Global crisis threatens US LPG exports
The closing of arbitrages to key regional importers despite the slump in US prices has led to cargo cancellations on the Gulf coast, writes Amy Strahan
The crash in global crude, oil product and LPG prices owing to the coronavirus pandemic and Opec dispute has put the US natural gas liquids (NGL) sector under growing pressure, closing arbitrages vital to releasing rising output and exports.
Mont Belvieu EPC propane fell to a low of 24.50¢/USG ($128/t) on 23 March, its lowest since 1999, while butane dropped to 20.25¢/USG ($91.75/t), the lowest since assessments began in 1993. Mont Belvieu EPC natural gasoline fell to 31.125¢/USG ($131/t) and ethane to 9.25¢/USG ($68.90/t) on 23 March — their lowest since 1999 and at least 1993, respectively.
US independent refiner Phillips 66 told analysts on 24 March that US oil products demand had fallen by a fifth in the week after Washington imposed measures to limit the spread of the coronavirus.And the decline was nearer to a third on the US west coast after California governor Gavin Newsom issued a statewide order for residents to remain at home on 19 March.
The pressure on oil products prices, in particular gasoline and naphtha, weighed on US butane and natural gasoline levels. Lighter ethane and propane suffered more from declines in global LPG prices as a result of the outbreak paring demand and the crude price war between Opec and Russia, which were threatening to simultaneously raise production.
But the US price falls were not enough to prevent a swift narrowing of the propane arbitrage to Asia-Pacific and Europe. This prompted several cancellations or deferrals of cargoes from the US Gulf coast in April — as many as eight, according to market participants. Prices in northwest Europe and Asia-Pacific also moved ahead of naphtha on 24 March, further eroding already weak demand.
US shale producers and midstream operators are having to adjust to collapsing demand and prices, with both sharply revising their capital expenditure programmes in 2020. This is likely to slow the growth in output of NGLs in the country's key shale areas, and lead to deferrals or even cancellations of projects upstream, midstream and downstream.
US petrochemicals plants, which rely on mostly ethane feedstock for their ethylene production, did not show an immediate slowdown in demand as a result of the virus. The ethane-to-polyethylene spread remains wide enough to keep up production, and Phillips 66 says its operating rates will remain in the low-90pc range this quarter.
Southern comfort
The recent boom in US ethylene capacity is keeping domestic ethylene prices in the single digits, even with at least one plant at Point Comfort, Texas, currently in turnaround. Petrochemicals plants are considered essential services, and there have been no reports of reductions to operating rates as a result of coronavirus concerns.
Shell's petrochemicals division on 18 March said it wastemporarily suspending construction at its 1.5mn t/yr ethane cracker and petrochemical complex in Monaca, Pennsylvania, owing to concerns over impacts from the coronavirus.
Yet the impact on downstream demand from economic contractions both in the US and around the world is still uncertain. Lower feedstock costs have boosted margins for producers, leading them to consume more or raise operational rates — as demonstrated by Chinese propane dehydrogenation plants. But the situation is likely to change over the coming months.
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Poland struggling to prepare for looming LPG shortfall
Poland struggling to prepare for looming LPG shortfall
Warsaw acknowledges the LPG shortage the country faces but has done little to support the domestic sector, writes Waldemar Jaszczyk London, 17 September (Argus) — The Polish government has woken up to the risks posed by the upcoming EU embargo on Russian LPG, but current measures are falling short of the industry's requests and a significant upcoming shortfall is looking increasingly likely. Warsaw is attempting to get ahead of the curve by analysing the latest information from the domestic LPG market in weekly crisis reporting. The data show a decline in imports from Russia as a direct result of the industry's preparation for the EU's ban from December, the Polish energy ministry says. This is apparently contradicted by Russia increasing its share of Polish LPG imports to 53pc in the first half of 2024 from 50pc a year earlier, with Russian prices 25pc lower than northwest European equivalents. But deliveries have slumped this summer for various reasons including payment problems. Still, the Polish government estimates an initial product shortage of 300,000 t/yr given insufficient import and distribution infrastructure, growing consumption and more re-exports to Ukraine. In the worst-case scenario, state-owned refiner Orlen is prepared to cover the most politically sensitive demand sector — residential heating — with its production, its risk management director Jakub Ruszel recently told lawmakers. The company operates Poland's 373,000 b/d Plock and 210,000 b/d Gdansk refineries, in addition to the 190,000 b/d Mazeikiai refinery in Lithuania and the 108,000 b/d Litvinov and 66,000 b/d Kralupy plants in the Czech Republic. Household and commercial heating accounted for around 10pc of the 2.5mn t/yr market in 2023, according to Polish LPG association POGP. The LPG industry hopes to avoid the logistical issues that haunted the market during the immediate diversification drive in 2022. Coal transportation by rail was given priority over other fuels after Poland's Russian coal imports ban. This time, railway operator PKP PLP has been told to prioritise LPG should bottlenecks emerge. Upgrades to ports that capped rail capacity have also now largely been completed. And although more investment is needed, with only two out of six Polish-German rail crossings electrified, a