lpg world - argus media · 7/10/2012 · the deal marks eneos globe’s first term contract to buy...

T W I C E M O N T H L Y NEWS, PRICES AND ANALYSIS VOLUME XVIII, ISSUE 13, 10 JULY 2012

LPG World

© Argus Media Ltd www.argusmedia.com

Editorial: Making history 2

News/inventories

Gaspol grabs Orlen Gaz cylinder business 3

Rubis sells assets 3

Japanese imports increase 4

Study mulls Marcus Hook NGL reincarnation 4

Chinese imports surge 5

Toyota urged to keep autogas models 6

Kazakh terminal ships direct to China 6

Features

Puerto Rico sees propane generation role 7

Autogas positions itself for EU benefit 7

US ethane supply builds as price dives 8

Norway’s strike threat unsettles market 9

Q&A: WLPGA’s Kelly on Cooking for Life 10

Data

Shipping 11

Market review — Europe 12

Market review — Asia 13

Market review — Americas 14

Prices 16

Inside

Jan Apr Jul Oct500

600

700

800

900

1,000

1,100

1,200201020112012

Propane cif NWE $/tPropane cif ARA $/t

Jan Apr Jul Oct500

600

700

800

900

1,000

1,100

1,200

1,300

201020112012

Propane Saudi CP $/tPropane Saudi CP $/t

Leading Japanese LPG importer Eneos Globe has signed a term contract with US firm Enterprise Products Partners to import US LPG through the expanded Panama Canal

Japanese LPG buyers are gearing up to secure more imports from the US as the expected increase in availability of rising shale gas production — and the planned expansion of the Panama Canal — give east Asian importers more supply options.

Japanese LPG importer Eneos Globe has signed a deal with US midstream natural gas liquids (NGL) giant Enterprise Products Partners to buy around 200,000 t/yr of propane from 2014, when the expansion of the Panama Canal is expected to be completed (see p2).

The increased capacity will allow more and larger carriers to pass through the canal, shortening shipping times to northeast Asia.

Fob dealThe deal marks Eneos Globe’s first term contract to buy LPG from the US, which has been agreed on a fob basis linked to Mont Belvieu market prices, the company says. Eneos Globe has not revealed the period of the contract.

Fellow Japanese importer Astomos Energy has had a term contract with Enterprise since around 2009 to buy an undisclosed amount of LPG. Astomos is expected to buy 100,000-200,000 t/yr of propane at Mont Belvieu-linked prices for the next few years. “We want to reduce our dependence on supply from the Middle East,” Astomos says. The com-pany may increase US import volumes depending on prices.

Enterprise says it could export 50mn bl, or around 4mn t of propane, from its terminal on the Houston Ship Channel in 2013. The increase is based on a project to double LPG loading capacity at the ter-minal to 10,000 bl/hour, which is on track for completion by the end of the year. This will contribute to a 75pc increase in US propane exports to 65mn bl/yr from the current 37mn bl/yr, Enterprise says (LPGW, 17 August, p7).

The firm’s latest projections for the expected surge in US NGL supply put US ethane production rising to up to 1.3mn b/d by 2015, propane and butane higher by 21pc to 810,000 b/d and up to 480,000 b/d, respectively. Where the extra US NGL supply will be used is one of the key unknowns in market projections at present (see p2).

Japan’s LPG imports in fiscal year 2011 increased by 3.4pc to 12.4mn t from 12mn t in the same period a year earlier, according to Japan’s finance ministry. Imports from the US rose by 38.6pc to 194,987t in the same period.

The US until now has remained one of Japan’s smaller LPG suppliers, given the problems involved with shipping long-haul from the US Gulf not using the Panama Canal. The US share of imports is just 1.6pc.

Japanese petrochemical producers have increased LPG imports taking advan-tage of competitive LPG prices that dipped below the cost of rival feedstock naphtha.

Japan looks to US supply

‘The Norwegian strikes have led to uncertainty in the market’ — European LPG broker (see p9)

© 2012 Argus Media Ltd www.argusmedia.com

10 July 2012Argus LPG World

A term supply deal between Japanese and US LPG firms marks a moment of some historical significance for the global LPG sector.

Japanese LPG importer Eneos Globe has signed an agreement with US mid-stream natural gas liquids (NGL) giant Enterprise Products Partners to buy around 200,000 t/yr of propane from 2014, when the expansion of the Panama Canal is expected to be completed (see p1).

This is Eneos’ first US term contract, although Japanese rival Astomos set up a term supply contract with the same US company in 2009.

The deal stands out because it forges an entirely new long-haul LPG export link, which relies on the existence of two key infrastructure expansions.

The first such expansion is the mas-sive $5.2bn upgrade of the Panama Canal to include new locks, widening of exist-ing channels and the creation additional shipping channels. The revamped Canal will allow for the first time traffic of very large gas carriers from the US Gulf over to the Pacific and east Asian markets. The expansion is around 40pc complete.

The second expansion comes from Enterprise, which is busy upgrading its exports terminal on the Houston Ship Channel (LPGW, 18 May 2011, p8). Enterprise shipped a record 3.9mn bl in April, but will increase its capacity to export propane by up to 3.5mn bl/month by the fourth quarter of 2012.

Both projects would help free up what could become a new vital passage

of US NGLs to the consuming markets of east Asia, primarily Japan, South Korea and China.

If US LPG production was simply sta-ble — as it had been for much of the last decade, then the expansions would make limited commercial sense.

But US shale gas extraction has led to a surge in US NGL supply. Total NGL sup-ply from shale gas is around 300,000 b/d but could rise to over 1mn b/d by 2017, according to estimates by US consultancy Purvin & Gertz — nearly one third of total US NGL supply.

The LPG industry has been debating

the likely destination of all this extra sup-ply for some time, but the Panama Canal possibility has tended to be downplayed in the discussions.

The wave of US NGL supply has pushed US prices lower and out of their customary relationship with Europe and Asia-Pacific — such that importing US LPG makes commercial sense. This explains why over the past 12 months the markets have seen a sea-change in the pricing relationship between US NGL prices and international prices.

At present, US exports to east Asia are minimal. And the Eneos deal is for a relatively small amount — considerably less than the 3.6mn t/yr Japan imports from Qatar, for example. But it is a start.

The final challenge is whether Japan actually needs new sources of LPG, given its gradual decline in domestic LPG demand. The key word is gradual. Demand peaked last decade, but its 16mn t/yr market depends on 12mn t/yr of imports. The Japanese value long-term relationships with producers. But com-mercial opportunity beckons and new relationships are being forged.

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 (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, 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, Fiona Riches, Euan Sadden, Alex Sands, Ayca Sera Rodop, Ruth Sharpe, Toby Shelley, Matthew Sotherton, Katherine St Lawrence, Eva Stepniewska, Matt Stone, Ewan Thomson, Jack Tunstall, Saket Vemprala, Kathleen Wainwright, 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, 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, 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 Moscow: Mikhail Gulyaev (bureau chief), Teymuraz Arkhangelskiy, Ekaterina Bedash, Julia Buneeva, Grigory Chugunov, Elvira Chukmarova, Tatyana Demidova, Julia Gapeeva, Dmitry Goncharenko, Anastasia Goreva, Dmitry Grigolaya, Rauf Guseinov, Maria Ivanina, Oleg Kirsanov, Yagmur Kurbanov, Vladislav Kurshakov, Alexei Morshchagin, Sergei Nacharov, Svetlana Novolodskaya, Victor Parno, 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: Elsa Brechotte, Will Collins, Richard Cretollier, Zuzi Durica, Jane Faulkner, Jacob Henriksson, Sam Johnson, 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, 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.

