Global LPG Glut Remains Unchanged

Jun 28th, 2017

David Appleton, an analyst at Argus Media, delivered a report on the situation of liquefied petroleum gas (LPG) in the global market in the period from 2010 until now at the Congress of the European LPG Association. Within 6 years, the production of LPG has increased by 25% while the consumption has been growing more slowly. Thus, since 2013 the world market has been experiencing stable LPG overproduction. Today, the gas surplus amounts to 6-7 million tonnes.

The United States continues to oversaturate the LPG market while Asia holds a position of an active consumer and refiner of this raw material. Based upon this, the experts note the presence of a geographical imbalance of supply and demand. From 2010 to 2016 the share of global LPG increased by 5% and now comprises 63%. Such an increase primarily results from the ongoing shale gas production in the United States.  The number of drilling units has been reduced while the output has increased up to 600 barrels per day within the last decade. Appleton reports that the excess of LPG is stored in tankers, floating storage facilities with a displacement of 55-60 thousand tonnes.

According to Argus, LPG is most widely used in the petrochemical industry. Active application of gas in this sector is explained by its cheapness, caused by the global oversupply. Despite the fact that naphtha is a substitute product in the petrochemical industry, and in 2010 the cost of both products was often equal, generally, the price of LPG remains cheaper compared to naphtha.

The expert noted that LPG car fuel is one of the less dynamic sectors of gas consumption. Europe is the biggest consumer of LPG for car fuel production, however, geographically; the consumption of LPG for car fuel is varying. For example, the countries in Western Europe consume half as much LPG for car fuel as Eastern Europe countries and Turkey.