuing kerosine use.

Overall LPG demand in Europe, including Turkey and Ukraine but excluding Russia and the former Soviet Union, managed to post a modest 0.7pc year on year fall to reach 30.1mn t in 2011.

A fall in LPG consumption as a heating fuel from Europe’s LPG residential sector primarily reflected the lack of strong weather-related demand, as well as caution from household consumers in how much fuel they used.

Autogas challengesThe global autogas sector has been dominated by a few coun-tries for many years, but these countries experienced mixed fortunes in 2011. Overall global autogas demand reached 23.7mn t in 2011, just over 3pc higher than in 2010 — and welcome news to a sector that is experiencing stiff competition from a variety of other fuels.

But South Korea, the world’s largest autogas market, saw demand drop to 4.25mn t in 2011 compared with 4.46mn t in 2010 — and the same pattern of slight decline was seen in Australia, Poland and Germany.

The EU autogas sector in 2011 faced major uncertainty in changes to EU legislation proposed by the European Commission, which could at a stroke apply one rate of mini-mum fuel excise duty — removing the different levels applied by EU member states and leading to major price increases.

Top five LPG producers ’000 t/yrCountry 2011 2010 ±% 11/10

US 49,559 49,967 0.8

Saudi Arabia 27,200 26,363 3.2

China* 21,820 20,160 8.2

Qatar 13,582 6,629 104.9

Russia 12,830 12,020 6.7

*Excl Hong Kong — Argus, WLPGA

Top five LPG consumers ’000 t/yrCountry 2011 2010 ±% 11/10

US 49,472 50,233 -1.5

China* 24,040 22,440 7.1

Saudi Arabia 19,600 17,490 12.1

Japan 16,833 16,096 4.9

India 15,069 14,041 7.3

*Excl Hong Kong — Argus, WLPGA



World LP Gas Association (WLPGA) director David Tyler talked to Argus about his own views of the state of the industry as revealed in this year’s annual Statistical Review of Global LP Gas. Edited highlights follow:

What is the general state of the LPG industry?The LPG industry is unique in that we are essentially dealing with a by-product. Production levels of LPG are driven by refinery and natural gas field activities, and in that respect, the future looks promising. With the new natural gas fields coming on stream, especially in the Middle East, and the prospect of more to come, the main challenge for the industry is to find a good home for this new supply of LPG.

What do the statistics show about production growth in 2011 and where it comes from?The main increase in production in 2011 came from the Middle East, particularly Qatar, which reported an increase of nearly 6mn t/yr over 2010 levels, coming mostly from natural gas production. Total Middle East production exceeded 65mn t. This compares with around 35mn t for the region, just 10 years ago. Production levels in North America in 2011 were quite flat at around 59mn t. The only other region to show any significant growth in production was Africa, which recorded a 8pc increase to 18.6mn t.

How did LPG demand fare in 2011?The big surprise was such a small rise in residential demand worldwide to just under 116mn t in 2011 from 115mn t in 2010. Residential demand is now around 45pc of total consumption, compared with around 50pc some 10 years ago.

Some of the key drivers for LPG demand continue to be economic growth — particularly through population growth — LPG infrastructure development and a suitable regulatory framework, as well as adherence to good business practices and LPG’s relative value for money to the consumer. These drivers will most influence consumption patterns in a country where residential demand is proportionately the highest, espe-cially the ability of the consumer to pay.

Indonesia is a good example of where government policy can assist in increasing LPG demand. The government’s initiative to encourage over 50mn kerosine users to switch to LPG with incentives has had a major impact, with demand last year exceeding 4.4mn t compared with 1.2mn t in 2007 when the programme started. The nature of LPG is “use it or lose it” and as a consequence the majority of the increased production has found its way into the chemical sector as a feedstock. But future growth will continue to be generated from countries with growing populations. It is a challenge for the industry to present LPG as an affordable and available proposition to these often low income groups.

How about demand in China and the US in 2011?China consumed over 24mn t/yr of LPG last year, an increase of over 7pc compared with 2010. China remains the second highest consumer of LPG behind the US, which consumed 49.4mn t, a fall of 1.5pc over 2010.

How does the autogas sector look from these latest global statistics?If you discount the chemical sector, autogas has been the shining star of our industry and has outgrown every other market sector. The latest figures continue to show growth, with consumption volumes now exceeding 23.8mn t/yr.