Making history


10 July 2012Argus LPG World — In brief

Europe & FSURubis sells assetsEurope’s third-largest LPG distributor Rubis has announced the sale of its LPG distribution businesses in Senegal and the Czech Republic for €23m ($29mn). Vitogas Senegal was sold at the end of June to Puma Energy, while the sale of the company’s Czech subsidiary has been signed and is currently undergoing approval by the local competition authori-ties. The sales are aimed at improv-ing Rubis’ competitive advantage after significant developments of its business portfolio in the past few years, Rubis says. Rubis markets LPG under the Vitogaz, Gaz’L and Vito brands. It is also a large independent storage operator in France for liquid industrial products including oil, fertilisers and chemicals.

Turkish LPG demand faltersTurkish autogas consumption rose by less than 2pc to 208,792t in April, compared with the same month a year earlier as the poor economic environment suppressed domestic demand. The use of piped LPG fell by 10pc to 72,016t, according to the most recent data published by the coun-try’s energy regulator EPDK. LPG imports rose by less than 1pc year on year to 247,157t in April.

AfricaMoroccan production favours butaneMoroccan propane production fell by almost 40pc year on year to 7,876t during the first quarter. But butane consumption in the country remained strong. Butane production continued to rise steadily to reach 27,883t, according to government data published last month. Butane sales rose by almost 10pc to 573,047t, while sales of propane were down by around 4pc to 47,040t.

Puma boosts African LPG presenceTrading firm Trafigura subsidiary Puma Energy has completed its purchase of LPG distributor Vitogaz Senegal and the 5,000m³ LPG terminal at Dakar port. Puma also bought a 5,000m³ LPG termi-nal in Benin in April. Angolan state-owned oil firm Sonangol has a 20pc stake in Puma, which is in talks to buy Kenya-based oil trader KenolKobil. Senegal con-sumes around 112,000 t/yr of LPG.

Skikda upgrade work beginsAlgeria’s state-owned Sonatrach began planned upgrade work on its 300,000 b/d Skikda refinery on 1 July. Skikda is the largest refinery in the country. The work will entail a full shutdown for two weeks,

followed by 50pc reduced capacity for up to six months. The refinery is a major exporter of naphtha and gasoline into the Mediterranean market. It exports some three 30,000t cargoes of naphtha and a smaller number of gasoline cargoes each week. It also supplies the domestic market with LPG. The upgrade is part of a $4.2bn investment to revamp Skikda and two other refineries in the country — the 50,000 b/d Arzew and 58,000 b/d Algiers. Algeria intends to raise its refin-ing capacity to around 600,000 b/d by 2015 from 447,000 b/d.

Asia-PacificVietnam reinstates LPG import duty Vietnam has reintroduced a 5pc tariff on LPG imports effective 20 June, following a sharp decline in state-owned Saudi Aramco’s Contract Price (CP) over the past three months. The 5pc import tariff had been scrapped on 2 March, after the trade body for LPG importers and distributors the Vietnam Gas Association appealed for a review following a surge in LPG prices. Vietnam is a net importer of LPG with imports of 745,490t in 2011, according to Vietnamese customs figures.

Polish distributor Gaspol has signed a deal to buy the LPG cylinder business of rival Orlen Gaz. The move solidifies Gaspol’s leading position in Poland’s cylinder market.

The transaction is conditional and will be finalised following approval from Poland’s competition authorities. The companies have not disclosed financial terms of the deal.

Gaspol — the Polish subsidiary of Dutch LPG distributor SHV Energy — is the country’s largest distributor of LPG cylinders, and would control around 30pc of the market on completion of the deal, market participants say.

Orlen Gaz sells about 23,000 t/yr in cylinders, which is about 7pc of the mar-ket. The sale of the cylinder business is in line with the company’s strategy to focus on core areas, including its wholesale business and autogas distribution.

Poland consumed about 330,000 t/yr of LPG cylinders last year, which is down by 4.3pc from the previous year. LPG cylinders in Poland are mainly used for cooking in areas where there is no access to the gas grid.

Cylinder consumption has been steadily falling in past 10 years as the country’s natural gas grid penetration continues to improve.

Gaspol grabs Orlen Gaz cylinder businessAustralia’s LPG exports fell by 66pc to 48,587t in May from 144,844t in April as prime customer Japan imported less butane and propane.

Propane exports declined to 23,755t in May from 54,355t in April, while butane shipments fell steeper, with exports at 24,805t in May from 90,451t in April, according to Australian Bureau of Statistics data.

The fall in shipments was a result of a drop in exports to Japan to 21,014t of propane in May com-pared with 52,978t in April. Japan’s butane imports dropped to 23,585t in the month of May from 77,977t in April. Australian LPG exports totalled 476,529t in the five months to the end of May.

Australian LPG exports fall


10 July 2012Argus LPG World —

Japan’s LPG imports in May rose by 4.5pc on the month to 1.1mn t, with imports of propane and butane increas-ing by a respective 4.1pc and 6.1pc to 908,713t and 226,251t, according to finance ministry data. Japanese import-ers raised LPG procurement in May after cutting purchases in April.

Imports from Saudi Arabia in May more than doubled to 211,545t from 92,468t in April. Australian supply increased by 42.2pc to 202,681t, while

imports from Qatar rose by 19.9pc to 331,597t. Japanese importers also increased purchases from the US, rais-ing imports by 96.6pc to 65,020t. The increases outstripped declines in sup-ply from Kuwait and UAE.

Total LPG imports for the first five months of this year totalled 5.7mn t, up by 11.9pc compared with 5.1mn t in the same period last year. Import figures released by the ministry reflect cargoes that have received customs clearance.

In brief

US stocks of propane in primary stor-age increased by 857,000 bl for the week ended 29 June, about half of the rise that market participants expected. Propane inventories on the US Gulf coast increased by 1pc, or 223,000 bl, to 29mn bl, and inventories in the midcontinent were up by 275,000 bl to 25.8mn bl. East coast inventories added 247,000 bl, to 5.3mn bl, while inventories in the Rocky Mountains and on the west coast were up by 5pc.

US stocks rise again

South Korean private-sector LPG stocks increased on the month by 22.9pc in May to 265,731t as a result of higher production. Propane stocks rose by 19pc to 144,568t, while butane stocks increased by 27.8pc to 121,164t. LPG production increased by 17.7pc to 158,809t as refining rates rose by 6.3 percentage points to 88.9pc over the period. The rise in output offset a 2.7pc fall in imports in May to 479,083t.

South Korean stocks riseJapanese imports increase

US propane inventories mn blRegion 22 Jun 29 Jun 1 Jul 11

East coast 5.006 5.253 4.333

Midcontinent 25.482 25.757 18.27

US Gulf coast 28.797 29.020 17.746

Rocky Mts, west coast 2.091 2.203 1.159

Propylene* 3.735 4.147 2.257

Total 61.376 62.233 41.508

*included in US Gulf coast total — EIA

The best reuse options for US firm Sunoco’s idled 175,000 b/d Marcus Hook refinery in Pennsylvania are as a site for natural gas liquids (NGL) pro-cessing and fractionation or as an ethane cracker to produce ethylene and deriva-tives, according to a study produced by consultancy IHS for the Delaware County Industrial Development Authority.

Reuse options were designated as either energy-based or chemical-prod-uct. Additional energy-based options include natural gas-to-liquids produc-tion and storage, a natural gas liq-uefaction and LNG export terminal, a refined products import terminal or the expansion of existing natural gas power generation assets.

Another chemical-product reuse option was a propane dehydrogena-tion facility to produce propylene, which Brazilian chemical producer Braskem

could use at an adjacent polypropylene facility it purchased from Sunoco in 2010, according to the study.

Some of the site’s advantages include excess utility infrastructure, several light hydrocarbon fractiona-tion towers that could easily be repur-posed, berths that can accommodate clean product tankers and plentiful on-site storage capacity. Disadvantages include a shallow, 40ft (12m) draft in the Delaware River, no independent sup-ply of hydrogen and limited access to inexpensive midcontinent crude, a major reason the refinery shut down.

The report says around $2bn-3bn of capital spending would be required to repurpose the site to crack ethane. Another option would require a more modest capital outlay of $300mn-400mn to alter the facility to process NGLs or for propane dehydrogenation.

