The East-of-Suez region was likely to move in 2000 from being a net LPG exporter to a net importer under pressure from changes in worldwide LPG production capacity and demand. This shift is a departure from historical trade patterns.
LPG analysts at Purvin & Gertz, Houston, saw the deficit of LPG in the Middle East lasting only until 2003, when production capacity in the region would begin to increase to meet internal regional demand (Fig. 1).
Along with the changes in the exporting position of the Middle East, the overall level of waterborne trade across the globe was expected to expand dramatically. Waterborne trade in LPG expected to be near 50 million tonnes in 2000 was projected to grow to more than 80 million tonnes by 2020.
Historic shift
Purvin & Gertz noted that LPG markets in the 1990s reflected a rapidly shifting balance between East-of-Suez and West-of-Suez markets, moving the market out of historical trade patterns. This shift produced a surplus of LPG in some regions that had historically been net importers.
Annual global demand for LPG through 1999 was approximately 188 million tonnes, up substantially from 1985 consumption (Fig. 2). During the 1990s, world LPG demand rose on average nearly 3.6%/year, compared with 1.4%/year for petroleum products overall, as the world economy grew.
LPG demand expanded worldwide but most dramatically in the developing countries of Asia. Demand in the region grew by an average of more than 6%/year, said the consulting firm, as per-capita consumption increased with improving standards of living.
For example, per-capita consumption of LPG in China in the 1990s increased from around 1 kg to more than 6 kg, and consumption was likely to expand to more than 15 kg/capita in the 21st Century.
The Middle East was another region that experienced considerable growth, driven by the addition of several LPG-based petrochemical projects. Continued growth of Middle East petrochemical activity was likely further to increase consumption of LPG in the region.
Purvin and Gertz expected worldwide LPG demand to continue to grow, reaching almost 240 million tonnes/year (tpy) by 2005, as per-capita consumption continued to increase in many parts of the world. This represents an increase of more than 57 million tonnes from 1998 demand of slightly more than 182 million tonnes.
Areas of probable expansion include Latin America, Eastern Europe, Africa, and the former Soviet Union.
By 2020, said Purvin & Gertz, world LPG supplies would surpass 300 million tpy in order to keep pace with continuing demand growth.
LPG demand
Purvin & Gertz separates world LPG demand into two markets.
The East-of-Suez market was a fairly small part of total world LPG consumption in 1985, accounting for only 23% of global LPG demand (Fig. 3). By 1990, the region`s demand had grown to slightly more than 27% of world LPG demand and continued to grow in the 1990s.
In 1999, the East-of-Suez region accounted for nearly 32% of worldwide demand and would likely reach more than 40% of world LPG demand by 2020.
The West-of-Suez market had been losing overall market share in terms of the global LPG market, but the absolute size of the market continued to increase (Fig. 3). In 1990, West-of-Suez LPG demand was slightly less than 100 million tpy, or approximately 73% of the total demand of 137 million tpy.
By 2000, Purvin & Gertz expected West-of-Suez LPG demand to account for about 65% of total world LPG demand and decrease further to approximately 60% by 2020.
The demand profile for East of Suez was quite different than West of Suez (Fig. 4). In 1990 in the East-of-Suez markets, more than 50% of the total LPG demand was in the residential-commercial sector, with chemical demand accounting for another 10% of total demand.
The "other" category represented almost 40% of total East-of-Suez demand. This category includes LPG used as engine fuel, industrial uses other than petrochemicals, and town-gas applications.
By 2020, residential-commercial demand in the East-of-Suez market should represent approximately 65% of the regional LPG demand, with petrochemical demand accounting for 12%, while the "other" category falls to near 20% of total LPG demand.
For the West-of-Suez markets, Purvin & Gertz anticipated the demand profile to be much more evenly distributed among the end uses of LPG. In 1990, residential-commercial applications accounted for 45% of total LPG demand, with petrochemical and "other" categories almost even.
The petrochemical end-use category exhibited the largest growth potental due to planned projects. It was expected to account for nearly 30% of total LPG demand in 2020. The commercial and residential category should remain essentially flat as a portion of total LPG demand in West of Suez markets.
Worldwide, the residential-commercial sector remained the largest end-use sector for LPG.
Developing countries in Asia and elsewhere grew most rapidly in the 1990s. By 2020, Asia was expected to account for more than 70 million tpy of residential and commercial LPG demand, more than 40% of total world LPG demand.
Between 1990 and 1999, average residential and commercial LPG consumption had risen more than 20% on a per-capita basis. World per-capita consumption of LPG was more than 15 kg/year in 1999, with consumption levels in the West-of-Suez markets at more than 22 kg.
East-of-Suez per-capita consumption was slightly more than 10 kg/year. East of Suez per-capita consumption had significant room to grow to catch up with per-capita consumption West of Suez.
In the residential and commercial sector, Asia will become by far the largest consuming region in the future. Purvin & Gertz expected demand growth in the region in this end-use sector to be more than 8%/year, with total demand expected to be more than 70 million tonnes by 2020.
