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21st INTERNATIONAL LP GAS SEMINAR
Prepared for:
INTERNATIONAL
LP GAS SEMINAR
Tokyo 2018
The Global LPG Market:Changes, Challenges & the Next Chapter
HOUSTON NEW YORK LONDON ATHENS SINGAPORE GUANGZHOU PERTHWWW.POTEN.COM
March 6-7
INTERNATIONAL LP GAS SEMINAR
MONTH 2009
© POTEN & PARTNERS 2009
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© POTEN & PARTNERS
March 2018 Page 1
The Global LPG Market:Changes, Challenges & the Next Chapter
Prepared for
INTERNATIONAL LP GAS SEMINAR
Tokyo 2018
By
Poten & Partners (UK) Ltd.
101 Wigmore Str.
London W1U 1QU
UK
This material has been compiled by gathering market intelligence from various public and industry sources which is subject to limited
validation procedures and may include estimates or judgments. No representation or warranty, express or implied, is made as to the
fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the
maximum extent permitted by law, Poten & Partners Inc., together with its affiliates and their respective officers, directors, employees and
agents disclaim any liability (including without limitation any liability arising from fault or negligence) for any loss arising from any use of
this presentation or its contents or otherwise arising in connection with this presentation. This presentation should not be distributed or
otherwise reproduced.
Poten & Partners, Inc. ©Copyright 2018
MONTH 2009
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March 2018 Page 2
Poten & Partners
Complimentary Businesses Across the Value Chain Poten & Partners Businesses • Global brokerage for petroleum products, LPG
and LNG
– Largest US tanker broker
– Largest LNG shipbroker
• Commercial advisory
• Capital markets solutions
• Research
- LNG
- LPG
- Tankers
- Petroleum
www.poten.com
NGL Consulting
NGL Retainer Services Available
Global Ethane Trade
DevelopmentsAvailable
NGL Publications Monthly and Forecast
Upstream DownstreamMarine InfrastructureMidstream
MONTH 2009
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Agenda
1. Introduction
2. 2017 Evolution
3. The Future
4. Bringing it all Together
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1 – Introduction
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March 2018 Page 5
Supply Demand
Is the LPG market changing from a supply driven market to a demand driven
market…?
New Era/New Tides
East supply insufficient
to meet growing East
demand
Petrochemical
demand increasing
China dominance
in LPG landscape
How much demand
is price sensitive?
Competition with
lighter feeds
Key supply region no
longer just the Middle
East
Shale Gas
revolution in the US
Surplus supply in
the West
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The changing focus of LPG seaborne demand
— Source, Poten & Partners
Large Bulk Demand
Retail Demand
Seaborne Exports
New PDH facilities
particularly in China and
Korea where propane
demand for PDH grew by
over 6 mm t from 2012 -
2017
Declining retail demand
Increased LPG utilisation
in steam cracking as price
advantage over naphtha
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Pricing becoming more “global”
30%
60%
90%
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Pro
pan
e %
of
oil
Propane prices relative to Oil
NW Europe US Gulf
NE Asia Saudi CP
-100
300
700
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
$/t
Propane price spreads
US Gulf - NE Asia
US Gulf - NW Europe
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1 – 2017 Evolution
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Overview of LPG seaborne trade
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A tighter market…particularly in the East
EASTWEST
Unfavorable cracking economics
Displacement by ethane
Increased supply from US, Norway and West Africa
OPEC production cutsUnfavorable US – Asia arbs
Growth in Asia particularly in retail outlets
Poor cracking economics limited petrochemical demand
-1
8
2015-16 2016-17
mm
t
Changes in seaborne supply/demand (mm t)
Supply
Demand
-1
8
2015-16 2016-17
mm
t
Changes in seaborne supply/demand (mm t)
Supply
Demand
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West to East volumes continue to grow in difficult arb environment
US