Do you think that new applications such as the use of LPG in energy-efficient boiler systems or in conjunction with renewable energy and as a dual fuel in autogas, are necessary to keep the industry growing?Yes, there are several examples of LPG being used in new applications. The ones you mention are particularly excit-ing, especially blending LPG with diesel, given renewed concerns over the carcinogenic effect of diesel emissions on humans following a recent reclassification by the World Health Organisation (LPGW, 26 June, p3). LPG has a very low carbon footprint and must surely mitigate the harmful emissions from diesel engines when displacing diesel fuel in dual-fuel systems.

The WLPGA runs a Global Technology Conference (GTC) every year during the World Forum, where many new applica-tions are showcased. Last year the winner of the WLPGA inno-vation award — which is selected from submissions to the GTC — was a paper describing the successful application of LPG as a feed into fuel cells for domestic use. We of course cannot identify these new applications in the statistics because we do not report at that level, but be assured they are there.

What do you see as the role of the chemical sector in LPG fundamentals?Personally, I think it is a waste to use LPG as a chemical feed-stock when we have over 2bn people still using biomass as their primary energy. The big challenge for our industry is to make sure this exceptional energy is used in the most deserv-ing manner and the best way we can do that is to channel as much of the production into the non-chemical sectors.

What value do you think these annual statistics give to decision makers in the industry?Nowhere else will you find this data, to this degree of detail. It provides information from most countries in the world, where LPG is featured in the energy portfolio. I do not think anyone should be making strategic decisions about the future of our industry without making reference to these global statistics.

Q&A: WLPGA’s Tyler reviews statistics

Statistics



Frontline 2012 — an offshoot of the struggling shipping giant Frontline — has revealed it will continue to acquire newbuild LPG vessels following the recent purchase of two very large gas carriers for $127mn.

The company, owned by shipping tycoon John Fredriksen, also secured fixed-price optional contracts for a fur-ther four vessels for a value of $254mn,

to be delivered in 2014 and 2015.“These two vessels have fuel-effi-

cient engines and some of the latest features on-board, coming into a market that has a very small order book and an ageing fleet,” Frontline 2012 chief exec-utive Jens Jensen says. “The increase in LPG demand makes the sector attrac-tive and we expect to increase the two orders we have made.”

Shipping ratesThe very large gas carrier market saw an active end to August, with plenti-ful vessel availability — especially east of Suez. The large gas carrier and mid-sized sector saw little spot activity, which principally reflects the lack of available spot tonnage. The northwest European coaster market is subdued, with little demand for ton-nage in September so far.

Shipping/infrastructure news

Shipping ratesSpot $/t

44,000t Mideast Gulf/Japan 72.70

4,000t UKEC/Mohamedia nc 80.00

1,800t Tees/ARA nc 37.00

1,800t Tees/Lisbon 85.00

— EA Gibson

Shipping rates12-month time charter $/calendar month

78,000m³ nc 1,200,000

59,000m³ nc 950,000

35,000m³ nc 825,000

5,000m³ (west) nc 315,000

3,500m³ pressurised (west) 250,000

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Purvin & Gertz: ethylene plant gross margins (Mont Belvieu, Texas)¢/pound of ethylene

— Purvin & Gertz

Ethylene plant gross margins (Mont Belvieu, Texas) ¢/lb of ethylene

NGL economics/shipping

Ethylene plant total variable cash cost*2 Aug 9 Aug 16 Aug 23 Aug 30 Aug

Ethane (E/P mix) 10.38 10.61 9.50 9.52 8.30

Purity ethane 11.42 12.38 11.27 10.82 9.47

Propane 13.00 15.69 17.13 14.29 12.20

N-Butane 23.07 26.79 32.20 34.64 32.40

Natural gasoline 38.09 43.85 50.15 51.33 48.85

Naphtha 38.19 43.24 49.99 51.46 48.86

Gasoil 52.91 59.17 62.00 64.94 66.34

*at Mont Belvieu, Texas — Purvin & Gertz

Ethylene plant gross margins* (graph below)2 Aug 9 Aug 16 Aug 23 Aug 30 Aug

Ethane (E/P mix) 35.04 35.81 39.54 42.78 47.41

Purity ethane 34.00 34.03 37.77 41.47 46.24

Propane 32.42 30.73 31.91 38.01 43.51

N-Butane 22.27 19.55 16.77 17.57 23.23

Natural gasoline 6.20 1.43 -2.24 -0.17 5.73

Naphtha 6.08 2.03 -2.10 -0.32 5.71

Gasoil -8.64 -13.90 -14.11 -13.80 -11.77

*at Mont Belvieu, Texas — Purvin & Gertz



European butane

• Large cargo cif Amsterdam-Rotterdam-Antwerp (ARA) butane prices were higher to $948.50/t by the start of September, a rise of $77.50/t from $871/t in the second half of August.