Latin America should grow at more than 2%/year from 1999 to 2020 and consume more than 35 million tonnes of LPG by the end of the forecast period.
The Middle East was expected to exhibit growth of more than 3%/year between 1999 and 2020. Total consumption for residential and commercial purposes should exceed 12 million tpy in 2020.
Overall, the residential-commercial end-use sector was expected to grow an average of more than 2.5%/year through 2020 as newly added LPG infrastructure allows access to larger markets.
Growth in LPG as a petrochemical feedstock will continue to be strong and remain concentrated in North America, Western Europe, and the Middle East.
Through 2020, Purvin & Gertz expected North America to continue to be the largest consuming region for this sector, with annual average growth of 3%.
By 2020, total chemical demand for LPG should exceed 43 million tpy. The Middle East will overtake Europe as the second largest consuming region for petrochemical feedstocks, with an annual average growth rate near 7%/year, after increasing at an annual rate of more than 32% from 1990 to 1998.
By 2020, Purvin & Gertz expected chemical LPG demand in the region to be more than 10 million tpy, largely due to petrochemical expansion.
LPG supply shift
The changing supply-demand picture for LPG will cause a major shift in trading patterns during the first 2 decades of the 21st Century. Purvin & Gertz expected world LPG supplies to grow in every region of the world and to surpass 300 million tpy before 2020 (Fig. 5).
The supply growth would be strongest in Africa, Asia, and Latin America as new gas-processing facilities are added and refinery LPG production increases. From 1999 to 2020, world LPG supplies should expand about 2.5%/year.
Supplies from Latin America were expected to grow more than 3.5%/year to 2020, while Africa, Asia, and the Middle East showed strong annual growth of 2.5-3.5%. Growth of LPG supplies in the mature markets of North America and Western Europe will be lower than the world average of 2.5%/year, with Western Europe exhibiting the lowest growth on a regional basis.
The consulting firm`s analysis said many of the traditional export supply regions would continue to grow as new projects are built and capacity in the region increases.
The first 10 years of the new century were expected to see supply additions in Argentina, Qatar, Venezuela, Australia, and Iran. Additionally, some nontraditional locations would start LPG exports, including Nigeria, Viet Nam, Iraq, Papua New Guinea, Peru, Colombia, Kazakhstan, Oman, and Bolivia.
LPG production in the East-of-Suez region had been growing faster than West of Suez. During 1990-99, East-of-Suez LPG production rose by more than 50%. Even with this growth in production, however, additional imports were needed to keep pace with the increases in demand.
Beyond 1999, regional LPG supplies were expected to grow more slowly rate than during the 1990s. Additional gas-processing activity was likely in China, Malaysia, Thailand, and Viet Nam.
LPG production growth also was likely to result from expansion of regional refining capacity to meet increasing requirements for gasoline and distillate fuels.
Total LPG production in East of Suez at the end of the 1990s accounted for about 34% of total world production. This percentage was to slip somewhat in the early years of the 21st Century before rebounding to about 36% in 2005.
North America continued to dominate the world LPG supply picture, with more than 68.6 million tonnes in 1998, compared with the overall supply of 181.8 million tonnes. (1998 was the last year for which complete data were available as 2000 began.)
In comparison, the Middle East provided approximately 34.8 million tonnes of LPG.
Gas-processing activities in North America were positioned to continue to provide large volumes of LPG as Gulf of Mexico and additional Canadian gas production came on-line.
Changing patterns
As a result of the increase in LPG supply in many regions of the world, export patterns were changing in the new decade.
Some traditional net-importing regions were becoming net exporters of LPG in the early years of the century as a result of expanded LPG-production capability.
In the 1990s, net LPG supplies from major exporting regions increased about 35%, and Purvin & Gertz expected further increases of 65% by 2020.
With the exception of the Middle East, increases in exports were likely from all the major exporting regions. Middle East exports should drop, however, primarily because of increased use of LPG as a chemical feedstock in a region with an expanding petrochemical industry.
Net exports from the Middle East of 25 million tonnes in 1998 were falling towards 21 million tonnes in 2001 but were due to rebound to 27 million tonnes by 2005. This change in net exports will foster many of the changes in world LPG trade patterns early in the new century (Fig. 6).
Purvin & Gertz expected Africa to become a much larger net exporter of LPG in the new decade. Exports from the region were expected to triple between 1995 and 2005, mainly as a result of additional LPG from gas-processing facilities and increasing refinery capacity utilization.
After exporting only slightly more than 6 million tonnes in 1998, exports of more than 8 million tonnes in 2000 were likely, growing to more than 12 million tonnes by 2005.
Continued exploration for offshore oil and gas, especially in the deepwater areas offshore Nigeria and Angola, would add additional LPG production.
Planned reduction in gas flaring in Nigeria (and the associated gas processing), along with the additional LPG associated with LNG facilities, would add more than 1 million tonnes of net exports from the region.
