Condensate demand in both splitting and refinery units in Middle East and more than that in Asia Pacific. Not only condensate, but also LPG production will improve due to the incoming development of S.P. gas field.
Asia LPG Supply- Demand
The non-refinery LPG production by OPEC Members is around 80 million tons. While, non- OPEC LPG production is near to 100 million tons. Roughly 43% of total non-refinery LPG production is from OPEC countries and this is while Middle East covers 37 million tons of OPEC LPG production. Based on OPEC’s production targets, its production is expected to grow during the next periods and part of the gain is due to Iran incremental LPG production.
According to the latest statics, Asia LPG Demand is around 105 million tons this year and the LPG market will be the most growing LPG market in the world in both consumption and production side. China, Japan, India and Indonesia will play more important role in the consumption market while Middle East producers are leading LPG production.
Asia LPG Supply- Demand (mt)
On the demand side, there are two sources which support this increasing volume in the futures, first is residential consumption and the second and is petrochemical usage. Total import volume in Asia for the year 2014 was around 41 million tons and for 2015 was around 44.2 million tons which shows 7 to 8 percent increase in import figures. As per FGE’s forecast annual growth for LPG consumption in the Asian countries between 2015-2020 would be around 4.1% annually and for the period 2020 -2030 would be around 1.1%. China's LPG imports topped 12 million tones in 2015 and put it on course to overtake Japan as the world's largest LPG importing nation. Moreover, India and Indonesia are two other growing Asian LPG consumers.
China imported more than 6.5 m/t of LPG in the first five months of this year, a remarkable increase of about 56 % year on year. This increase is largely attributed to growing LPG demand from propane dehydrogenation (PDH) units. The country’s dependency on imported LPG has increased to around 40%, from 37% in 2015 and 24% in 2014.
Selected Asian Countries LPG Imports (mt)
Furthermore, there is an advantage for countries like Iran to invest and focus on Asian LPG market as main export outlet due to the freight aspects.
On the supply side, Middle East countries are leading the market and the majority of Middle East LPG exports head to Asia and in particular India, Japan, Indonesia and China. Middle East is totally producing 37 million tons of LPG per year. Iran With small difference from its competitors is in fourth place among Middle East exporters after Qatar, Saudi Arabia and UAE. Iran’s LPG production totaled 6.5 million in 2015. However, it is expected that Iranian LPG production and accordingly its export will considerably rally during the upcoming period. This will happen mostly on the back of developing the world's largest gas field shared between Iran and Qatar. Iran aims to produce more than 12 million tons of LPG each year by the year 2025.
As of fourth quarter of 2015, there are sixteen phases in operation in South Pars gas field, with ten of them producing LPG. The eight further phases are currently in the development stage (with varying degrees of progress) and are expected to start up production between 2016 and 2025.
In 2015, the exportable quantity of LPG from Iran is around 13 percent of total volume exported from Middle East. The total volume of Iranian seaborne exports between January and December was round 4.5 million tons. This volume is already significantly higher than 2014, which was estimated at 3.2 million tons. This hike already highlights the current activity of the S.P. developments and its potential. Looking forward, Iranian LPG exportable volume will reach to 9 million tons by the year 2025.
All in all, seaborne exports are estimated to grow significantly in the forthcoming years, but the final export volume will be a function of the investment activity in the country, the further development of S.P. gas field and the startup timing of the new petrochemical consuming facilities.
All things considered, Iran energy investment may plan to Define Future LPG Supply- Demand. The current exportable volume (5 million tons) and forecasted quantity (9 million tons) will be resulted Iran to be in a more powerful position in the LPG market.
With this general picture in mind, you can see why it is important for Asian countries to have a more strategic relationship. Asia demand for Crude oil, Condensate and LPG is growing at a fast pace and Iran growing production should be considered as an opportunity for these countries.
References
BP Statistical Review of World Energy; June 2016
FGE; MENA Gas Monthly Report; May & June 2016
Poten & Partners; LPG in World Markets; Apr & May 2016
FGE; Asia Pacific Petroleum Monthly; Apr & May 2016
FGE; Asia Pacific Data book; Spring 2016
FGE; Middle East Petroleum Data book; Spring 2016 & 2014
Petroleum Intelligence Weekly (PIW); NOs 5,21 & 22
***This paper is presented at the "Asian Energy Cooperation Forum" conference held in Chongqing, China, 26th-37th June 2016