LPG Balance – Short
LPG Balance – Long
2015 5 mm t $120/t
2016 5 mm t $52/t
2017 4 mm t $44/t
-60
0
mm
t
Asia/Pacific
0
60
mm
t
US Exports
-60
0
mm
t
Europe/Med
20157 mm t$241/t
201611 mm t$93/t
201715 mm t$87/t
Year Seaborne trade
Average propane spread
0
30
60
90
2016 2017
Nu
mb
er
of
can
cella
tio
ns
US LPG Cancellations
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4.0
1.3
0.7
3.4
2.6
1.0
Korea
2016 2017
Total LPG exports
2016 = 25.3 mm t 2017
= 28.5 mm t
US exports head east displacing Middle Eastern volumes
*estimated
0
5
9
Latin America Asia Europe/Africa
mm
t
US Exports
1H 16 2H 16
1H 17 2H 17*3.4
6.4
1.1
5.94.1
0.8
2016
2017
Japan
Qatar, UAE, Saudi
Arabia & KuwaitUS Others
3.3
12.0
3.13.3
10.7
2.1
China
2016 2017
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…leaving NW Europe tighter…
Supply into the region limited with less from
the US and more exported
to the Med
Propane prices relative to naphtha
significantly increased in
2017
2015 and 2016 saw propane
priced to crack for the majority
of the year
Propane advantage over
naphtha declined
LPG utilization in steam cracking
backed out in favor of ethane and naphtha
0
8
NW Europe Med Asia US
mm
t
NW Europe LPG Movements
2016 2017Imports from US
-200
0
January March May July September November
$/t
NW Europe propane-naphtha spread
2017
2015
2016
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... and lower petrochemical utilisation
Margins for cracking were higher than 2016
But the incentive to crack LPG over naphtha lower
Imports for steam-cracking declined by around 1.3 mm t in 2017
Displacement of LPG by ethane
0
8
2014 2015 2016 2017
mm
t
Imported petchem demand - NW Europe
20%
-300
-150
0
150
300
450
-300
-150
0
150
300
450
Nap
hth
a-Pro
pan
e Sp
read
$/tM
argi
n o
ver
nap
hth
a $
/t
NW Europe Incentive to Crack Propane versus NaphthaBasis: spot prices
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The ethane effect
1H 2015
1.3 mm t
1H 2015
0.4 mm t
— Source, Poten & Partners
Borealis Stenungsund
• Supply of US ethane from
the East Coast expected
1H 2018Sabic Wilton
• 1st cargo arrived
December 2016 from
the US
INEOS Grangemouth
• 1st cargo arrived in
September 2016 from the
US
INEOS Rafnes
• Received 1st ethane cargo
in March 2016
0
450
Rafnes Stenungsund Grangemouth Tees
'00
0 t
on
s
US Gulf ethane exports
0
450
Rafnes Stenungsund Grangemouth Tees
'00
0 t
on
s
US East Coast ethane exports
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Asian petchems turn to naphtha in 2017
LPG prices firmed in the East to 97% of naphtha for propane and 100% of naphtha for butane
Despite steam cracking margins remaining high, the advantage for using LPG declined
Imports into Korea and Taiwan in particular declined for butane
0
1400
Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17
$/t
eth
yle
ne
N.E. Asia Cracker Incremental Margins
Naphtha Butane Propane
0.0
0.4
Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17
$/t
Monthly butane imports
Korea, Taiwan & Thailand butane imports
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Future vision?
FUTURE VISION
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3 – The Future
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3.1 Focus on US Supply
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New gas production drives near-term growth
US exports continue to drive expansion in seaborne trade
US exports will account for 33% of total seaborne supply by 2020 and over 38% by 2025
Middle East exports rise but limited by start-up of new gas projects/infrastructure
Other supply regions expecting growth: Canada, Australia, Angola
0
140
2017 2018 2019 2020 2021 2022
mm
t
Global LPG Seaborne Supply
Middle East Asia Pacific Northern Europe
Mediterranean West & Other Africa Americas
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— Source, Poten & Partners
Production growth pushes exports higher…
LPG production in the US is anticipated to grow around 9% in 2018
Limited growth in domestic demand particularly for butane
Increased levels of LPG “pushed” towards the export market
Last of wave of infrastructure developments expected mid 2018 with the Mariner East 2 completion
Will there be future investment in export capacity and when?