• Butane’s value relative to naphtha rose to 96.5pc on a delivered basis by the start of September, compared with 92pc during the second half of August.

• Supply became tighter towards the end of August with talk of cargoes arriving only towards the end of the month.

• Northwest European coaster prices on a cif basis surged by over $75/t to $919/t following strong increases in naph-tha’s value and a rise in demand.

• Fob Mediterranean butane coaster prices rose by around $30/t to $925/t, driven by strong regional demand, espe-cially from Morocco and Turkey.

• Supply tightness, as surplus cargoes were absorbed by local refineries for blending purposes, also buoyed prices.

European propane

• Large cargo cif Amsterdam-Rotterdam-Antwerp (ARA) propane prices reached $945/t at the start of September.

• August cif ARA spot prices reached levels of $998/t on 23 August, almost $100/t higher than a year earlier when the highest price for the August 2011 was $901/t cif ARA.Th key contributing factors are North Sea terminal mainte-nance and tight supply.

• Arbitrage cargoes are expected into the region in September from the US , where propane supply is high.

• Northwest European coaster prices on a fob and cif basis were stable over the second half of August, reaching $875/t and $912/t, respectively.

• Fob coaster prices peaked at $925/t on 23 August, mir-roring strength in large cargo markets.

• The inland ARA market saw prices rise to $945/t by the start of August from $930/t in mid-August, despite weak demand in the region.

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Asian butane

• Saudi Aramco set the September butane monthly con-tract price (CP) at $930/t, up by $155/t compared with the previous month.

• Discussions in the 22,000t butane market were thin because of a lack of demand from petrochemical crackers. Naphtha remained the preferred feedstock as butane was comparatively more expensive.

• A Chinese importer secured a mixed 44,000t cargo at September CP plus mid-$70s/t for second-half September delivery into China.

• The pressurised market saw some spot supply avail-ability appearing from Taiwanese private refiner Formosa Petrochemicals, which issued a tender to sell 1,500-2,000t of either butane or 30:70 propane:butane loading during first-half September from its refinery in Mailiao.

• A Vietnamese trading company sold a 1,700t cargo from its loading storage at $900/t fob Vung Tau to an importer in Cambodia, for first-half September loading.

Asian propane

• Saudi Aramco set the September monthly contract price (CP) for propane at $970/t, up by $195/t from August.

• Limited fob sales from the Mideast Gulf contributed to tightening supplies in September.

• Saudi Aramco sold a full 44,000t propane cargo to a European trading firm at $930/t for early-September load-ing on a fob Ras Tanura basis. Saudi Aramco also sold a 44,000t cargo on a fob Yanbu basis at $1,020/t, loading 23-25 September.

• Saudi Arabia’s domestic petrochemical demand has strengthened, drawing away export availability.

• Abu Dhabi’s Adgas sold a mixed 44,000t cargo for 5-11 October loading from Das Island at October CP plus $8/t.

• Thailand’s state-controlled importer PTT secured an evenly-split cargo from a north Asian importer at September CP plus high-$60s/t for 23-24 September arrival into Sri Racha.

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Americas propane

• Spot propane prices at the US trading hub of Mont Belvieu, Texas, fell sharply over the second half of August hitting 78.87¢/USG, or 35pc the value of WTI by 27 August.

• Primary storage caverns continue to fill in the US and could reach full capacity of 75mn bl in the first half of September (see p1).

• Propane at Mont Belvieu averaged 40pc of WTI in August, compared with around 74pc at the start of September one year earlier as high inventories and limited export capacity continue to suppress values.

• The market has slipped into a stronger contango as the forward price curve into the end of 2012 steepened during August. Outer-month propane activity was robust. Spreads between calendar 2013 and calendar 2014 traded at parity and at a 0.5¢/USG contango during the latter half of August.

• Midcontinent propane prices rallied to a high of 84.75¢/USG by the end of August.

Americas butane and ethane

• Ethane prices at Mont Belvieu fell to 13pc the value of WTI, the lowest value relative to crude in several years, dur-ing the last week in August, reflecting continued oversupply on the Gulf coast.

