Review delays Brazil's LPG assistance program

Spanish Market: Biomass, LPG
11/11/24

Brazil's lower house has removed a proposed LPG assistance program from its urgent voting schedule, submitting it to further review and revisions.

The program announced in August is still under deliberation, but officials now expect further revisions before it moves forward and launches on 1 January.

The bill may add new controls to avoid fraud, the mines and energy ministry's petroleum, natural gas and biofuels secretary Pietro Mendes said last week during a debate in the lower house about LPG.

Congressman Hugo Leal, the bill's overseer, told Argus that he will propose creating LPG cylinders smaller than the typical household 13kg models to ease access for low-income families.

Low-income families spend 70pc of their resources on housing and groceries, according to Carlos Ragazzo, a researcher at the Getulio Vargas Foundation. That suggests that the current government financial support has likely been used for monthly expenses rather than substituting firewood usage for cooking with LPG.

Consumption of firewood for cooking fell from 2005-2015 (see chart), thanks to improved economic conditions throughout the country, according to energy research firm EPE. But the share of households that use firewood for cooking has hovered around 25pc since 2015, even after the launch of program to promote LPG cooking use in 2021 to help those families during the Covid-19 pandemic.

Leal met with lower house leader Arthur Lira on 5 November to discuss the program's proposals and voting agenda, but no details have emerged since.

Almost 1mn Brazilian households cook with biomass only. That represents 1.1pc of the 12.7mn households that use biomass for any energy need. Additionally, 56pc of the biomass-only households are low-income families.

A 13kg LPG cylinder in Brazil costs R106.63 ($18.49), on average. That represents 7pc of Brazil's minimum wage. Low-income families usually receive only half of the minimum wage, on average.

By Betina Moura

Brazil residential energy sources

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24/12/24

Viewpoint: US ethane to be oversupplied for 2025

Houston, 24 December (Argus) — US ethane production growth will likely continue to outpace exports and domestic demand into the first half of 2025, keeping US inventories of the natural gas liquid in record territory until export capacity expands late next year. Ethane, which is widely used for ethylene production at US steam crackers, has emerged as the lowest-cost petrochemical feedstock worldwide, spurring infrastructure investments in Asia, particularly China, to receive US ethane exports. Still, US ethane production from gas processing continues to outpace the country's ability to ship it into demand centers in Europe, India and China. Mont Belvieu, Texas, EPC ethane spot prices fell relative to natural gas in 2024 due to record ethane production, leaving ethane stocks oversupplied entering 2025. EPC ethane's premium to its fuel value in Nymex natural gas at the Henry Hub averaged 3.25¢/USG during 2024, 54pc lower than in 2023. It also averaged a 1.75¢/USG premium to its fuel content in the second half of 2024, 77.5pc lower than the same period last year, as spot ethane prices fell on ample supplies. Cheaper natural gas in the Permian basin spurred higher rates of ethane recovery from the natural gas stream and led to a disproportionate rise in ethane production. Spot prices for natural gas at the Waha hub in west Texas across the year averaged -$0.10/mmBtu, with prices remaining negative for eight of nine months from March-November. Prices were consistently positive in 2023, averaging $1.66/mmBtu across the year. Negative Permian gas prices allow ethane recovery from the gas stream at a much lower cost. US natural gas production in 2024 