By Tom Manning and Veeral Mehta

Strong demand from Asia coupled with large US production has put the US in the top spot for LPG exports, while creating some challenges in other regions. LPG production and exports from the US are driving shifts to the global trade pattern.

Propane exports will continue to increase as the propane surplus in the United States, the Commonwealth of Independent States (CIS), and the Middle East grows. Most of the export expansion will be absorbed by the rapidly growing markets in Asia, particularly China. Butane exports will continue to rise as more butane is recovered from natural gas processing and in excess of indigenous refining requirements. Most of the butane will also be absorbed by Asia's rapidly growing markets. In the short term, ample supplies and low prices will stimulate price-sensitive demand growth as petrochemical feedstock as well as in the residential/commercial sectors.

Additional implications from recent IHS Markit analysis include:

• US trade dominates. The US surplus has allowed the United States to displace essentially all of Latin America's propane imports from the Middle East and Europe.
• European supply shifts. African propane exports to Northwest Europe have been displaced with imports from the CIS and the United States, while Africa continues to export to markets in the Mediterranean given Algeria's proximity to this market.
• Middle East development pushes exports. Middle East propane exports will increase steadily as new non-associated natural gas reserves are developed and associated gas increases along with crude oil production.
• Russian domestic consumption shapes exports. Russia is rapidly developing its gas reserves and building new gas processing plants. One of the major determinants to future availability of propane exports is the timing of new petrochemical projects that would increase local consumption.
• Regional domestic butane growth is slower. Middle East butane exports will account for most of the increase in butane exports since indigenous demand will increase slowly, leaving most of the butane received from gas processing available to be exported.

Dynamic market fundamentals and changing trade flows will continue to drive complexity in the LPG market in regions around the world.

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This post is a collaboration of Tom Manning, Senior Director, NGL Consulting and Veeral Mehta, Senior Consultant at IHS Markit. Veeral Mehta is a Senior Consultant, Midstream Oil and NGLs at IHS Markit. With over nine years of experience in the midstream gas processing sector, Mr. Mehta provides consulting services related to oil, gas, and NGL market outlook studies and investment due diligence support.

Posted 1 February 2017

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.