• Ethane’s price relative to propane averaged 39pc in August, compared with 48pc one year ago as fundamen-tals for both feedstocks remained weak.

• Butane prices at Mont Belvieu rose sharply in August, from 131.13¢/USG at the start of August to 152.13¢/USG by 30 August.

• Mont Belvieu butane’s value relative to crude strength-ened to 68pc from 62pc during the month of August.

• Midcontinent butane prices rose to 147.63¢/USG for the week ended 24 August before falling to a low of 140¢ /USG during the last week of the trading month. Demand from refiners ahead of the seasonal gasoline specification change on 15 September has supported butane prices in the midcontinent.

Markets

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Propane Mont Belvieu non-LST ¢/USGPropane Mont Belvieu non-LST ¢/USG

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Propane Mont Belvieu LST percentage to Nymex WTI %Propane Mont Belvieu LST percentage to Nymex WTI %

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Butane Mont Belvieu non-LST ¢/USGButane Mont Belvieu non-LST ¢/USG

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Ethane Mont Belvieu ¢/USGEthane Mont Belvieu ¢/USG



INTERNATIONAL LPG

Markets

Naphtha $/tAug 11 Sep Oct Nov Dec Jan 12 Feb Mar Apr May Jun Jul Aug

Cargoes cif NWE 939.55 940.53 882.48 865.59 876.75 949.60 1,029.17 1,068.64 1,029.61 877.61 730.66 826.15 934.77

Cargoes c+f Japan 946.11 946.70 883.55 578.35 902.54 955.56 1,032.07 1,074.01 1,035.56 897.81 746.32 833.72 939.86

Ethane ¢/USGAug 11 Sep Oct Nov Dec Jan 12 Feb Mar Apr May Jun Jul Aug

Mont Belvieu 73.86 79.33 90.05 87.42 80.77 66.71 49.62 53.05 49.56 41.75 30.33 34.77 35.40

Chinese domestic prices yuan/tAug Sep Oct Nov Dec Jan 12 Feb Mar Apr May Jun Jul Aug

East China terminal

Ningbo ex terminal 6,721 6,657 6,210 6,121 6,312 6,620 7,393 8,346 7,603 6,517 5,542 5,905 6,805

Wenzhou ex terminal 6,721 6,686 6,463 6,350 6,350 6,617 7,393 8,507 7,706 6,925 5,958 6,100 6,860

Taicang ex terminal 6,721 6,671 6,210 6,121 6,312 6,620 7,393 8,507 7,603 6,531 5,542 5,894 6,805

Shanghai ex terminal 6,743 6,695 6,370 6,221 6,374 6,618 7,354 8,575 7,641 6,891 5,604 5,902 6,793

Zhangjiagang ex terminal 6,721 6,664 6,210 6,121 6,312 6,620 7,393 8,507 7,603 6,531 5,543 5,905 6,805

Fujian ex terminal 7,018 6,642 6,467 6,400 6,400 6,643 7,393 8,641 7,856 7,450 6,500 6,273 6,888

East China refinery

Shanghai ex refinery 6,070 6,381 5,770 5,879 6,041 5,743 6,388 7,405 7,244 5,864 5,340 5,893 6,495

Zhenhai ex refinery 6,294 6,612 6,022 6,136 6,352 6,161 6,783 7,766 7,465 6,213 5,648 6,139 6,770

Yangzi ex refinery 5,964 6,292 5,737 5,841 6,006 5,778 6,365 7,320 7,071 5,858 5,291 5,826 6,453

Fujian ex refinery 6,302 6,396 5,908 5,999 6,282 6,318 6,744 7,562 7,150 6,091 5,369 5,764 6,330

Gaoqiao ex refinery 5,965 6,242 5,699 5,769 5,854 5,624 6,263 7,423 7,150 5,806 5,183 5,701 6,295

South China terminal

Zhuhai ex terminal 6,767 6,606 6,253 6,267 6,444 6,785 7,489 8,641 7,842 6,580 5,859 6,196 6,764

Shenzhen ex terminal 6,883 6,712 6,388 6,360 6,473 6,795 7,499 8,647 7,891 6,771 5,894 6,250 6,781

Raoping ex terminal 6,285 6,342 5,908 6,035 6,295 6,505 7,185 8,341 7,319 6,030 5,335 5,734 6,376

Nansha ex terminal 6,848 6,660 6,328 6,348 6,458 6,812 7,506 8,681 7,884 6,796 5,810 6,216 6,781