is poised to be steady to slightly down, having averaged 3.14tcf in monthly production from January to September, according to US Energy Information Administration (EIA) data. Meanwhile, ethane production is set to reach a record high for the 11th consecutive year, with monthly production averaging 2.78mn b/d over the same period, up from a 2.65mn b/d average over the whole of 2023. Waha gas prices turned positive in the second half of November and spiked to a multi-month high of $2.56/mmBtu on 2 December, pushing ethane prices to a 13-month high of 25.625¢/USG the following day as downstream buyers bid higher to fulfill contracts for the month . Ethane's rally was brief, however, with Mont Belvieu prices falling to 22.5¢/USG over the next week even as Waha climbed further. Record ethane inventories Ethane inventories hit record highs in 2024, according to EIA data, including a peak of 80.89mn bl in July, 79.5mn bl in August and 77.23mn bl in September. Mont Belvieu ethane has also been in backwardation in December, with January prices at a 2-4c discount to prompt December prices, encouraging selling interest. Sustained cold weather and additional surges in natural gas spot prices may further draw down ethane supplies as higher volumes are rejected into the gas stream, market participants suggest, but as it stands, ethane supplies are likely to remains at or near record highs for the first part of the new year. In the EIA's most recent Short Term Energy Outlook (STEO), the agency projects ethane inventories to end 2024 at 74.1mn bl , which would be a year-end record following a seasonal draw down, and 12.6pc higher than a year earlier. In that same report, including projections for the fourth quarter, domestic consumption of ethane is estimated to be 2.26mn b/d in 2024, up by about 98,000 b/d on the year, and net exports are estimated at 483,000 b/d, up by around 13,000 b/d, whereas production of ethane from natural gas processing is expected to be 113,000 b/d higher at 2.77mn b/d. Playing catch-up If projections are accurate, 2024's record end-of-year ethane supply will exceed the peak previously set in 2020 of 69.6mn bl, based on EIA data. The first VLEC loadings at Energy Transfer's 180,000 b/d Nederland, Texas, export terminal began in January of 2021, resulting in year-end inventories reaching a relative trough in 2022 at 53.55mn bl before rebounding by nearly 50pc in the last two years. Domestic ethane consumption growth has kept pace with or fallen behind growth in production since 2020. Conversely, ethane exports in 2021 jumped by 98,000 b/d to 369,000 b/d on the opening of the Nederland terminal and grew more slowly in 2022 and 2023. Exports of US ethane are limited by infrastructure at receiving terminals abroad and the specialized vessels required to ship the lighter feedstock. Overseas markets are gearing up to take ethane imports over the next few years , and US ethane inventories are likely to continue building ahead of of an expansion to domestic export infrastructure as US production grows further. Enterprise's Neches River export terminal in Beaumont, Texas, is the next scheduled US expansion and is set to complete its first phase in the third quarter of 2025 , adding 120,000 b/d of ethane export capacity. Completion of the second phase in the first half of 2026 would take this capacity to a total of 180,000 b/d. The project, if it remains on track, should curtail ethane inventory growth at the back end of 2025. Until then, abundant supply probably will continue to weigh on spot prices, and the first half of 2025 may see ethane prices fall further, both outright and relative to natural gas, especially since the EIA's outlook also forecasts gas prices to rise through the winter. By Joseph Barbour Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US LPG cargo premiums poised to fall