Study mulls Marcus Hook NGL reincarnation

South Korean LPG balance ’000tMay Apr May 11 ±%

May/Apr

Production 158.8 134.9 166.6 17.7

Propane 73.05 71.02 61.21 2.9

Butane 85.75 63.90 105.39 34.2

Imports 479.08 492.52 354.67 -2.7

Propane 201.16 261.08 132.08 -23.0

Butane 277.92 231.44 222.59 20.1

Consumption 671.81 632.56 625.32 6.2

Propane 256.13 276.73 232.78 -7.4

Butane 415.68 355.83 392.53 16.8

Exports 243 11.03 162.0 -97.8

Stocks 265.73 216.25 132.99 22.9

— KNOC

Japanese LPG imports tMay 2012 Apr 2012 May 2011

Saudi Arabia 211,545 92,468 133,567

Qatar 331,597 276,512 295,638

Kuwait 77,675 172,570 82,650

UAE 225,028 300,315 234,743

Australia 202,681 142,493 116,960

Others 86,438 102,194 45,931

Total 1,134,964 1,086,552 952,301

— Finance ministry


10 July 2012Argus LPG World — China

China imported 344,500t of LPG dur-ing the month of May, reaching its highest level since September — and more than doubling volumes imported in April — according to Chinese cus-toms data.

The spike in spot imports reflected renewed interest from price-sensitive Chinese importers.

Rapid falls in Asia-Pacific spot val-ues were accompanied by the reduc-tion of the Saudi Aramco May contract price for propane to $810/t and to $895/t for butane, lower by $90/t and $100/t on the month, respectively.

Inventories at Chinese terminals have also dwindled owing to steep falls in imports volumes during the first quarter, which helped to boost spot demand for May arrival cargoes.

As a result, May imports into China rose by 209,300t compared with 135,200t in the previous month. This brought total imports during the first five months of this year to 931,900t, just over 16pc lower com-pared with the 1.11mn t imported dur-ing the same period one year earlier.

The surge in imports also boosted demand for Chinese re-exports, with sales from Chinese terminals hitting historic highs of 159,800t in the month of May to buyers in neighbouring countries including the Philippines, Vietnam and South Korea.

Imports surge Chinese LPG imports ’000tImports by country May Jan-May Jan-May 11 ±% Jan-May 12/11

Saudi Arabia 92.2 220.4 70.0 215.0

UAE 46.9 186.5 163.6 14.0

Qatar 34.8 148.5 254.1 -41.6

Kuwait 98.5 134.0 176.4 -24.0

Iran 26.4 87.7 329.2 -73.4

Bahrain - 16.7 16.7 0.2

Total Middle East 298.8 777.1 1,010.0 -23.1

South Korea 0.0 70.8 50.1 41.3

Malaysia 22.0 22.0 -

Other Asia-Pacific - 7.6 47.3 -83.9

Total Asia-Pacific 22.0 100.4 97.4 3.1

Nigeria 23.3 53.2 -

Kazahkstan 0.3 1.1 3.0 -62.6

Other countries - - - -37.3

Other regions 23.6 54.4 3.1 1,659.9

Total imports 344.5 931.9 1,110.5 -16.1

Imports by product

Liquefied propane 194.2 588.5 657.6 -10.5

Liquefied butane 149.9 342.3 452.9 -24.4

Other LPG 0.3 1.1 - <0.1

Imports by province

Guangdong 217.3 632.7 771.8 -18.0

Guangxi 45.3 70.9 58.3 21.6

Total south China 262.6 703.6 830.1 -15.2

Shanghai 53.2 119.5 147.7 -19.1

Jiangsu - 19.3 34.6 -44.2

Zhejiang 28.3 88.1 94.7 -7.0

Shandong 0.0 0.0 0.1 -84.0

Total east China 81.5 226.9 277.1 -18.1

Xinjiang 0.3 1.1 3.0 -62.6

Liaoning 0.0 0.3 0.2 29.2

Other provinces - 0.0 0.0 -34.8

NW/NE/N China 0.3 1.4 3.3 -56.3

Total Imports 344.5 931.9 1,105.5 -16.1

Chinese LPG exports ’000tDestination May 12 Jan-May Jan-May 11 ±% Jan-May 12/11

Hong Kong 40.2 146.6 146.5 0.1

Philippines 45.2 126.0 98.8 27.5

Vietnam 15.2 100.6 156.5 -35.8

South Korea 43.5 87.3 49.5 76.4

Malaysia 6.2 26.7 30.0 -11.0

Macau 5.3 23.8 21.8 9.1

Indonesia 1.5 5.0 0.0 >100.0

Singapore 2.1 4.7 2.0 139.0

Cambodia - 4.0 2.0 102.5

Thailand - 2.5 10.1 -75.3

Other countries 0.6 2.8 4.3 -35.1

Total Exports 159.8 529.9 521.4 1.6


10 July 2012Argus LPG World — Asia-Pacific/FSU

Japan’s faltering autogas market faces a new threat from automobile manufacturer Toyota as it mulls whether to reduce or cancel production of autogas-fuelled vehicles.

Industry groups the Japan LP Gas association (JLPGA) and Japan LP Gas Sales association (JLPGSA) — represent-ing the country’s LPG importers and wholesalers, respec-tively — have written to Toyota asking the firm to continue production of its autogas-fuelled models, especially for use in the taxi fleet. The associations stressed the importance of LPG-powered vehicles in terms of consumer choice and for its cleaner fuel burn.

Halting productionThe letter follows recent suggestions that Toyota may stop production of taxi-class autogas-fuelled vehicles in the near future. “We cannot say anything related to our future business strategy,” the company says.

If Toyota does stop manufacturing these types of vehi-cles, the impact on Japan’s autogas industry will be signifi-cant, JLPGSA says. The automobile manufacturer supplies around 80pc of the country’s autogas-fuelled vehicles used by Japan’s taxi market — which accounts for around 84pc of all taxis. This means that Toyota has a 67pc share of the entire taxi sector.

A decision by Toyota to halt production of autogas-fuelled taxis would force the fleet to shift to models that run on con-ventional fuels such as gasoline, or electric cars — piling further pressure on the already-dwindling autogas market.

The associations stressed the big contribution made by

autogas in helping the country’s vehicular fleet keep moving following last year’s earthquake and tsunami (LPGW, 6 April 2011, p9). The disaster forced several refineries to shut, sparking shortages of gasoline and diesel. But autogas was less affected as Japan relies mostly on imports to meet LPG demand. The associations also noted autogas’ environmen-tal credentials, with the fuel producing an estimated 6-18pc less CO2 compared with gasoline.

Japan’s autogas demand fell by 5.6pc to 1.1mn t in fiscal year 2011 ending on 31 March from 1.2mn t a year earlier. This was the ninth consecutive annual decline since 2002-03, when demand totalled 1.54mn t, JLPGA data show. Improved fuel efficiency and a gradual fall in the number of taxis on the road have eaten away at demand.

Road to recoveryThe JLPGA plans to reverse the decline with an ambitious target to increase the number of autogas-fuelled vehicles ten-fold by 2031 (LPGW, 1 May, p8). But its strategy envisages an increase in autogas demand from the passenger car sector rather than the taxi industry to achieve the target.

The association’s plans would see the number of autogas-fuelled vehicles rise to 2.6mn from the current level of 250,109. This in turn would boost autogas consumption by 55pc to 1.7mn t/yr from around 1.1mn t/yr at present, JLPGA estimates.

Taxis consumed 93pc of autogas demand in Japan dur-ing the last fiscal year, according to transport ministry data. And autogas accounted for 7pc of Japan’s total LPG con-sumption in the period, JLPGA data show.

Toyota urged to keep autogas models

Kazakh firm Asia Gas plans to begin LPG shipments direct to China by tank containers this autumn, according to chief executive Ailey Suleymanov.