Shantou ex terminal 6,256 6,271 5,825 5,880 6,260 6,505 7,187 8,568 7,319 6,164 5,368 5,734 6,376

Yangjiang ex terminal 6,369 6,443 6,143 6,073 6,280 6,462 6,945 7,626 7,268 6,110 5,424 5,963 6,468

South China refinery

Maoming ex refinery 6,284 6,441 6,182 6,110 6,349 6,410 6,881 7,640 7,339 6,175 5,500 5,964 6,491

Guangzhou ex refinery 6,387 6,515 6,192 6,148 6,366 6,434 6,964 7,788 7,328 6,156 5,457 6,016 6,515

Northeast China refinery

Daqing ex refinery 5,233 5,498 5,710 5,269 6,349 5,203 5,345 6,291 6,609 6,009 4,918 5,150 5,905

Dalian ex refinery 5,900 6,193 6,003 5,798 6,366 5,850 6,105 7,109 7,463 6,123 5,135 5,627 6,269

Northwest China refinery

Urumqi ex refinery 4,451 4,424 4,570 4,126 4,107 4,150 4,226 5,089 5,350 4,950 4,663 4,641 4,750

Inland China refinery

Lanzhou ex refinery 5,727 5,832 5,903 5,550 5,512 5,530 5,724 6,689 6,781 5,482 4,900 5,271 5,820

Yan-An ex refinery 5,470 5,875 5,456 5,279 5,451 5,278 5,771 6,643 6,528 5,360 4,663 5,318 5,857

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Propane export prices Saudi, Algeria, North Sea $/tPropane export prices Saudi, Algeria, North Sea $/t


5 September 2012Argus LPG World — Prices monthly

PropaneSep 11 Oct Nov Dec Jan 12 Feb Mar Apr May Jun Jul Aug Sep

Middle East $/t

Saudi Arabia 790.00 735.00 750.00 770.00 850.00 1,010.00 1,230.00 990.00 810.00 680.00 575.00 775.00 970.00

Kuwait 790.00 735.00 750.00 770.00 850.00 1,010.00 1,230.00 990.00 810.00 680.00 575.00 775.00 970.00

Mediterranean $/t

Algeria (Sonatrach) 830.00 770.00 775.00 790.00 810.00 950.00 1,160.00 955.00 815.00 660.00 580.00 765.00 930.00

Spot prices $/t

Large cargo cif ARA 828.43 780.79 804.25 820.58 887.50 1,030.76 1,032.77 921.13 714.66 610.16 756.27 920.98

Large cargo cif Lavera 816.73 768.21 791.32 807.95 873.02 1,034.57 1,031.02 915.13 731.14 625.71 773.36 938.66

Large cargo USGC 807.10 760.79 753.48 721.00 668.65 629.73 na na na na na na

Large cargo Japan CFR 800.02 777.88 821.79 846.95 968.82 1,121.12 1,123.98 924.33 756.21 654.33 774.39 969.39

Large cargo East China CFR 799.48 776.68 821.41 845.29 968.82 1,121.12 1,123.98 924.33 756.21 653.48 774.39 969.39

Large cargo South China CFR 799.02 775.48 821.17 843.62 968.82 1,121.12 1,123.98 924.33 756.21 652.91 774.39 969.39

Large cargo Far East Index 799.52 776.68 821.48 845.29 968.82 1,121.12 1,123.98 924.33 756.21 653.62 774.39 969.39

Asia spot premiums to CP $/t

Mideast Gulf -2.23 -2.00 4.10 4.26 -3.79 -35.88 -51.00 -20.70 -26.52 -22.43 11.96 15.88

South China (pressurised) 87.35 90.65 92.07 101.76 99.45 82.79 53.02 83.93 82.59 93.64 139.64 127.69

East China (refrigerated) 21.80 39.73 68.02 65.10 83.03 81.12 -61.11 -32.33 -23.98 -0.29 158.89 148.69

South China (refrigerated) 21.34 38.63 67.79 63.43 83.03 81.12 -61.11 -32.33 -23.98 -0.86 158.89 148.69

Taiwan 29.05 41.93 62.21 56.00 57.55 52.45 3.18 28.13 31.93 41.33 91.71 92.21

Japan 29.57 43.03 62.45 56.86 57.55 52.45 3.18 28.13 31.93 41.33 91.71 92.21

Mont Belvieu ¢/USG

LST 156.02 147.16 145.77 139.56 129.51 122.06 125.91 119.39 95.01 78.62 87.40 89.73

Non-LST 156.15 147.19 145.60 139.18 129.15 122.27 126.15 119.47 94.94 78.17 87.26 89.68

