: While US shale gas is poised to impact the global LNG trades, beginning in 2015, it has already made its presence felt in the international LPG market. As a result of steadily increasing shale gas production volumes in recent years, the US has switched from being primarily an importer of LPG to a country rapidly rising up through the ranks of the leading exporters of LPG. That rise is forecast to continue at least through the end of the current decade.

Shale gas now accounts for 35% of US gas output and the percentage is growing. US drillers developed the hydraulic fracturing (fracking) technology required to exploit this unconventional gas source and such operations are now widely employed in the states of Texas and Louisiana where many of the major US shale gas deposits are found.

The US Gulf region also has an extensive gas pipeline network in place which facilitates the delivery of liquids-rich shale gas to coastal LPG terminals. These facilities are being switched from their traditional import to a new export role through the provision of relatively straightforward modifications. Such upgrades usually include the provision of further marine jetties and process facilities.

As recently as 2005 the US was a net importer of LPG to the tune of 4.5 million tonnes per annum (mta). Export volumes, which have been climbing ever since, reached 3.7 mta in 2012 and made the US a net LPG exporter for the first time since 1973. Exports will continue to grow and are expected to top the 5 mta mark this year and 7 mta in 2014. Some forecasters say that US LPG export capacity could be touching the 12 mta level by 2015.

As part of the changing scenario, competitively priced US LPG exports to Atlantic Basin customers, primarily in Latin America, are displacing those from other suppliers and adding impetus to the projects getting underway to expand and upgrade US Gulf LPG terminal capacity. As a result of the abundant supply of feedstock, US LPG is competitively priced in the global marketplace, matched only by the output from the Middle East in terms of cost.

As US LPG exports grow, sales teams are targeting new, more distant customers, including in Europe and Asia. Shipments to the latter region will be facilitated by the opening of the Panama Canal's enlarged lock system in late 2014/early 2015. The new locks will be able to accommodate very large gas carriers (VLGCs) of up to 85,000 m3, the size of fully refrigerated LPG carrier favoured for the transport of propane and butane over long distances.

The global trade in LPG now stands at approximately 85 mta and the VLGC fleet of 150 ships is responsible for a large share of this market. The VLGC fleet is set to be augmented by 13 newbuildings this year and an additional 10 ships in 2014.

LPG carrier ordering activity has picked up over the past year, spurred by the promise of continued trade growth and relatively attractive newbuilding prices. Recent VLGC construction contracts have been concluded at around the USD 70 million level, some 20% less than the prices pertaining in 2006. Last year 11 VLGCs were ordered, up from four in 2011, and new contracts have continued to be placed in the early months of this year.

The centre for LPG exports remains the Middle East, the region accounting for about 35 mta of the total volume shipped by sea. The principal sellers are Qatar, Saudi Arabia, Abu Dhabi and Kuwait. A few years ago Middle East exports were expected to be even higher but only Qatar has lived up to expectations. Qatar's overseas LPG shipments now stand at 12 mta following completion of all the country's LNG liquefaction trains. The LPG output comes as a by-product of Qatar achieving its planned plateau LNG production output of 77 mta.

Overseas LPG sales from elsewhere in the Middle East have not reached forecast levels for a variety of reasons, not least rising domestic consumption. In Saudi Arabia, for example, the use of LPG as a feedstock in a number of new Worldscale petrochemical plants has pushed the country's once world-leading LPG export tonnage down below the 6 mta mark.

The traditional large-volume buyers of LPG in Asia - Japan, Korea and China - are relatively mature markets and, although still growing, are not expected to generate much in the way of sales for the new volumes of LPG coming onto the market. Considerable international trade growth is likely to come from India, Indonesia, Thailand and Egypt. Governments in these populous countries are subsidising LPG cylinder prices as part of efforts to discourage the use of oil products.

The cylinder markets, where the gas is used as a domestic fuel, are primarily butane outlets. However, the availability of competitively priced propane from the US Gulf could well prompt Japan, Korea and China to switch more of their propane purchases to this new source at the expense product from traditional suppliers. Japan, which currently imports LPG at a rate of 12.5 mta, has talked about switching to US LPG for 10-20% of its supplies in a bid to reduce costs.

Although the opening of the new Panama Canal locks will cut the duration of a westbound US Gulf-Japan VLGC voyage by 50%, to about 22 days, it will still generate much higher tonne-mile figures than the typical VLGC journeys currently undertaken. Such trans-Pacific voyages bode well for LPG carrier owners.

One interesting US shale gas-related newbuilding order, announced earlier this year, is that for four 27,500 m3 vessels that will be used to carry ethane from the US to Europe. The ethane will be sourced from the large Marcellus shale gas play in the Pennsylvania region and will be shipped from Marcus Hook near Philadelphia to Rafnes in Norway for use as petrochemical feedstock.

The vessels will be built as multipurpose gas carriers, able to carry LNG and LPG as well as ethane. They will be designed as semi-pressurised fully refrigerated (semi-ref) gas ships with Type C pressure vessel cargo tanks and will have dual-fuel propulsion systems, enabling them to run on both LNG and oil. The first vessel in the series is due for delivery in 2015.

The concentration of interest on VLGCs to carry large LPG cargoes to distant markets has obscured the fact that there will also be a need for a bigger fleet of small fully pressurised LPG carriers to serve those customers in the Caribbean, Latin America and the Atlantic Basin Rim close to the US Gulf loading terminals. These LPG buyers, too, will be anxious to take advantage of the availability of low-cost US LPG, even though their volume requirements may be relatively limited.

There are already a number of fully pressurised ships in the 3,000-7,500 m3 size range engaged in LPG distribution duties in Latin America, but this complement will need to be augmented in the months and years ahead. Several operators of such vessels - the workhorses of the LPG fleet - have already begun to redeploy a number of their ships in the region.

Editor's Note: Mike Corkhill is a technical journalist and consultant specialising in oil, gas and chemical transport, including tanker shipping and chemical logistics. A qualified Naval Architect, he has written books on LNG, LPG, chemical and product tankers and is currently the Editor of LNG World Shipping.
 

منبع: مجله Maritime News