LPG: lots of supply, and US export prospects rising

And up the road from the CERA meeting, another IHS unit–Purvin & Gertz–was holding its own annual meeting on the market and outlook for NGLs/LPGs.

Starting off the presentation session was Ken Otto, consultant with the host company, who set the table for the day-and-half event. Total growth in LPG supply over the next three to four years is projected to be about 28 million tonnes/year, rising from around 245 million tonnes/year in 2011 to 275 million tonnes in 2015.

Global LPG supply growth rate depends on developments in segments of the oil and gas industry: rising oil production in the Middle East, refinery expansions in Asia, and shale gas development in North America. Remember, LPG is a byproduct of processing hydrocarbons: from oil wells, from gas wells, and in the refining process.

On the consumption side, demand growth in the residential and commercial sectors in Asia and the overall Middle East has accounted for over 80% of global LPG demand growth since 2005. The rapidly expanding ME petchem sector has made that region a “significant” LPG consumer, primarily driven by the availability of supply, Otto said.

In the US, waterborne exports of propane from the US are expanding, and that trend is expected to continue. The US exported only 7 million barrels in 2008, but exports soared to 25 million in 2009, 34 million in 2010 and 37 million barrels in 2011.

“The primary driver behind this sharp jump has been low propane prices in the US relative to the rest of the world,” Otto said.

Butane exports were flat around 4 to 6 million barrels but those are expected to grow, as Otto predicted it is “only a matter of time” before butane exports ramp up.

Overall, Otto painted a pretty rosy picture as far as the scope of the international LPG market. Supply growth combined with demand growth should prove this a balanced market, but regional supply/demand changes in regions both east and west of the Suez could result in a very dynamic market. “Global LPG trade patters may shift significantly depending on where new LPG supplies are needed,” Otto said.

John Bretz, VP of marketing at Anadarko, took the stage next, giving a producer’s view of the US shale resource base, and a look into the hometown company’s foray into the Eagle Ford shale.

Overall, North America has added 64.6 billion barrels of oil equivalent derived from shale resources. Shale gas is estimated at 336,145 bcf, with approximately 8,580 billion barrels of oil from shale.

Bretz talked about the above and below ground elements to a successful shale play, including geology, land access and political/environmental roadblocks or guidelines.

Looking at Anadarko in the Eagle Ford, Bretz said it provides highest returns across the shale plays as with the Eagle Ford “you get significant condensates and NGLs.” Anadarko currently has an estimated 200 rigs there, and an 450,000 b/dof oil equivalent expected.

Hunter Battle, a VP at midstream operator Targa Resources, spoke next. Broadly speaking, there are a total of 77 new gas plants planned in the US, adding 11,625 Bcf/d of additional processing capacity.

This added gas capacity will bring more raw, or Y-grade, NGLs into Mont Belvieu, Texas, the epicenter of the NGL market. In 2006, raw mix intake to Mont Belvieu was 740,000 b/d. In 2012, 1.13 million b/d will come in, and with the rapid growth going on in the de-bottlenecking and pipeline additions, an estimated 2.11 million b/d of raw NGLs are coming to Mont Belvieu by the end of 2013. Pipeline ramp-up capacity will bring another 813,000 b/d, totaling close to 3 million b/d. “Current pipeline constraint will be lifted later this year,” Battle said.

With the raw liquids on the way in, fractionation is the next step. For more perspective on where the market is going, you have to look at it has been. Mont Belvieu had 672,000 b/d fractionation capacity in 2006. The market will expand that to 943,000 b/d by the end of 2012, and 1.29 million b/d by 2013.

As raw liquids continue to saturate Mont Belvieu, an additional 450,000 b/d of fractionation capacity could be announced. Enterprise Products has filed two air permits with regulators, so a seventh and an eighth could be announced to bring 150,000 more.

Battle said Targa Resources is looking at adding another 100,000 b/d fractionator, with an official announcement coming in two weeks perhaps. Hint Hint.

 Platts