predicted increase of 1,000 trains arriving from northwest Europe each year can be accommodated, the infrastructure ministry says. The main logistical problem is likely to be throughput at privately run terminals, according to the government. Most rail terminals are on Poland's eastern border with Belarus, with only two projects planned to raise import capacity in the west. Polish trading firm Barter plans to commission a 400,000 t/yr terminal in Slawkow in December. And Polish oil company Orlen is expanding its Szczecin terminal on the Baltic Sea by 50pc to 400,000 t/yr, but not until mid-2025. These will help, but they fall well short of adding enough capacity to replace lost Russian supply. Private matters But although the government is more aware of the coming shortfall, the domestic sector is largely having to fend for itself. Plans for a state-owned seaborne terminal were rejected on the basis the industry has had little state intervention to date, and a request for lower fuel duty for firms that invest in infrastructure was also denied. The 2015 tax was introduced to establish strategic LPG reserves, with the private sector contributing $643mn so far, according to separate LPG association PIGP. Simplifying environmental permitting procedures has received more consideration from Warsaw. Local authorities are required to process applications within three months, but this often extends to a year or more, according to market participants. The environment ministry started talks with regional administrations in July to improve investment conditions, but progress has been hampered by recent government reshuffles. The responsibility for energy resources has been transferred from the environment to the new industry ministry as of 1 August, temporarily halting engagement with the LPG industry. Poland sea LPG imports by origin Poland LPG infrastructure Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Duqm plans key to Oman’s LPG export outlook
Duqm plans key to Oman’s LPG export outlook
The revival of a major petrochemical project could cap exports despite rising production, writes Ieva Paldaviciute Dubai, 17 September (Argus) — Production from the new Duqm refinery has boosted Oman's LPG output this year, and driven an 89pc year-on-year rise in exports to 371,000t for the first eight months of 2024, according to data from analytics firm Kpler. But plans for new petrochemical facilities linked to the refinery could put a cap on export capacity in the near future. Oman's LPG output has more than doubled within the past decade, from 420,000t (13,400 b/d) in 2015 — the earliest year for which energy and minerals ministry data are available — to around 990,000t last year. That is due in large part to the start-up of state-owned OQ's Salalah LPG extraction plant in the southern Dhofar governorate. The first-of-its-kind gas treatment project in Oman and now contributes close to 300,000 t/yr to the country's LPG output. The majority of Oman's LPG production now comes from downstream facilities operated by OQ — around 62pc of last year's output came from its 198,000 b/d Sohar and 106,000 b/d Mina al Fahal refineries. Another 30pc came from the Salalah LPG plant, and just 8pc from the upstream Bukha and West Bukha, Saih Rawl and Wadi Aswad fields. Shortly before the Salalah plant came on line, OQ in early 2021 started up its Liwa Plastics Industrial Complex (LPIC), whose 880,000 t/yr ethylene steam cracker would fast become a major LPG consumer. Output from the steam cracker, in turn, feeds the complex's 880,000 t/yr polyethylene and 300,000 t/yr polypropylene units. This contributed to a near collapse in Omani LPG exports in the first quarter of 2021, as OQ started diverting the Sohar refinery's LPG output to feed LPIC. But once the Salalah LPG plant began to ramp up, Oman managed to gradually resume exports, this time from Salalah port. This has enabled Oman to export refrigerated LPG cargoes on larger tankers, with Sohar previously only able to accommodate pressurised or midsize carriers. Oman is now a net LPG exporter, but still imports the occasional cargo when Sohar is unable to provide sufficient feedstock supply to LPIC — Sohar port received 104,000t of LPG between January and August, according to data from analytics firm Kpler. Both the Sohar refinery and LPIC are in northern Oman, far from the sultanate's other LPG production points. Chemical ambitions Oman's LPG output and exports have been lifted this year by new supply from the 230,000 b/d Duqm refinery, which at full capacity can produce up to 15,000 b/d of LPG. The facility was inaugurated in February but appears to have exported its first LPG cargo in September 2023, according to Kpler data, although this is not recorded in government data. But future exports could be capped if a new planned petrochemical complex, fed with naphtha and LPG produced at Duqm, is built alongside the refinery. Operator OQ8 — a 50:50 joint venture between OQ and Kuwait's state-owned KPI — initially had plans to build a 1.6mn t/yr petrochemicals complex, but design works were suspended in 2020, during the early part of the Covid-19 pandemic, because of the uncertain demand outlook. Plans appeared to have been revived in 2022, when OQ and KPI welcomed Saudi chemical giant Sabic onboard to develop a jointly owned petrochemical complex in Duqm. This project envisaged construction of a steam cracker and derivative units, as well as a natural gas liquid extraction facility. The three parties signed a non-binding agreement in late 2022, but a final investment decision has not yet been made. Oman LPG infrastructure Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
LPG World editorial: Cracks appear
LPG World editorial: Cracks appear