23/12/24

Viewpoint: US LPG cargo premiums poised to fall

Houston, 23 December (Argus) — The booming US LPG export market has fueled record spot fees this year for terminal operators that send those cargoes abroad, but those fees are poised to fall next year as additional export capacity comes online. US propane exports surged over the past two years, hitting an all-time high of 1.85mn b/d in the first quarter of this year, according to data from the US Energy Information Administration (EIA). Terminal fees for spot propane cargoes out of the US Gulf coast hit an all-time high of Mont Belvieu +32.5¢/USG (+$169.325/t) in mid-September. US propane production is expected to grow by another 80,000 b/d in 2025 to 2.22mn b/d while the outlook for domestic consumption is fairly steady, at 820,000 b/d next year — meaning even more propane will be pushed into the waterborne market. But that is dependent on US infrastructure keeping up with the pace of production. US export terminals in Houston, Nederland and Freeport, Texas, have run at or above capacity for the last two years given the thirst for cheaper US feedstock, largely from propane dehydrogenation (PDH) plant operators in China. This demand has created bottlenecks at US docks, and midstream operators like Enterprise, Energy Transfer, and Targa have rushed to ramp up spending on both pipelines and additional refrigeration to stay ahead of the wave of additional production. US gas output spurs LPG exports As upstream producers have ramped up natural gas production ahead of new LNG projects, most producers are counting on LPG demand from international outlets in Asia to offload the ethane and propane the US cannot consume. For the past four years, Asian buyers have been more than happy to oblige. US propane exports to China rose from zero in 2019, when China imposed tariffs on US imports, to an average of 1.36mn metric tonnes (t) per month in January-November 2024, according to data from analytics firm Kpler, making China the largest offtaker of US shipments. US exports to Japan averaged 480,000t per month throughout most of 2024, and exports to Korea averaged 460,000t per month in the first 11 months of 2024. China, Korea, and Japan received 52pc of US propane exports in 2024, up from 49pc in 2020, according to data from Vortexa. Strong demand in Asia has kept delivered prices in Japan high enough to sustain an open arbitrage between the US and the Argus Far East Index (AFEI). Forward-month in-well propane prices at Mont Belvieu, Texas, have remained well below delivered propane on the AFEI. In 2020, Mont Belvieu Enterprise (EPC) propane averaged a $143/t discount to delivered AFEI — a spread that has only widened as additional PDH units in Asia have come online. During the first 11 months of 2024, the Mont Belvieu to AFEI spread averaged a hefty $219/t, leaving plenty of room for wider netbacks in the form of higher terminal fees for US sellers, especially as a wave of new VLGCs entering the global market has left shipowners with less leverage to take advantage of the wider arbitrage. The resulting wider arbitrage to Asia has kept US export terminals running full for the last two years. So when a series of weather-related events and maintenance in May-September limited the number of spot cargoes operators could sell and delayed scheduled shipments, term buyers willing to resell any of their loadings could effectively name their price. This spurred the record-high premiums for spot propane cargoes in September. New projects may narrow premium An increase in US midstream firm investments in additional dock capacity and added refrigeration in the years ahead could narrow those terminal fees, however. Announced projects from Enterprise and Energy Transfer, in particular, will add a combined 550,000 b/d of LPG export capacity out of Houston and Nederland, Texas by the end of 2026. Enterprise's new Neches River terminal project near Beaumont, Texas, will add another 360,000 b/d of either ethane or propane export capacity in the same timeframe. These additions are poised to limit premiums for spot cargoes by the end of 2025. Already, it appears the spike in spot cargo premiums to Mont Belvieu has abated for the rest of 2024. Spot terminal fees for propane sank to Mont Belvieu +14¢/USG by the end of November. The lower premiums come not only as terminals resume a more normal loading schedule, but at the same time a surplus of tons into Asia ahead of winter heating demand has narrowed the arbitrage. The spread between in-well EPC propane at Mont Belvieu fell from $214.66/t to $194.45/t during November. A backwardated market for AFEI paper into the second quarter of 2025 means US prices are poised to fall more in order to keep the spread from narrowing further. By Amy Strahan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

WLGA calls for immediate action in African LPG roadmap

17/12/24

WLGA calls for immediate action in African LPG roadmap

The roadmap identifies 11 high-opportunity markets in sub-Saharan Africa where LPG consumption could significantly increase, writes Yasmin Zaman London, 17 December (Argus) — The growth of LPG as a clean cooking fuel in sub-Saharan Africa will remain limited without immediate and considerable advancement in regulation and investment, according to a new roadmap released by the World Liquid Gas Association (WLGA). The report, commissioned by the WLGA's recently formed Cooking For Life Africa Task Force (CFLA), calls for clear, enforceable regulatory frameworks, financing and payment plans to reduce cost barriers, and investment in infrastructure including roads to better support distribution. The roadmap identifies 11 high-opportunity markets in sub-Saharan Africa where under favourable conditions per capita LPG consumption could increase to 25kg/yr by 2030 and 40kg/yr by 2050. In seven markets, including Nigeria, Kenya, Ghana and Cameroon, policies are already in place that will drive growth opportunities, leaving four that need to address this challenge, according to the roadmap. Affordability is an issue in all countries except Ghana. In Nigeria, this is considered a "major roadblock" because of the depreciation of the naira. The roadmap was released after the UN's Cop 29 climate conference, where major European oil firms pledged $500mn to energy access in sub-Saharan Africa and south and southeast Asia. The WLGA established the CFLA at the IEA's summit on clean cooking in Africa earlier this year. Its founding members include TotalEnergies, Norway's Equinor, Nigerian state-owned oil firm NNPC, LPG trading firm Petredec and regional LPG distributor Oryx Energies. "The LPG roadmap, which targets about 60pc of the continent's population without access to clean cooking solutions, will simultaneously address economic, health and environmental challenges across Africa," NNPC's managing director Huub Stokman said. TotalEnergies' vice-president of LPG Biova Agbokou added that the CFLA and the roadmap can also act "as another lever to reach more end-users". Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: VLGC market faces uncertainties in 2025