The transportation of LPG via pure rail tanks, which run on Kazakh rail lines, is prohibited in China. But tank contain-ers are different, as they can be used “intermodally” on trucks or rail — and, crucially, moved on different rail gauges using a different chassis.

“Kazakh LPG exporters need to put the product into the tank containers in order to deliver it to China, and currently no one has the opportunity to ship big volumes,” Suleymanov says.

Asia Gas will launch this September its LPG transloading terminal at the

Burunday rail station, located 18km from the Kazakh capital of Astana. The com-pany invested €5mn ($6.1mn) to build the terminal, which has a storage capac-ity of just 250t. “Using our terminal will reduce the logistic costs by $80-90/t, because LPG will be shipped to storage facilities by Kazakhstan’s internal rail tariff,” Suleymanov says.

Market participants say Chinese state-owned CNPC and other trading companies, which ship LPG from the 160,000 b/d Chimkent refinery, may use the new terminal. Only CNPC has the capability to ship up to 1,000-1,200t of LPG from the Zhanazhol gas processing plant to China in tank containers. The Chinese company began shipments of

LPG in tank containers last year. Kazakh LPG is currently exported to

China via the border crossing at Dostyk-Alashankou. But railcar backlogs are a regular occurrence because of the slow handling and changing of rail wheels. Traders say around 4,000 rail tanks are currently standling idle.

Asia Gas intends to provide storage services at the Burunday terminal for third party use. The main clients of the new storage include Kazakh firm Helios and CNPC subsidiary Sino Oil, according to local traders.

The cost of storage is estimated at around $38/t per month, but it is expected that discounts may be offered to third par-ties that store more than 200t.

Kazakh terminal promises easier access to China



Puerto Rico is turning to propane as a power generation fuel as it seeks to comply with tougher US emissions standards promulgated by the US Environmental Protection Agency (EPA).

State-owned utility Puerto Rico Electric Power Authority (Prepa) is in the process of converting units 5 and 6 — which have an aggregate capacity of 440MW — at its 840MW combined-cycle turbine San Juan plant. The units will con-sume around 10mn USG/month (19,000 t/month) of propane for power generation as early as September. A second plant at Aguirre, in the country’s south, may also be converted to burn propane over the next 18 months, Prepa senior purchasing, logistics and strategy manager Ramon Caldas says.

Quick uptakePuerto Rico is urgently assessing options to cope with new emission regulations enacted by the EPA. Puerto Rico’s gov-ernor-appointed Intersectoral Committee on Environmental Compliance and Energy Alternatives on 19 June recommended in its report that the country move quickly to convert its power plants to natural gas and to secure US supplies of LNG.

But the report also points out that propane is “a viable short-term alternative for reducing fuel costs, because pro-pane is cheaper than the diesel fuel used in these combus-tion turbines. This option was recently presented to the com-mittee and has its support to be used immediately, but not for more than five years, or until natural gas can be brought to San Juan area plants”.

Prepa has some of the highest electricity prices in the region and is a heavy emitter because it burns residual fuel oil and distillate oil for its base-load generation. The utility expects to spend around $2.8bn-3bn this fiscal year on petroleum

products for power generation. The San Juan plant’s units 5 and 6 burn distillate No. 2

oil. Major propane retailer Tropigas is expected to provide the plant with propane storage capacity, and the conversion should be completed in three to six months.

Supply contractsThe retailer has agreements with European LPG trader Geogas for propane imports, according to Tropigas executive Rodolfo Quinones. And the Government Development Bank for Puerto Rico has been named as the agency responsible for buying Prepa’s LPG.

Prepa also plans to convert its 1,500MW Aguirre plant to burn propane. Engineering studies for the construction per-mits are being made to convert units 1 and 2 of the available 458MW of distillate oil-fired, combined-cycle capacity to gas. The company would need around 500,000 bl of semi-refrig-erated floating storage to fire the units at about 80pc utilisa-tion, Puerto Rican retailer Empire Gas vice-president Ramon Gonzalez says. The two plants could consume 25mn USG/month of propane after the conversion process, depending on their utilisation rate, Caldas says.

Meanwhile, Puerto Rico’s upcoming elections in November would see Prepa’s capital investment contracts being sus-pended from September until January 2013, Caldas says. But the propane conversions will not be affected.

The island’s electricity generation mix is currently 67pc liquid fossil fuels, 23pc natural gas, 8pc coal and 2pc renew-able fuels. But those figures will change drastically if the territory manages to execute its transition to natural gas and renewables by 2016.

Puerto Rico sees propane generation role

Emissions

The EU autogas sector could receive an indirect boost from the European Commission in the latest twist to upcoming legislation.

The commission on 11 July may pre-sent proposals aimed at implementing a 2020 CO2 emissions limit of 95g/km of CO2 for new cars. Manufacturers will have to pay fines if they exceed the limits.

The move forms part of new regula-tions that aim to reduce the average CO2 emissions of car fleets per automo-bile manufacturers.

On conservative well-to-wheel esti-mates, including a 2010 in-house com-mission study, a medium size LPG-fuelled

car would account for some 10-15pc less CO2 emissions than comparable diesel and gasoline cars vehicles.

The European LPG association (AEGPL) argues that taking into account the relatively lower emissions profile of autogas vehicles would help manufac-turers meet their CO2 reduction goals. It would also help them to comply with more stringent emission standards with-out extra significant costs.

The AEGPL also cites estimates that an originally gasoline-fuelled car emit-ting 134.4g/km of CO2 at the tailpipe would emit 120g/km once converted to LPG. Autogas-fuelled cars represent

just 3pc of the overall European pas-senger car fleet.

The European Parliament insisted in the 2009 regulation on a binding aver-age CO2 emissions limit of 95g/km by 2020, and had this limit included in its legal text. But the 2009 regulation has no clear provisions on how the target should be reached.

“Tighter CO2 standards will be wel-comed by drivers across Europe who will save an average of €500/yr ($616/yr) in fuel costs if the 95g/km of CO2 limit is adopted,” says Greg Archer, cars policy manager for environmental organisation Transport and Environment.

Autogas positions itself for EU benefit



Despite a forecasted supply glut, the forward curve for US ethane recently moved to a steep contango — as near-term supplies of the feedstock this year look likely to grow faster than consumption.

The ethane price discount of third quarter 2012 volumes to calendar 2013 reached 3.62¢/USG on 7 June. Meanwhile, spot prices for ethane at Mont Belvieu tumbled in June, averaging 30.18¢/USG, less than half the value of ethane prices during the same period last year (see graph). Ethane averaged 15pc the value of WTI in June, well under last year’s value of 33pc.

The price weakness and contango reflects brimming US ethane stocks, which built steadily throughout the first quarter and start of the second quarter.

Ethane inventory data from the US Energy Information Administration (EIA) historically has a two-month lag, but the agency’s latest figures for the start of May put US ethane stocks at 33mn bl.

High stocksThis was the highest level since July 1995, when ethane sup-plies stood at just under 31mn bl — and the highest since EIA records began in 1967. Stocks rose by 3mn bl over February and March.

Natural gas liquids (NGL) market analysts anticipate stocks grew again throughout May, primarily as a result of maintenance at several ethylene crackers on the US Gulf coast. One US NGL analyst forecasts that US ethane invento-ries could have been as high as 35mn-40mn bl by the end of May. Although this growth may have levelled off as ethylene plants came back on line in June, it is doubtful the US will have had the ability to work off the supply overhang.

At the midcontinent trading hub of Conway, Kansas, stor-age levels are so high that Conway prices for ethane:propane

mix hit an all-time low of 2.25¢/USG on 3 July, according to Argus data.

Overall NGL inventories remain so high that storage cus-tomers at US midstream Enterprise Products Partners’ Mont Belvieu, Texas, facility received letters from the operator in mid-June requesting that they “maintain an inventory balance at or below their storage volume per their contract”. “Co-operation from our shippers in this matter will assist us in avoiding brine containment issues resulting from excessive inventory levels,” the notice says.