The emergence and growing supplies of alternative feedstocks are challenging LPG's position in Europe London, 17 September (Argus) — The European petrochemical sector's growing appetite for LPG has been vital in maintaining the region's position as an important LPG hub over the past few decades. But this outlet could come under increasing strain from more readily available and competitively priced naphtha from European refineries, as well as ethane from the US, all while regional olefins production flags. Europe's LPG production and demand for LPG as a fuel is in a state of long-term decline. The former is being constricted by North Sea field decline and energy transition pressures in Norway and the UK, even if investment is made to try to shore up North Sea oil and gas supplies in the prelude to net zero. It is also hamstrung by an ageing refining sector sorely lacking in investment and also at threat from the energy transition. Non-petrochemical LPG consumption meanwhile has been sliding and would have fallen more sharply were it not for the growth in autogas sales in eastern Europe — another sector moving towards decarbonisation. This demonstrates how important cheap and abundant US LPG imports have been in terms of supply, and investment in the flexibility of Europe's fleet of ethylene steam crackers in terms of demand. The latter has arisen from the year-round discounts LPG has secured over naphtha feedstock since US supplies started washing up on Europe's shores. But healthy LPG discounts to naphtha could be about to shrink, because European refineries are increasingly producing more naphtha at the same time as oil products and cracker feedstock demand wanes. The region's refiners have found naphtha weighing much more heavily on their bottom lines since the Covid pandemic. Naphtha's discount to North Sea Dated crude has averaged $8/bl this year in northwest Europe and $11/bl since 2022, compared with $4/bl in 2010-19. EU refiners produced much more naphtha this year and last year than they delivered domestically, including to petrochemical producers, Eurostat data show. This is because the best-value crude for them has become increasingly light. The loss of Russian medium sour Urals owing to EU sanctions has been partly offset by more naphtha-rich US light sweet WTI arriving in the region — climbing to about 1.86mn b/d in the first half of the year from 1.45mn b/d in 2022, Kpler data show. The light naphtha increasingly emerging from refineries is more suitable for cracking. But EU olefins output has shrunk since the pandemic, with cracker operating rates still trailing far behind those prior to 2020. European polypropylene production last year was the lowest since at least 2013 and 20pc lower than a 2017 peak, Eurostat data show. This is partly because the EU petrochemical sector has lost competitiveness with its Asian rivals. Cheap slates The US shale boom that has flooded Europe with cheap LPG has also blessed the US with bountiful volumes of an even cheaper petrochemical feedstock — ethane. Overseas shipments have grown over the past two decades, but the investment needed in ethane-fed crackers, US export capacity and ethane vessels has limited European uptake. Yet flows are increasing. Europe has imported around 180,000 t/month of US ethane this year, steady from 2023 but 12pc more than in 2022, Kpler data show. The US has been shipping 750,000 t/month since 2023, more than triple the 2017 volume. US ethane prices meanwhile keep falling as supplies keep growing. European producer Ineos is due to open Europe's largest cracker in Antwerp by 2026, a 1.4mn t/yr ethane-fed unit. Other investments in new ethane-fed capacity could emerge, or in conversions of crackers. The challenge of getting the ethane over the Atlantic may prolong plans to increase its use in Europe, but it is likely to arrive in increasing volumes and probably join swelling naphtha supplies, potentially reducing LPG's appeal among producers looking to regain their competitive edge. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
NGL pipeline burning in La Porte, Texas: Update
NGL pipeline burning in La Porte, Texas: Update
Houston, 16 September (Argus) — A natural gas liquids (NGL) pipeline operated by Energy Transfer Partners caught fire in La Porte, Texas, this morning, sending a bright orange plume of flame hundreds of feet into the air and leading to evacuations of nearby homes and businesses. The fire started at a valve station for a 20-inch NGL line, Energy Transfer said, located in a right-of-way shared with a number of other pipelines and high voltage power lines about 17 miles southeast of downtown Houston. Energy Transfer said the line has been isolated so that the residual product in the line can safely burn itself out. "We have no timeline at this point on how long that process will take, but we are working closely with local authorities," the company said. In a broadcast press conference today La Porte officials said it would likely be many hours until the fire burns out. Energy Transfer said it was aware of reports indicating that an unknown passenger car entered the right-of-way and struck the valve location. A vehicle could be seen very close to the flaring pipeline in video broadcasts of the fire this morning. The fire was first reported at 11:24am ET by the La Porte Office of Emergency Management via the X social media platform. The fire is near the intersection of Somerton Drive and Spencer Highway. First responders, including Harris County hazardous materials officials, were on the scene at the time of the post. The right-of-way includes a refined products pipeline system, various petrochemical pipelines, a Shell butadiene line, a Chevron ethylene line and an Enbridge Energy natural gas pipeline. Chevron said its pipeline was not affected by the fire. A shelter-in-place order has been issued for the nearby San Jacinto College campus and La Porte is recommending an evacuation of all homes and businesses between Luella and Canada roads. By Michael Camarda and Gordon Pollock Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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