0
80
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
mm
t
US gas plant LPG production
0
50
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
US LPG Terminal Capacity vs Estimated Export Volumes
Total US exports US export terminal capacity
millio
n t
on
s p
er
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… increasing length in the West
EASTWEST
-30
0
2017 2018 2019 2020 2021 2022
mm
t
LPG Balance – Short
LPG Balance – Long
0
30
2017 2018 2019 2020 2021 2022
mm
t
20 mm t
•2017
21 mm t
•2018
27 mm t
•2022
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3.2 Key demand centres
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Asia holds the key to absorbing additional supply
Asia continues to be pivotal in absorbing additional LPG supply volumes
Near term increase in steam cracking demand over 2017 levels west and east
Anticipation of new wave of petrochemical projects (PDH, steam crackers)
Continued growth of retail with potential new outlets
0
140
2017 2018 2019 2020 2021 2022
mm
t
Global LPG Seaborne Demand
Middle East Asia Pacific Northern Europe
Mediterranean West & Other Africa Americas
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The changing focus of LPG seaborne demand
— Source, Poten & Partners
Large Bulk Demand
Retail Demand
Seaborne Exports
0%
100%
2012 2015 2017 2020
mm
t
Asia/Pacific
0%
100%
2012 2015 2017 2020
mm
t
Global seaborne import demand
0
40
2012 2015 2017 2020
mm
t
N. America
Increased LPG flexibility in
steam cracking
Continued growth in retail
demand and delayed/cancelled
new PDH facilities
Increased infrastructure
developments and new
PDH facilities
Limited growth due to
ethane displacement
0%
100%
2012 2015 2017 2020
mm
t
NW Europe
MONTH 2009
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Other Asia
China expected to remain dominant LPG importer…
2
0
30
2015 2017 2019 2021
mm
t
India
0
30
2015 2017 2019 2021
mm
t
China
0
30
2015 2017 2019 2021
mm
t
Japan
0
30
2015 2017 2019 2021
mm
t
Korea Korea
Japan
China
India21%
% Large Bulk Demand in 2017
% Retail Demand in 2017
% of total seaborne trade in 2022x %
12%
10%
7%
0
30
2015 2017 2019 2021
mm
t
Other Asia
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… but is growth slowing?
No new PDH plants started since end 2016
Refinery production continues to grow
Some new plants/additional phases delayed or cancelled
Competition between LPG and other fuels e.g. natural gas
Some growth in feedstock flexibility in steam cracking
Ethane: new projects looking at importing US origin C2
-40
0
40
80
Supply Demand Supply Demand Supply Demand
mm
t
China LPG Supply/Demand Balance
Gas Plant RefineryImports/Inventory "Net" RetailPetchem/Large Bulk Exports "Seaborne & Land"
2015 2017 2022
64%25%
25%
10%
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India leads the way for retail demand…
0.2
0.7
1.2
Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17
mm
t
Quarterly average LPG imports
29%
31%
19%
10%
4%6%
2017 Import Origin
Saudi
Qatar
UAE
Kuwait
Oman
Other
2nd largest global importer of LPG in 2017
96% of total demand is for
retail
Political pressure
Displacement of LPG with ethane
Diversification of supply
Competition with other fuels
Infrastructure limitations
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… with new markets import potential centered on retail outlets
Additional LPG
steam cracking
flexibility
Continued retail
growth
Retail growth
potential
Retail & Power
Generation
0
3
2017-2022
mm
t
Japan, Korea & Vietnam
0
3
2017-2022
mm
t
Indonesia
0
3
2017-2022
mm
t
Caribs/Central America
0
3
2017-2022
mm
t
Africa & Other Asia
*base case scenario
0
3
2017-2022
mm
t
S. Med & N. Africa
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4 – Bringing it all together
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Oversupply again
Lower prices –
petchems setting the
price?
US export availability
key
Increased liquidity
India/China the price
settersFurther infrastructure
investment?
How much of a role will
Africa play and when?New demand centres or
growth of current outlets
PROPANE BUTANE
2017 seemed to be an anomaly in the trend
What does this mean going forward?
MONTH 2009
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LNG & NATURAL GAS CONSULTING CONTACTS:
AMERICAS
Contact: Jim Briggs
Email: [email protected]
Tel: +1 212 230 2000
EUROPE, MIDDLE EAST, AFRICA
Contact: Graham Hartnell
Email: [email protected]
Tel: +44 207 493 7272
ASIA PACIFIC
Contact: Stephen Thompson
Email: [email protected]
Tel: +61 8 6468 7942
LPG CONSULTING CONTACTS:
Emma Lamb
Email: [email protected]
Tel: +44 (0) 20 3747 4883
Poten & Partners (UK) LTD
101 Wigmore Street
London, W1U 1QU
Tel: +44 (0) 20 3747 4800
Fax: +44 (0) 20 3747 4870
E-mail: [email protected]