Meanwhile, outer-month values for ethane are still rising as traders anticipate a surge in demand as ethylene crackers come back on line in June — including several that have been modified in the interim to crack larger quantities of ethane.

“While the much-anticipated spike in ethane prices follow-ing cracker turnaround season has not yet materialised, we expect ethane prices to rebound modestly in 3Q,” Deutsche Bank analyst David Begleter says. And Houston-based con-sultancy EnVantage estimates US ethane consumption will grow by 100,000 b/d this year.

Ethane supply builds as price dives

Americas

Pennsylvania, which aims to lure the petrochemical industry to the state, has passed an ethylene manufacturing tax credit worth 5¢/USG ($2.10/bl) of ethane purchased as feedstock for up to 20pc of the qualified taxpayer’s total liability.

The credit will be available in 2017 for 25 years, as long as the manufacturer invests at least $1bn in an ethylene pro-duction facility and creates 2,500 jobs during the construction phase.

Pennsylvania governor Tom Corbett proposed the legislature as part of the state’s annual budget in order to

“keep the petrochemical supply chain in Pennsylvania,” a spokesman says.

Much of the Marcellus shale, with its wealth of ever-expanding natural gas liquids production, falls within Pennsylvania state lines.

Shell Chemicals, which intends to build an ethylene plant in western Pennsylvania, says it is concerned that if various planned pipelines take away regional ethane, there would not be suffi-cient supply to operate an ethylene plant at full capacity for the life of the facility without some sort of added incentive.

Midstream companies Enterprise Products Partners and Markwest Energy Partners have proposed pipelines to carry ethane out of Pennsylvania. The pipelines could have an aggregate ethane capacity of over 300,000 b/d.

Lawmakers in Pennsylvania are “cautiously optimistic” that this new law — which would effectively pay for the construction of a company’s ethane cracker — will attract more than just Shell Chemicals and help create an integrated petrochemical industry that will support long-term job growth.

Pennsylvania passes ethane tax credit

Jan Apr Jul Oct25

50

75

100

201020112012

Ethane Mont Belvieu ¢/USGEthane Mont Belvieu ¢/USG



Norwegian oil industry employers organisation OLF has announced industrial action to start from 10 July, which could shut in all of the country’s oil, gas and LPG production.

The lock-out threat comes after mediation talks in a pen-sion dispute failed on 5 July. No further talks between OLF and trade unions are planned. The lock-out, if implemented, would halt all Norwegian May production of 2mn b/d oil and natural gas liquids (NGLs) and 276.3mn m³/d of gas. Strike action has already shut in up to 250,000 b/d of crude output since 24 June.

Norway’s labour ministry had said it continues to monitor the situation. The government is entitled to intervene in the dispute if it endangers the national economy.

A complete shutdown would have a serious impact on the fundamental supply and demand of the northwest European LPG market, which is heavily dependent on North Sea supply. Operations under threat include up to five very large gas carrier propane cargoes out of the giant Norwegian NGL hub of Karsto over this month.

Norway is Europe’s largest LPG producer and the world’s third-largest LPG exporter. The country exports around 5.5mn t/yr of its 7mn t/yr LPG output to northwest Europe, the Mediterranean and Asia-Pacific.

State-controlled Statoil dominates the domestic LPG market and holds around 70pc of equity in Norwegian pro-duction. It exports LPG from the Karsto and Mongstad gas processing facilities in Norway, which are operated by trans-

mission system operator Gassco.A shutdown in production will also hit other big energy

multinationals with equity in Norwegian fields and Norwegian LPG output, including Total, BP and Shell.

The northwest European market is currently tight in supply. But at the end of July up to 120,000t of propane imports are due to start arriving from the US and west Africa.

The threat of a lock-out comes at a time when LPG trad-ers are already struggling to secure spot cargoes. European LPG prices have been rising since the start of July as LPG traders have returned to the market to pick up spot supplies for July delivery.

Benchmark large cargo propane levels on a cif Amsterdam-Rotterdam-Antwerp (ARA) basis rose in the first week of July to $740/t — up by $100/t since the end of June — buoyed by spot demand from the trade to cover contract commitments in the storage sector.

Back to backwardationEuropean traders traditionally return to the market during the low-demand third quarter to buy cargoes for primary stor-age, in advance of the high demand fourth quarter. But the strength of July spot demand has pushed the market into unexpected backwardation.

On the forward curve, July propane swaps traded at a premium of $20/t above August by the end of the first week of July, compared with just $2/t at the start of the week (see graph). This return to backwardation highlights the premium in the market for July cargoes, owing to the scarcity of prompt supply.

The rise in demand for July cargoes has also pushed propane’s value relative to naphtha to a discount of $90/t — making it less attractive to petrochemical customers. The price relationship between LPG and naphtha is an important one over the summer months as petrochemical demand usually guarantees a floor price for propane and butane.

Northwest European propane prices reached lows of 82pc of naphtha in June, leading to a spurt in spot demand from the petrochemical sector, which also cut into North Sea spot availability.

Norway’s strike threat unsettles market

Northwest Europe

“Statoil has halted all market discussions, so is not willing to sell anything before it knows the real impact and production goes back to normal. Naturally, the market sentiment has got very bullish, probably more on the uncertainty of the length of this strike, than on the volume lost.” — North Sea LPG trader

“The Norwegian strikes have certainly had an impact on availabilities and led to uncertainty in the market. If the Karsto cargoes were no longer available in July, the market would be very tight and people who need to cover existing sales would struggle to find cargoes.” — European LPG broker

“We are already desperate for product now. A 20,000t large cargo was supposed to have arrived from the North Sea and has not. Now there is so little spot product around, I could sell 5,000t in 15 minutes.” — Belgian LPG trader

“The outlook for the rest of July is linked to the strike out-come as this impacts the July/August calendar spread.”— European LPG trader

Market reactions

Jul 11 Oct Jan 12 Apr Jul-250

-200

-150

-100

-50

0

50

100

150

$/tNWE: Propane differential to Naphtha

Naphtha = 0

NWE: Propane differential to naphtha $/t


10 July 2012Argus LPG World — Europe

The World LP Gas Association (WLPGA) recently announced its pioneering Cooking For Life initiative at the UN Rio+20 sum-mit last month (LPGW, 26 June, p1). Argus interviewed WLPGA deputy managing director Michael Kelly, who discussed the goals of the programme. Edited highlights follow:

What made you decide that now was the right time to kick-start the Cooking for Life initiative?UN secretary-general [Ban Ki-moon] launched the Sustainable Energy for All programme this year, so we decided to create Cooking for Life as a way to allow the LPG industry to par-ticipate fully in the initiative — in a way that would adequately represent the interest of the LPG industry. It also allows us to co-operate with various organisations, for example the World Bank, by developing a partnership with its African Clean Cooking initiative.

When was Cooking for Life launched?We had a soft launch recently at the Rio+20 [sustainable development] negotiations last month. The official launch will take place at the WLPGA Forum this September in Bali.

What is the nature of the programme? Is it mainly educational or commercial?It is primarily to educate cook stove makers and rep-resentatives of development organisations on the potential long-term health benefits for communities by switching to LPG.

How far along is the programme?We have made a significant amount of progress. There seems to be growing recognition that indoor pollution exists, and there are solutions available such as LPG.

The WLPGA is a member of the Global Alliance for Clean Cook Stove initiatives led by the UN Foundation. Is there any direct UN or World Bank involvement in Cooking for Life?We have a working partnership with the African Clean Cooking Initiative, which is a World Bank project. We will formally announce our co-operation in Bali. We are planning to focus on three to four sub-Saharan African markets to pro-mote and incentivise the safe growth of the LPG market. The potential candidates are Kenya, Uganda, Tanzania, Ghana and Cameroon.

We are looking at these markets because they have critical issues that LPG can help solve and are experiencing substan-tial economic growth. They are facing the problem of acceler-ated deforestation, which needs to be slowed down. Also, as the purchasing power of the population increases, people are looking for a modern fuel to replace charcoal.