Europe $/t

Coasters fob NWE 784.09 780.81 773.36 800.48 846.43 977.14 981.71 888.03 669.55 561.58 698.30 852.50

Barges fob NWE 860.80 789.10 816.25 821.00 859.05 1,088.45 1,078.11 959.68 711.59 623.37 775.75 880.80

Coasters fob Med 870.80 837.40 823.68 798.00 882.26 1,047.74 1,042.73 936.58 762.61 619.74 737.96 879.09

ButaneSep 11 Oct Nov Dec Jan 12 Feb Mar Apr May Jun Jul Aug Sep

Middle East $/t

Saudi Arabia 865.00 815.00 810.00 820.00 910.00 1,040.00 1,180.00 995.00 895.00 765.00 620.00 775.00 930.00

Kuwait 865.00 815.00 810.00 820.00 910.00 1,040.00 1,180.00 995.00 895.00 765.00 620.00 775.00 930.00

Mediterranean $/t

Algeria (Sonatrach) 915.00 865.00 820.00 830.00 910.00 1,005.00 1,110.00 1,005.00 940.00 690.00 590.00 760.00 925.00

Spot prices $/t

Large cargo cif ARA 901.41 841.71 820.68 842.05 948.93 1,002.40 1,029.55 983.84 794.77 601.58 722.55 876.23

Large cargo cif Lavera 919.89 861.60 838.36 865.93 988.36 1,043.55 1,058.14 1,016.11 836.52 620.87 750.23 927.23

Large cargo USGC 845.90 783.62 792.75 893.67 872.35 809.28 na na na na na na

Large cargo Japan CFR 880.09 835.63 862.55 898.52 1,015.21 1,062.14 1,085.91 992.63 850.75 705.33 799.77 938.41

Large cargo East China CFR 880.09 834.43 862.17 896.86 1,015.21 1,062.14 1,085.91 992.63 850.75 704.48 799.77 938.41

Large cargo South China CFR 880.09 833.23 861.93 895.19 1,015.21 1,062.14 1,085.91 992.63 850.75 703.91 799.77 938.41

Large cargo Far East Index 880.09 834.43 862.24 896.86 1,015.21 1,062.14 1,085.91 992.63 850.75 704.62 799.77 938.41

Asia spot premiums to CP $/t

Mideast Gulf 3.07 -1.93 5.38 5.12 -2.37 -35.88 -51.00 -19.95 -14.77 -17.55 14.36 14.43

India cfr 20.73 15.90 46.74 55.67 53.87 1.00 -47.21 38.25 -4.16 4.43 102.18 101.12

South China (pressurised) 88.18 90.65 97.31 101.76 99.45 82.79 53.02 79.43 82.14 93.64 139.64 127.69

East China (refrigerated) 27.14 22.83 51.88 65.71 77.66 4.98 -61.46 17.23 -14.57 -23.76 147.82 127.38

South China (refrigerated) 27.14 21.63 51.64 64.05 77.66 4.98 -61.46 17.23 -14.57 -24.33 147.82 127.26

Taiwan 31.50 35.10 53.69 56.00 54.34 24.33 -5.89 45.75 37.73 36.91 86.34 84.86

Japan 31.50 36.20 53.93 56.86 54.34 24.33 -5.89 45.75 37.73 36.91 86.34 84.86

Mont Belvieu ¢/USG

LST 190.76 176.99 179.01 201.29 196.58 182.65 185.52 178.81 154.77 117.37 123.31 134.95

Non-LST 191.96 180.59 182.37 203.09 197.63 187.64 192.86 191.09 165.05 128.60 133.02 145.93

Europe $/t

Coasters fob NWE 879.30 822.86 785.57 812.30 961.86 965.00 959.57 922.95 737.98 540.87 668.09 817.05

Barges fob NWE 884.80 842.93 800.55 823.25 932.00 955.31 995.27 953.74 759.32 576.82 688.48 838.11

Coasters fob Med 938.59 883.02 904.02 904.13 1,037.14 1,115.00 1,073.75 1,066.05 901.18 674.47 796.27 890.23

LPG World - Argus Media · Nemov New York: John Demopoulos, Maggie King, Ian Stewart, Nasreen...

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