16/12/24

Viewpoint: VLGC market faces uncertainties in 2025

London, 16 December (Argus) — Looming tariffs, Panama Canal's new dynamics, limited US export capacity and a continued cap on Mideast Gulf LPG production will bring uncertainty to the VLGC market next year and may keep rates well below 2023's record levels. VLGC freight rates were largely suppressed in 2024 compared with the previous year because of smoother transits at the Panama Canal as water levels rose. Full capacity at the canal resumed mid-year, and this weighed on freight rates because it resulted in global higher tanker availability as it reduced voyage length between the US and Asia-Pacific. Panama Canal transits in 2025 will continue to affect rates with the kick off of the long term slot allocation system, where 40pc of slots available have already been allocated. This will mean there could be fewer available slots in the usual Neopanamax daily auctions, and could make it more difficult for vessels without bookings needing immediate passage. Another crucial factor that pressured VLGCs in 2024 was the reduction of available US spot cargoes because of weather related delays and maintenance at US terminals halfway through the year. High demand for export cargoes matched with a surplus of ships drove premiums for US cargoes to record highs in September, effectively capturing a larger share of the arbitrage and weighing on freight rates. This has since dialled down once terminals caught up with their schedules, but higher premiums for US cargoes is likely to remain a factor weighing on freight until further export capacity comes online in mid-2025 — when Energy Transfer's Nederland export terminal will add 250,000 b/d of export capacity with a new LPG dock. In the east of Suez market, Opec+ has voted to maintain the recent production cuts rather than unwinding them as previously intended. This will continue to cap LPG output and cargo availability in the Pacific Basin market this year, and free up ships to compete in the US Gulf instead. Fewer Mideast Gulf cargoes could add pressure over freight rates in the first half of 2025, before more US Gulf shipments are made available mid-year. This will absorb ships on the long haul Houston to Chiba route and likely support freight rates in the second half of the year. This may be boosted on occasion by short term shortages of ships while a large portion of the fleet is expected to be temporarily out for mandatory maintenance this year, reducing tanker availability. Shipowners BW LPG and Dorian LPG said 80 ships are scheduled to drydock in 2025, double the number of this year. This will match 13 expected newbuild deliveries in the year, and the outcome could support rates. Trump's tariffs But global LPG flows could be significantly disrupted in the case of another trade war between the Washington and Beijing if US president-elected Donald Trump fulfils his campaign promise to impose a tariff on Chinese goods. Should Beijing introduce retaliatory tariffs on LPG, a two-tiered market for US exports to Asia-Pacific could emerge as seen in 2018, when Mideast Gulf cargoes were bought and sold by Japanese and South Korean importers and traders and then resold to China at $15-20/t premiums. Back then several US shipments ended up redirected to Europe as US traders reduced exports to China — although such actions remain speculative for now. A potential trade war remains a significant risk for the VLGC freight market along with further disruptions at the Panama Canal and the continued Opec+ cuts, which could keep 2025 freight rates to levels recorded in 2024. By Yohanna Pinheiro Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Erex delays starting wood pellet production in Vietnam

16/12/24

Erex delays starting wood pellet production in Vietnam

Tokyo, 16 December (Argus) — Japan's renewable energy developer Erex will postpone the start-up of its wood pellet factory in Vietnam from December 2024 to around February 2025. The Tuyen Quang factory — which is the company's first wood pellet production project in Vietnam — has been running test operations, but cannot start commercial operations this month as initially scheduled, Erex said on 13 December. The company did not disclose the reasons for the delay. The factory in Tuyen Quang province will produce around 150,000 t/yr of wood pellets, mainly from locally-secured unused forest materials, and export them to other countries including Japan for biomass-fired power plants. The investment amount for this project is $20.4mn. Erex aims to build up to 20 wood pellet factories in Vietnam, and several ones in Cambodia. The company is also planning biomass-fired generation capacity in southeast Asia, with up to 18 power plants in Vietnam and five in Cambodia. The first one is scheduled to come on line this month in Vietnam. Erex's profits from projects in Vietnam and Cambodia are expected to grow rapidly and will account for more than 70pc of its whole profits around 2030, according to the company. By Takeshi Maeda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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