alan hayes lpg summit nigeria · argusmedia.com lpg summit nigeria novmber2019 alan hayes vp...

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LPGSummitNigeriaNovmber 2019AlanHayesVPBusiness DevelopmentLPG&OlefinsArgusMedia

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Agenda

1 Globaloverview

1a Supply

1b Demand

2 Tradeandprice

3 FocusonME

4 Developmentsinlocalmarkets

5 Someuncertainties

illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 4Copyright©2018ArgusMediagroup.Allrightsreserved.

AtlanticBasisandARA• Propanestandardcontract• LargeCargotradethroughoutAtlanticBasis

• Barge&CoasterTradinginARA

ConnectingtheAsiancontinent• UsedextensivelyAcrossAsia• Twolargestimportmarkets• Millionsoftonsofphysical• Deepandwidederivativesmarket

ArgusLPGbenchmarksfacilitateglobaltrade

ArgusLargeCargoCIFARA

ArgusFarEastIndex

MainpricingbenchmarkformainlandEurope• RefineryproducedLPG• Robustbasis• DerivedfromcifARA(last5daysminusyearlyfreight

KeybenchmarkforRussian&CentralEuropetrade• AllRussianrailcartrade• Central,EasternandBalticRegion

• Russiantaxcalculations

ArgusdafBrest

ArgusNorthSeaIndex

illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 55Copyright © 2019 Argus Media Ltd. All rights reserved.

RegionalLPGtradeflowshaveincreased

US

Exports:+14pc

Imports:+9pc

Mexico

Imports:-7pc

Europe

Exports:+6pc

Imports:-4pc

Russia

Exports:-0.2pc

China

Imports:+15pcJapan

Imports:-1pc

India

Imports:+13pc

Australia

Exports:-1pc

Algeria

Exports:-5pc

Brazil

Imports:-20pc

SouthKorea

Imports:-16pc

Qatar,SaudiArabia,UAE

Exports:-3pc

Thailand

Imports:+41pc

Annualimport/exportchanges,2017/18


Keytakeawaysfromglobalreview§Strongsupplygrowthtocontinue,ledbytheUS§Asiawillcontinuetodrivedemand– particularlyinthepetchemanddomesticsectors

§Asaresultofsupplyoverhang,priceswillcontinuetobeheldatrelativelylowlevelsversuscrudeandnaphtha

§LPGwillneedtocontinuetopriceatalevelsthatsupportsgrowth

§ThereisanOpportunitytodevelopNewMarkets


Productioninkeyregionsbeyondthenextdecadeisforecasttogrow

0

50

100

150

200

250

300

350

400

2010 2015 2020 2025 2030

mnt

Africa Europe LatinAmerica

MiddleEast NorthAmerica Asia-Pacific

RussiaandCentralAsia

— ArgusConsultingServices

LPGproductionbyregion,2010-30


GasprocessingwillberesponsibleforthemajorityofincrementalsupplyLPGproductionbysource,2010-30

0

50

100

150

200

250

300

350

400

2010 2015 2020 2025 2030

mnt GasProcessing Refinery



ThesourceofLPGvariesfromregiontoregionLPGproductionbysourceandregion,2017

Europe

25%

75%

LatinAmericaAsia-Pacific

36%


18%

82%

18%

Africa

82%

NorthAmerica

79%

21%

16%

64%

84%

MiddleEast

91%

9%

Refineryproduction

Gasprocessing


USshaleefficienciesareadriverforincreasedUSexportsUSshalerigcount,productionandefficiency,2007-18

-

200

400

600

800

1.000

1.200

1.400

1.600

1.800

2.000

-

200

400

600

800

1.000

1.200

1.400

1.600

1.800

Jan13 Jan14 Jan15 Jan16 Jan17 Jan18

Rigstomaintainlegacyproduction(leftaxis) Rigcount(leftaxis)

Productionperrig(b/d,rightaxis)

— EIA;ArgusConsulting

Rigs b/d


GrowthinUSNGLproductionConsensusUSCrude&NGLProductionGrowth,2010-2030


Agenda

1 Globaloverview

1a Supply

1b Demand

2 Tradeandprice

3 FocusonME


5 Someuncertainties


Globally,theresidential&petchemsrepresenttwo-thirdsofdemand

LPGdemandbysector,2018

40%

26%

9%

7%

7%

11% Residential

Petrochemical

Transport

Industrial

Commercial

Other

— Argus ConsultingServices


Asia,alreadythelargestdemandregion,isforecasttoseecontinuedstronggrowth

Incrementalchangesindemandbyregion,2015-2030

-5.000

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

2015-20 2020-25 2025-30

'000t

Africa Europe LatinAmerica MiddleEast NorthAmerica AsiaPacific RussiaandCentralAsia



TwosectorsdriveglobaldemandIncrementalchangesindemandbysector,2015-2030

-5.000

0

5.000

10.000

15.000

20.000

2015-20 2020-25 2025-30

'000t

Residential Petrochemical Transport

Industrial Commercial Other



DemandinAsiaisunderpinnedbygrowthintheresidentialandpetchemsectors

LPGAsiandemandbysector,2010-30

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

180.000

200.000

2010 2015 2020 2025 2030

'000t

Residential Petrochemical Industrial Commercial Transport Other



Thedemandsplitisforecasttoremainrelativelystable

Globalsplitofdemandbetweenpropaneandbutane(est.)2010-30

0

50

100

150

200

250

300

350

400

2010 2015 2020 2025 2030

mntPropane Butane



Agenda

1 Globaloverview

1a Supply

1b Demand

2 Tradeandprice

3 FocusonME


5 Someuncertainties


NorthAmericanexportsforecasttoriseLPGavailableforexportbyregion,2010-30

0

20

40

60

80

100

120

140

160

180

2010 2015 2020 2025 2030

mnt Africa Europe LatinAmerica

MiddleEast NorthAmerica Asia-Pacific




Asianimportrequirementsareballooninganddiversifying

WeforecastasignificantincreaseinLPGdemandinAsia,andacorresponding

increaseinimportrequirements.

