LPG 'very easy' substitute for gas: WLPGA

Liquefied petroleum gas (LPG) is a "very easy" substitute for natural gas and its consumption worldwide is due to continue increasing as efforts to decarbonise gather pace, World LPG Association (WLPGA) director David Tyler told Argus.

LPG can be blended with air to create synthetic natural gas (SNG) or LPG/air, which has very similar properties to natural gas and can be transmitted in gas distribution networks and consumed in the same appliances, Tyler said. And SNG or LPG/air systems have supported the penetration of gas around the world since the 1950s, he said.

"There are very few applications where SNG cannot be interchanged with natural gas. SNG systems are being used to supply gas to some of the world's biggest energy users including large steel mills, city utilities, hospitals, military bases and residential neighbourhoods," Tyler said.

SNG systems are particularly valuable in helping utilities to manage demand swings, guarantee supply during disruptions and provide a "bridge" to new communities without a gas grid, he said. Consumers with SNG plants that support natural gas supplies would have the flexibility to switch between the two "immediately" depending on their circumstances, Tyler said.

And SNG systems are quick to construct and involve "inexpensive" blending units comprising LPG storage facilities with pumps, vapourisers, regulators and associated pipework, Tyler said.

LPG is traded on a spot basis, but around 80pc of supply worldwide is underpinned by term contracts, Tyler estimated. Unlike the day-ahead gas market, LPG liftings usually occur 10-45 days ahead of delivery and are shipped in parcels of up to 44,000t each, which requires shippers to book vessels and slots at terminals and ports, Tyler said. LPG is then normally trucked from ports to inland demand centres, and this is how most users receive LPG, although some is sent by railcar as well.

And as governments move to decarbonise, LPG use is likely to continue increasing where the fuel can replace higher-carbon coal and fuel oil, although demand growth will be limited in places where natural gas is widely available, Tyler said. The petrochemical sector is another source of growing demand for LPG, with demand for propane in particular having jumped significantly over the past decade as a feedstock in the production of propylene, particularly in China.

LPG refinery use surge

As gas prices soared to record highs last year LPG demand surged, particularly in the European refining sector, Argus data show.

In the five largest EU gas-consuming countries — Germany, the Netherlands, Spain, Italy and France — LPG use by refineries jumped by 242pc on the year to roughly 624,000t in 2022, which was almost six times higher than in 2020, Argus data show (see refinery consumption table).

Refineries have long been able to substitute some or all their gas consumption with LPG, but in previous years, gas was sufficiently cheap and fuel switching happened only occasionally. But record-setting gas price rises last year prompted many refineries to switch to LPG as a cheaper alternative (see graph).

That said, LPG use across the industrial sector in those five EU countries was less dramatic last year, increasing by a marginal 2pc compared with 2021. There were steep increases in Italy and Spain, but this was mostly offset by falls in France and Germany (see industrial consumption table).

Looking ahead, Argus expects LPG use by refineries and industry to decline this year, with refinery use falling more sharply but still remaining stronger than in previous years.

By Brendan A'Hearn

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