Countries would need to make an upfront investment for the necessary infrastructure to be able to use LPG. How would you convince them?It will be a case of highlighting the comparative advantages of LPG. The amount of infrastructure required for LPG to be up and running is relatively minimal compared with natural gas. The construction cycle also tends to be shorter. Cylinders and drilling plants are the biggest infrastructure investments for LPG. They are easier to put together than that for natural gas.

Do you have any regional priorities apart from sub-Saharan Africa?That is our first region of focus. In the future, we plan to expand our scope of influence to parts of west Asia and south-east Asia, the Indian subcontinent and Latin America.

What goals do you aim to achieve by the end of the programme’s five-year span?

Our primary aim is to reach key decision-makers including governments and multi-lateral development organisations that decide on infrastructure, funding and lend-

ing. We aim to make them aware of alternative fuel types and understand the potential benefits

of LPG. We do not aspire to educate end-users our-selves. We would assume market participants representing LPG in individual markets would have better access to, and understanding on, local consumers.

Are you excited about the campaign?Yes, I am excited. We have been endorsed by UK celebrity chef Jamie Oliver, who recognises that cooking should not kill or make you ill. We as an industry believe the indoor air pollution and the related health problems caused by cooking with traditional fuels is a very important issue to deal with. LPG has the capacity for improving people’s lives. I have seen it over and over again. As soon as it is introduced to a community, women’s lifestyles have improved immediately and exponentially.

What do you see as the biggest challenges to replacing traditional cooking fuels with LPG? The first is policy-makers’ lack of awareness of LPG’s poten-tial, although that is less the case today. Also, there is resist-ance from end-users who are afraid of LPG products. The first 20 clips on Youtube concerning LPG show explosions. We encounter this negative perception everywhere. We run educational campaigns to correct this perception and we tend to rely on the aspirational middle class in new markets as our change agents.

Q&A: WLPGA’s Kelly explains cooking initiative

‘UK celebrity chef Jamie Oliver

recognises that cooking should not kill or make

you ill’



Norwegian shipping firm Odfjell has bought two LPG/ethylene gas carriers with 9,000m³ carrying capacity each — the Gas Sumbawa and Gas Lombok — from two Singaporean companies owned by LFT Group. The vessels were built in South Korea in 2008.

Delivery is expected to take place between August and September.

Odfjell is re-entering gas shipping to

benefit from the forecasted growth in the LPG and LNG markets. The firm says it hopes that its existing brand name and global marketing and operational network will put its new operations in a strong position.

Odfjell already has a significant presence in the chemicals shipping market, and says it is considering further investment in the LPG market.

Shipping ratesThe disruptions caused by Norwegian strike action and logistical problems at the Black sea port of Novorossiysk — because of severe weather — pro-vided most of the focus for discussion on the shipping market. Very large gas carrier market rates eased lower and rising bunker fuel prices are an additional cause for concern for ves-sel owners.

Shipping/infrastructure news

Shipping ratesSpot $/t

44,000t Mideast Gulf/Japan 67.85

4,000t UKEC/Mohamedia 85.00

1,800t Tees/ARA nc 49.00

1,800t Tees/Lisbon 96.00

— EA Gibson

Shipping rates12-month time charter $/calendar month

78,000m³ 1,000,000

59,000m³ 900,000

35,000m³ nc 850,000

5,000m³ (west) nc 315,000

3,500m³ pressurised (west) nc 265,000

3,500m³ pressurised (east) 237,500

US ethylene plant gross margins ¢/lb of ethylene

7 Jun 14 Jun 21 Jun 28 Jun 5 Jul0

10

20

30

40

Ethane (E/P mix) Propane N-Butane

Natural gasoline Naphtha

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

— Purvin & Gertz

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

Ethylene plant total variable cash cost*7 Jun 14 Jun 21 Jun 28 Jun 5 Jul

Ethane (E/P mix) 7.89 7.00 7.08 6.20 7.52

Purity ethane 9.61 8.75 8.94 8.06 9.13

Propane 7.54 7.09 9.52 8.50 8.87

N-Butane 27.23 25.30 19.92 15.83 20.47

Natural gasoline 31.74 26.97 22.39 24.19 31.33

Naphtha 30.14 25.61 20.97 21.18 27.82

Gasoil 44.48 43.60 43.23 42.90 46.17

*at Mont Belvieu, Texas — Purvin & Gertz

Ethylene plant gross margins* (graph below)7 Jun 14 Jun 21 Jun 28 Jun 5 Jul

Ethane (E/P mix) 32.04 30.93 32.35 35.12 32.03

Purity ethane 30.31 29.18 30.49 33.36 30.42

Propane 32.38 30.84 29.90 32.92 30.68

N-Butane 12.62 12.55 19.43 25.52 19.00

Natural gasoline 7.06 9.83 15.91 16.10 7.09

Naphtha 8.64 11.17 17.31 19.10 10.58

Gasoil -5.70 -6.82 -4.94 -2.62 -7.76

*at Mont Belvieu, Texas — Purvin & Gertz

NGL economics/shipping



European butane

• Large cargo cif Amsterdam-Rotterdam-Antwerp (ARA) prices mirrored gains on crude and naphtha markets and rose to $725/t, up by over $105/t compared with the begin-ning of the month.

• Price gains were compounded by lack of North Sea spot supply forcing buyers to cover requirements on the coaster and barge markets.

• Butane’s value relative to naphtha rose to 90pc com-pared with 82pc at the start of July. Product tightness is expected to persist for most of July, with arbitrage cargoes not anticipated to arrive until the end of the month.

• Butane coaster levels on a cif basis rose by over $100/t to $660/t, tracking firmer naphtha values. Butane prices in fob coaster markets rose by around $95/t to settle at a midpoint of $605/t, in line with freight rates.

• Fob Mediterranean butane prices were up by almost $90t to $735/t, largely in line with naphtha increases in northwest Europe.

European propane

• Large cargo cif Amsterdam-Rotterdam-Antwerp (ARA) prices were pushed sharply higher at the beginning of July by product shortages in the North Sea and lack of arbitrage cargoes.

• Prices climbed by $185/t to $750/t cif ARA. Propane’s value relative to naphtha also rose to 93pc from 84pc.

• The pick-up in propane prices was mirrored on the for-ward curve, with propane swaps trading at a $80/t discount to naphtha in July, compared with a discount of $100/t at the beginning of July.

• July swaps are also trading at a steep premium of $25/t compared with August. The lack of prompt availability has tipped the market back into backwardation.

• European coaster prices rose strongly by $150/t to around $675/t on a fob basis, largely tracking gains in large cargo markets. But spot demand for small cargoes is thin, with only sporadic buying from storage facilities such as the UK’s Immingham and Tess, lending support to prices.

Markets

Jan Apr Jul Oct500

600

700

800

900

1,000

1,100

1,200

201020112012

Propane cif NWE cargoes large $/tPropane cif NWE cargoes large $/t

Jan Apr Jul Oct500

600

700

800

900

1,000

1,100

1,200

1,300201020112012

Propane fob ARA barges $/tPropane fob ARA barge $/t

Jan Apr Jul Oct500

600

700

800

900

1,000

1,100

201020112012

Butane cif NWE cargoes large $/tButane cif NWE cargoes large $/t

Jan Apr Jul Oct500

600

700

800

900

1,000

1,100

201020112012

Butane fob ARA barges $/tButane fob ARA barges $/t



Asian butane

• Saudi Aramco set the July monthly contract price (CP) for butane at $620/t, narrowing the propane:butane spread to $45/t from $85/t in June.

• A western major sold 44,000t pure butane of US origin in two shipments. The two 22,000t cargoes were slated for second-half July delivery into Japan.

• The pressurised market saw Philippines importer Petron buy via tender three 2,500t cargoes from a major, with a ratio of 30:70 propane:butane arriving during the second half of July at around the July CP plus $135/t cfr.