LPG from Oso, Escravos, and Cabinda will help provide the volumes available for export.
Additionally, Algeria by 1999 had embarked on several large gas-processing facilities expansions, with the assistance of multinational oil companies, which were to add more than 1 million tpy of LPG export capacity.
Purvin & Gertz predicted that Latin American LPG exports would expand by more than 300% between 1998 and 2020, moving the region`s status from that of a net importer of LPG to that of a net exporter.
Continued expansion of gas processing and LNG facilities in Trinidad were likely to contribute more than 250,000 tpy to the regional supply portfolio. Additional growth in gas processing in Argentina, Bolivia, Venezuela, and Mexico would increase LPG supply in the region, providing much of the supplies for export.
In 1990, refinery LPG supply in the region was 8 million tonnes and increased to more than 8.6 million tonnes by 1998. Continued growth in LPG supplies from refinery capacity utilization was expected to increase refinery LPG availability to more than 9.4 million tonnes in 2000 and more than 13.7 million tonnes by 2020.
In the North Sea, exports doubled in the 1990s, changing LPG trade patterns in Northwest Europe and the Mediterranean region.
North Sea LPG exports were expected to continue increasing through at least 2010, with the largest portion of the growth coming from projects in the UK sector of the North Sea as gas processing from the West of Shetlands and Central Graben areas increases.
As a result of the changes in production capacity in Africa, Latin America, and the North Sea, LPG export availabilities in the Atlantic Basin were set to rise from around 17 million tonnes in 1998 to more than 31 million tonnes in 2005.
Algeria, Argentina, Venezuela, and the North Sea were all adding more than 1 million tonnes each to LPG supply in the Atlantic Basin, while non-traditional sources such as Nigeria and Bolivia were also each contributing more than 1 million tpy.
Another region with resource potential to become a net exporter of LPG was the former Soviet Union, especially the littoral states of the Caspian Sea, Kazakhstan, and Azerbaijan.
Purvin & Gertz expected total LPG exports from the FSU to increase from slightly more than 1 million tonnes in 1998 to more than 3 million tpy by 2020. While many multinational oil companies became involved in the region in the 1990s, export gains from the region have been slow to materialize.
Two projects that started to export oil were the Tengizchevroil joint venture in Kazakhstan and the Azerbaijain International Oil Co. joint venture in Azerbaijan.
Increases in LPG exports from the region were possible by 2020 with addition of gas-processing facilities and the associated natural gas and transportation infrastructure.
New sources
Purvin & Gertz said all these new production activities would significantly affect LPG markets as importing regions gained supply choices. Also, trade patterns would change as the new production displaced traditional LPG imports in many regions.
The Far East would continue to be the largest LPG importing region in the world. Purvin & Gertz expected imports to expand by more than 60% to about 38 million tonnes by 2020.
China was expected to account for the greatest percentage of the growth in overall LPG imports as a result of continued growth of the domestic Chinese economy and per-capita consumption of LPG.
Additionally, the Indian subcontinent would increase LPG imports fivefold from 1998 to 2020. India would account for the largest share of the overall imports, exceeding 8 million tonnes by 2020.
Several infrastructure expansion projects under way since the late 1990s were to allow for additional imports and larger parcel sizes to be delivered to meet growing demand.
Growth in the region would continue as logistical constraints were removed and additional LPG import facilities were added.
Industrial demand in India (especially propane) was expected to increase by more than 1 million tonnes during the forecast period as domestic supplies and import availabilities increase in the region.
Net LPG imports by the US were expected to increase sharply during the first half of 2000. From 1998 imports of 6.4 million tonnes, net imports were to have increased to more than 15 million tonnes in 2005 as additional export supply projects are brought on-line in the Atlantic Basin.
Purvin & Gertz said that the US, with almost unlimited storage and large price-sensitive petrochemical demand, was one of the few markets able to absorb additional amounts of LPG. It said US LPG imports would peak at near 16 million tonnes in 2010 before falling to slightly more than 13 million tonnes by 2020.
These projections for the US were based on export-facility project schedules in the Atlantic Basin in the late 1990s. Should any projects in the region slip on schedule, imports by the US would be affected (Fig. 7).
Net imports by Western Europe were expected to rise between 2000 and 2005. Purvin and Gertz expected that more than 8.5 million tonnes of LPG would be be imported by the region in 2005, up from about 4.9 million tonnes in 1998.
As with the US, actual import growth rates would depend on the success and timing of new Atlantic Basin export projects.
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By mid-1999, the $155-million expansion at Phoenix Park Gas Processors Ltd.`s Point Lisas, Trinidad, plant was fully operating, including an additional 600,000 bbl of NGL storage capacity. One of the largest gas plants in Latin America, it improved prospects for increased LPG movements in the Atlantic Basin.
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Installation of new absorber and stripper towers (left) was part of the near doubling of inlet capacity to 1.35 bcfd at Phoenix Park Gas Processors Ltd.`s gas plant in Trinidad.
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