In2010,JapanandKoreaaccountedforalmost60pcofLPGimportrequirements.By2030,theywillaccountfor

around15pc

Combinedsmallermarketswillneed19mntofLPGin2030–threetimesmorethan2010

LPGimportrequirementinselectedAsiancountries,2010-30

0

20

40

60

80

100

120

2010 2015 2020 2025 2030

mnt Japan Korea China India OtherAsia

Other Asiaincludes:Bangladesh,Indonesia,Pakistan,Philippines,SriLanka,Taiwan,Thailand,Vietnam— ArgusConsultingServices


LPGisforecasttoremainstructurallylongthroughthenextdecade

SupplyOverhang

Moreinvestments

ininfrastructure

Upgradesand

newbuilds

Growthinpetrochemical

demand

GlobalnetLPGbalance,2010-2030

-50

0

50

100

150

200

250

300

350

400

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

mntTotalConsumption TotalProduction NetPosition



Thedifferenceinmarketlengthisforecasttonarrowoverthemedium-term

-0,8

-0,6

-0,4

-0,2

0,0

0,2

0,4

0,6

0,8

1,0

2005 2010 2015 2020 2025

kb/d

LPGtradebalance Naphthatradebalance


LPGandnaphthabalance,2005-2025


LPGpricehasdotheheavyliftingtobalancethemarket

RelativepriceofLPGhasundergonehugechanges

Supplyrevolutionpushedpricesdownto50%0f

naphtha

Demandbuildoutquicklypusheditbackcloseto

historicalnorms

Enteringanotherperiodofweakness

PropanevNaphthaPrices2010-2025

40%

50%

60%

70%

80%

90%

100%

PropaneRelativePriceStrength

AsiaPropane/NaphthaRationNWEuropePropane/NaphthaRatio(blue)


Agenda

1 Global overview

1a Supply

1b Demand

2 Tradeandprice


4 Someuncertainties


Pricesareconnectedmorethanever

200

250

300

350

400

450

500

550

600

ButaneUSGCexportHoustonclose,USD/t

ButaneARA/UKlargecargoLondonclose,USD/t

ButaneArgusMiddleEastIndexSingaporeclose,USD/t GlobalRegionsare

connected• Pricesreflectthisinter-connectivity

• Pricestrendacrosstheglobe

IncreaseinseaborneLPGtrade


§ Africasitsataninterestingpoint– between2bigtradinghubs,andabletotradewithmultipleregions.The“logical”pricesshouldbethelowestdeliveredpricelogisticallyachievable.

§ Moreoftenthannot,pricesinNigeriaareheavilyinfluencedbyimportprices.

§ Therefore,ArgushaslaunchedanewWestAfricaLPGIndex– basedonthelowestpriceofLPGdeliveredtoLagosfromeithertheUSGCorNWE.

Alongmarketleadsto“delivered”pricing


LPGproductioninNigeriaisforecasttorise

RisinggasproductionwillsupportNigeria’s

LPGoutput

WeforecastLPGproductiontoriseto5milliontby2025

Risingproductionfacilitatearisein

exports

NigerianLPGproduction2010-2030

0

1.000

2.000

3.000

4.000

5.000

6.000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

NigerianProduction&Demand

Propane Butane Consumption


Domesticdemandwillrisebutnotaheadofproduction

Nigerianexportsareforecasttoincreaseby600ktby2030

Propaneexportswillcontinuetodominatebutbutaneexportswillrisealso

NigerianLPGexportswillhavetocompete

The propane:butanemixwillhelp

NigeriaLPGexports2010-2030

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

NigeriaLPGExports

Propane Butane


Nigeria’sOpportunity– Drivingdomesticdemand

ImportsTotal 515,996 MarketShareUS 226,000 44%

Other 289,709 56%

LPGImports12months

0

1.000

2.000

3.000

4.000

5.000

6.000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

NigerianProduction

Propane Butane

ShipTrackingData

‘000t

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§ LPGsupplyanddemandcontinuestogrowinaneraofabundantgasproductionandincremental

cookingfuelandfeedstockneeds

§ Thepaceofproductionshouldseeattractivepricesrelativetonaphthaandcrude

§ Asiaislargelytheprice-settingregion,andwhenChinastopsbuying,globalpricestendtofall

§ ThereisarealneedforapricingmechanismthatgenuinelyreflectsmarketdynamicsinWAF– wehope

thatournewIndexcanbepartofthesolution.

§ Similarly,inordertoensurethatexportersfullycapturemarketvaluewhileremainingcompetitive

exportpricesmustbebasedonmarketfundamentals

BigPicture


LPGmarketisprimed

TheGlobalLPGMarkethasundergoneasupplyrevolution

Globaltradehasfacilitatedopeningupnewmarkets

Opportunitytobenefitfromthismarketupheaval

Benefitswillbelonglastingandtransformational

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illuminatingthemarkets

MarketReportingConsulting

Events

AlanHayesVPBusinessDevelopmentLPGandOlefins

alan hayes lpg summit nigeria · argusmedia.com lpg summit nigeria novmber2019 alan hayes vp...

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