• Petron also issued a term buy tender for pressurised cargoes arriving during August 2012-July 2013.

• Pakistan State Oil issued a buy tender for two 250-500t 30:70 propane:butane pressurised cargoes arriving during July-August into Karachi.

• South Vietnam importer Saigon Petro sought via tender 900t of pressurised cargo into Cat Lai during 4-6 August.

Asian propane

• Saudi Aramco set the July monthly contract price (CP) for propane at $670/t, a decrease of $5/t from June. The new CP was generally in line with market expectations.

• A spike in spot sales for July-lifting from Saudi Aramco failed to dampen bullish sentiment. Two mixed 44,000t cargoes for first-half July loading from Ras Tanura were sold at around $560-561/t for propane and $600-605/t for butane. Then a 44,000t propane cargo was sold in quick succession at $566/t for early-July loading.

• Saudi Aramco also sold a mixed 44,000t cargo from Ras Tanura to a European trader for 24-27 July loading. The pro-pane and butane fetched $600/t and $650/t, respectively.

• Qatar’s Tasweeq sold three mixed 44,000t spot cargoes for July-loading fob Ras Laffan on a fixed price basis.

• Northeast Asian buyers secured several cargoes of 22,000t propane at July CP plus premiums of $61-70.50/t for second-half July delivery, while a first-half August cfr cargo sold at August CP plus $67/t.

Markets

Jan Apr Jul Oct500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

201020112012

Propane Argus Far East Index $/tPropane Argus Far East Index $/t

Jan Apr Jul Oct-100

-50

0

50

100

150

201020112012

Propane cfr Japan premium $/tPropane cfr Japan premium to CP $/t

Jan Apr Jul Oct-150

-100

-50

0

50

100

150

201020112012

Butane cfr Japan premium $/tButane cfr Japan premium to CP $/t

Jan Apr Jul Oct500

600

700

800

900

1,000

1,100

1,200

1,300

201020112012

Butane Argus Far East Index $/tButane Argus Far East Index $/t



Americas propane

• Spot propane prices at the US trading hub of Mont Belvieu, Texas, remained range-bound in early July, mov-ing from 79.5¢/USG on 25 June to 80.875¢/USG on 6 July.

• Activity was low-key as many US traders remained on holiday in the first week of July.

• Propane’s value relative to crude weakened from 42pc of WTI to only 40pc of crude by 6 July.

• An oversupply of propane in the US is depressing front-month prices, and the forward curve remains steeply contango heading into 2013. On 6 July, a 2013 calendar strip at Mont Belvieu traded at a 4¢/USG premium to the front month.

• Mont Belvieu propane averaged 39.6pc of WTI during the first week of July, well below the 66pc of crude seen during the same period in 2011.

• Conway propane declined by 1.25¢/USG since 22 June to 51¢/USG by 6 July.

Americas butane and ethane

• Ethane prices at Mont Belvieu remained lower than expected during the first week of July as petrochemical buyers have been slow to return to the spot market follow-ing maintenance at several facilities last month.

• Ethane’s value relative to propane averaged 38pc dur-ing the first week in July, as it lagged gains seen in the heavier feedstock.

• Ethane’s forward curve remains steeply contango amid low prices for July, although outer-month activity was thin during the first week in the month.

• Butane prices at Mont Belvieu rose sharply, from 114.37¢/USG on 25 June to 127.06¢/USG on 6 July, as discount relative to gasoline spurred buying interest.

• Butane averaged 62pc of WTI during the first week of July, down from 78pc one year earlier.

• E/P mix at Conway hit a record low of 2.25¢/USG as over-supply and a lack of storage weighed on prices.

Markets

Jan Apr Jul Oct50

75

100

125

150

175

201020112012

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

Jan Apr Jul Oct30

40

50

60

70

80

90

100

201020112012

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

Jan Apr Jul Oct100

150

200

250

201020112012

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

Jan Apr Jul Oct25

50

75

100

201020112012

Ethane Mont Belvieu ¢/USGEthane Mont Belvieu ¢/USG



INTERNATIONAL LPG

Markets

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

Cargoes cif NWE 935.68 979.38 939.55 940.53 882.48 865.59 876.75 949.60 1,029.17 1,068.64 1,029.61 877.61 730.66

Cargoes c+f Japan 939.78 974.32 946.11 946.70 883.55 578.35 902.54 955.56 1,032.07 1,074.01 1,035.56 897.81 746.32

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

Mont Belvieu 75.72 81.75 73.86 79.33 90.05 87.42 80.77 66.71 49.62 53.05 49.56 41.75 30.33

Chinese domestic prices yuan/tJun 11 Jul Aug Sep Oct Nov Dec Jan 12 Feb Mar Apr May Jun

East China terminal

Ningbo ex terminal 7,251 6,713 6,721 6,657 6,210 6,121 6,312 6,620 7,393 8,346 7,603 6,517 5,542

Wenzhou ex terminal 7,251 6,731 6,721 6,686 6,463 6,350 6,350 6,617 7,393 8,507 7,706 6,925 5,958

Taicang ex terminal 7,251 6,713 6,721 6,671 6,210 6,121 6,312 6,620 7,393 8,507 7,603 6,531 5,542

Shanghai ex terminal 7,232 6,745 6,743 6,695 6,370 6,221 6,374 6,618 7,354 8,575 7,641 6,891 5,604

Zhangjiagang ex terminal 7,251 6,713 6,721 6,664 6,210 6,121 6,312 6,620 7,393 8,507 7,603 6,531 5,543

Fujian ex terminal 7,258 7,025 7,018 6,642 6,467 6,400 6,400 6,643 7,393 8,641 7,856 7,450 6,500

East China refinery

Shanghai ex refinery 5,780 6,004 6,070 6,381 5,770 5,879 6,041 5,743 6,388 7,405 7,244 5,864 5,340

Zhenhai ex refinery 6,075 6,360 6,294 6,612 6,022 6,136 6,352 6,161 6,783 7,766 7,465 6,213 5,648

Yangzi ex refinery 5,724 5,956 5,964 6,292 5,737 5,841 6,006 5,778 6,365 7,320 7,071 5,858 5,291

Fujian ex refinery 6,077 6,355 6,302 6,396 5,908 5,999 6,282 6,318 6,744 7,562 7,150 6,091 5,369

Gaoqiao ex refinery 5,786 5,894 5,965 6,242 5,699 5,769 5,854 5,624 6,263 7,423 7,150 5,806 5,183

South China terminal

Zhuhai ex terminal 7,175 6,968 6,767 6,606 6,253 6,267 6,444 6,785 7,489 8,641 7,842 6,580 5,859

Shenzhen ex terminal 7,248 7,088 6,883 6,712 6,388 6,360 6,473 6,795 7,499 8,647 7,891 6,771 5,894

Raoping ex terminal 6,786 6,764 6,285 6,342 5,908 6,035 6,295 6,505 7,185 8,341 7,319 6,030 5,335

Nansha ex terminal 7,221 7,087 6,848 6,660 6,328 6,348 6,458 6,812 7,506 8,681 7,884 6,796 5,810

Shantou ex terminal 5,852 6,338 6,256 6,271 5,825 5,880 6,260 6,505 7,187 8,568 7,319 6,164 5,368

Yangjiang ex terminal 5,910 6,479 6,369 6,443 6,143 6,073 6,280 6,462 6,945 7,626 7,268 6,110 5,424

South China refinery

Maoming ex refinery 5,900 6,415 6,284 6,441 6,182 6,110 6,349 6,410 6,881 7,640 7,339 6,175 5,500

Guangzhou ex refinery 6,014 6,455 6,387 6,515 6,192 6,148 6,366 6,434 6,964 7,788 7,328 6,156 5,457

Northeast China refinery

Daqing ex refinery 5,244 5,169 5,233 5,498 5,710 5,269 6,349 5,203 5,345 6,291 6,609 6,009 4,918

