US eyes deeper inroads into Asia's growing LPG market
Expected shrinking of domestic demand has country seeking new markets
TOKYO -- The anticipated boom in demand for liquefied petroleum gas in Asia has thrown a spotlight on the world's top exporter, the U.S., which indicated that it is looking to make further inroads into the market, during the International LP Gas Seminar here.
At this year's seminar in early March, corporate representatives from the main LPG producers Saudi Arabia and the U.S., and importing nations China and India, took turns giving presentations on the outlook for LPG. They agreed that global LPG demand, especially in Asia, will probably continue to rise.
The U.S. has led the world in LPG exports since 2014. The country has increased shipments since the new, wider Panama Canal opened, and a new LPG export terminal started operations in the state of Texas.
According to British data provider IHS Markit, combined exports of the seven leading LPG producers are forecast to reach 100 million tons a year in 2025. Half of this would be from the U.S.
Bill Briggs of U.S. energy company Phillips 66 said at the seminar that there will not be an upsurge in domestic demand in the U.S. Rather, he said, there is a possibility that demand will decline.
"We don't expect we are going to see much more demand growth soon. In fact, we think we will see demand fall off in the U.S. for the demand side."
This makes the country even more desperate to secure export destinations, he said.
LPG demand in China, the largest consumer, has maintained double-digit growth since 2013.
According to Benjamin Yao of China's Guangdong Oil & Gas Association, the country's imports topped 15 million tons in 2016, with 21% supplied by the U.S.
"In Asia, the obviously petrochemical market is vastly growing, and we expect that it will continue."
Yao said imports from the U.S. last year jumped 18% from 2015, possibly due to the expanded Panama Canal.
The start of operations of equipment to produce propylene, a petrochemical raw material, from propane in recent years has contributed to the higher demand in China.
"Last year, China imports from the U.S. increased to 3.3 million tons. That's an increase of 15% compared with 2015," he said.
Speaking of the Asian market, Briggs said the LPG market for petrochemicals is burgeoning and is expected to continue expanding.
He views the region as the most important market for the U.S.
The Philippines, with its population of around 100 million, is also a growing market.
Sixty or so percent of the population is 30 years old or younger, so a sharp increase in the nation's gross domestic product is expected.
Annual LPG demand in the country hovered at around 1.10 million tons until 2014. However, 2015 saw a year-on-year increase of 16% and 2016 a 9% increase.
Ruben Domingo, CEO of the Philippines' Isla LPG Corp., expects the annual growth rate of 4% in the Philippines to continue.
He noted that LPG demand is increasing in proportion to the growing middle class. "As the middle class expands, it drives demand for energy, including LPG," he said.
Participants at the seminar also pointed out a fact that will affect the relationship between LPG suppliers and importers. While the global LPG supply, chiefly from the U.S., will keep growing, the demand increase may be limited to Asia.
It also should be noted that if there is an energy shift from LPG to liquefied natural gas, it is unlikely that the market will shift back.
There are a number of challenges ahead to secure supply destinations for the industry.