Dalian ex refinery 5,641 5,699 5,900 6,193 6,003 5,798 6,366 5,850 6,105 7,109 7,463 6,123 5,135

Northwest China refinery

Urumqi ex refinery 5,475 4,361 4,451 4,424 4,570 4,126 4,107 4,150 4,226 5,089 5,350 4,950 4,663

Inland China refinery

Lanzhou ex refinery 5,570 5,594 5,727 5,832 5,903 5,550 5,512 5,530 5,724 6,689 6,781 5,482 4,900

Yan-An ex refinery 5,223 5,543 5,470 5,875 5,456 5,279 5,451 5,278 5,771 6,643 6,528 5,360 4,663

Apr 11 Jul Oct Jan 12 Apr Jul400

600

800

1,000

1,200

1,400

NWEUSGCJapan

Propane NWE, USGC, Japan $/tPropane NWE, US Gulf coast, Japan $/t

Apr 11 Jul Oct Jan 12 Apr Jul500

600

700

800

900

1,000

1,100

1,200

1,300

Saudi ArabiaAlgeriaNorth Sea

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


10 July 2012Argus LPG World — Prices monthly

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

Middle East $/t

Saudi Arabia 815.00 835.00 790.00 735.00 750.00 770.00 850.00 1,010.00 1,230.00 990.00 810.00 680.00 575.00

Kuwait 815.00 835.00 790.00 735.00 750.00 770.00 850.00 1,010.00 1,230.00 990.00 810.00 680.00 575.00

Mediterranean $/t

Algeria (Sonatrach) 820.00 880.00 830.00 770.00 775.00 790.00 810.00 950.00 1,160.00 955.00 815.00 660.00 580.00

Spot prices $/t

Large cargo cif ARA 879.45 847.84 828.43 780.79 804.25 820.58 887.50 1,030.76 1,032.77 921.13 714.66 610.16

Large cargo cif Lavera 869.45 837.84 816.73 768.21 791.32 807.95 873.02 1,034.57 1,031.02 915.13 731.14 625.71

Large cargo USGC 788.28 790.59 807.10 760.79 753.48 721.00 668.65 629.73 na na na na

Large cargo Japan CFR 856.36 832.74 800.02 777.88 821.79 846.95 968.82 1,121.12 1,123.98 924.33 756.21 654.33

Large cargo East China CFR 856.36 832.74 799.48 776.68 821.41 845.29 968.82 1,121.12 1,123.98 924.33 756.21 653.48

Large cargo South China CFR 856.36 832.74 799.02 775.48 821.17 843.62 968.82 1,121.12 1,123.98 924.33 756.21 652.91

Large cargo Far East Index 856.36 832.74 799.52 776.68 821.48 845.29 968.82 1,121.12 1,123.98 924.33 756.21 653.62

Asia spot premiums to CP $/t

Mideast Gulf 7.07 -2.52 -2.23 -2.00 4.10 4.26 -3.79 -35.88 -51.00 -20.70 -26.52 -22.43

South China (pressurised) 89.86 84.55 87.35 90.65 92.07 101.76 99.45 82.79 53.02 83.93 82.59 93.64

East China (refrigerated) 36.31 6.07 21.80 39.73 68.02 65.10 83.03 81.12 -61.11 -32.33 -23.98 -0.29

South China (refrigerated) 36.31 6.07 21.34 38.63 67.79 63.43 83.03 81.12 -61.11 -32.33 -23.98 -0.86

Taiwan 34.55 27.55 29.05 41.93 62.21 56.00 57.55 52.45 3.18 28.13 31.93 41.33

Japan 34.55 27.55 29.57 43.03 62.45 56.86 57.55 52.45 3.18 28.13 31.93 41.33

Mont Belvieu ¢/USG

LST 152.43 152.88 156.02 147.16 145.77 139.56 129.51 122.06 125.91 119.39 95.01 78.62

Non-LST 152.25 153.00 156.15 147.19 145.60 139.18 129.15 122.27 126.15 119.47 94.94 78.17

Europe $/t

Coasters fob NWE 794.52 777.14 784.09 780.81 773.36 800.48 846.43 977.14 981.71 888.03 669.55 561.58

Barges fob NWE 910.57 882.84 860.80 789.10 816.25 821.00 859.05 1,088.45 1,078.11 959.68 711.59 623.37

Coasters fob Med 816.91 812.93 870.80 837.40 823.68 798.00 882.26 1,047.74 1,042.73 936.58 762.61 619.74

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

Middle East $/t

Saudi Arabia 855.00 885.00 865.00 815.00 810.00 820.00 910.00 1,040.00 1,180.00 995.00 895.00 765.00 620.00

Kuwait 855.00 885.00 865.00 815.00 810.00 820.00 910.00 1,040.00 1,180.00 995.00 895.00 765.00 620.00

Mediterranean $/t

Algeria (Sonatrach) 848.00 915.00 915.00 865.00 820.00 830.00 910.00 1,005.00 1,110.00 1,005.00 940.00 690.00 590.00

Spot prices $/t

Large cargo cif ARA 910.00 889.05 901.41 841.71 820.68 842.05 948.93 1,002.40 1,029.55 983.84 794.77 601.58

Large cargo cif Lavera 926.05 905.05 919.89 861.60 838.36 865.93 988.36 1,043.55 1,058.14 1,016.11 836.52 620.87

Large cargo USGC 791.13 804.07 845.90 783.62 792.75 893.67 872.35 809.28 na na na na

Large cargo Japan CFR 898.67 908.83 880.09 835.63 862.55 898.52 1,015.21 1,062.14 1,085.91 992.63 850.75 705.33

Large cargo East China CFR 898.67 908.83 880.09 834.43 862.17 896.86 1,015.21 1,062.14 1,085.91 992.63 850.75 704.48

Large cargo South China CFR 898.67 908.83 880.09 833.23 861.93 895.19 1,015.21 1,062.14 1,085.91 992.63 850.75 703.91

Large cargo Far East Index 898.67 908.83 880.09 834.43 862.24 896.86 1,015.21 1,062.14 1,085.91 992.63 850.75 704.62

Asia spot premiums to CP $/t

Mideast Gulf 7.07 1.69 3.07 -1.93 5.38 5.12 -2.37 -35.88 -51.00 -19.95 -14.77 -17.55

India cfr 31.12 27.36 20.73 15.90 46.74 55.67 53.87 1.00 -47.21 38.25 -4.16 4.43

South China (pressurised) 89.86 83.83 88.18 90.65 97.31 101.76 99.45 82.79 53.02 79.43 82.14 93.64

East China (refrigerated) 37.41 28.83 27.14 22.83 51.88 65.71 77.66 4.98 -61.46 17.23 -14.57 -23.76

South China (refrigerated) 37.41 28.83 27.14 21.63 51.64 64.05 77.66 4.98 -61.46 17.23 -14.57 -24.33

Taiwan 36.45 51.02 31.50 35.10 53.69 56.00 54.34 24.33 -5.89 45.75 37.73 36.91

Japan 36.45 51.02 31.50 36.20 53.93 56.86 54.34 24.33 -5.89 45.75 37.73 36.91

Mont Belvieu ¢/USG

LST 178.63 181.49 190.76 176.99 179.01 201.29 196.58 182.65 185.52 178.81 154.77 117.37

Non-LST 187.35 186.20 191.96 180.59 182.37 203.09 197.63 187.64 192.86 191.09 165.05 128.60

Europe $/t

Coasters fob NWE 843.81 816.25 879.30 822.86 785.57 812.30 961.86 965.00 959.57 922.95 737.98 540.87

Barges fob NWE 891.67 864.75 884.80 842.93 800.55 823.25 932.00 955.31 995.27 953.74 759.32 576.82

Coasters fob Med 894.31 955.86 938.59 883.02 904.02 904.13 1,037.14 1,115.00 1,073.75 1,066.05 901.18 674.47

lpg world - argus media · 7/10/2012 · the deal marks eneos globe’s first term contract to buy...

Documents