LPG Introduction PDF

Liquified Petroleum Gas – An Introduction This report and/or presentation is based on our knowledge of relevant market conditions. Our estimates are made on the basis of this knowledge, but other circumstances, or new circumstances, as well as general uncertainty could cause the market to develop d...

Liquified Petroleum Gas – An Introduction This report and/or presentation is based on our knowledge of relevant market conditions. Our estimates are made on the basis of this knowledge, but other circumstances, or new circumstances, as well as general uncertainty could cause the market to develop differently. We take general reservation for misprints. MB Shipbrokers is not responsible or liable for any damages or losses resulting or arising directly or indirectly from your use of the report. © All rights reserved. No part of this publication may be reproduced in any material form (including photocopying or storing it in any medium by electronic means) without the written permission of the copyright owner. Likewise, any quoting is prohibited without the written permission of the copyright owner.  © 2024 MB Shipbrokers K/S. All rights reserv ed. LPG – An Introduction What is LPG ‒ Liquefied Petroleum Gas (LPG) stands has grown to be an integral component of the fossil fuel mix, which encompasses natural gas and crude oil products ‒ Unlike LNG, LPG does not occur in isolation within nature but is found alongside natural gas or crude oil deposits ‒ It emerges as a by-product from the processing of these primary fuels, with approximately 60% originating from the processing of natural gas and the remaining 40% from crude oil refining ‒ Condensing LPG from gas to liquid form reduces its volume to 1/250th, facilitating efficient transportation and storage without necessitating extensive infrastructure ‒ From an environmental perspective, LPG distinguishes itself as a cleaner-burning fuel, significantly reducing greenhouse gas emissions compared to traditional fuels. The advent of bio-LPG further lowers CO2 emissions. LPG as it is currently produced emits about 72kg/Gj of CO2 vs Coal at abt 101kg/Gj and LNG at abt 56 kg/GJ Page 2  © 2024 MB Shipbrokers K/S. All rights reserv ed. LPG Value Chain Introduction LPG is a Refined Product Value Chain Feedstocks are from either LNG production (Natural Gas Liquids) or refined from Oil Small ‘Coasters’ make up a small but important section of the LPG value chain ‒ Propane – Feedstock for ethylene cracking / blended into LPG for fuel ‒ Butane – Feedstock for ethylene cracking / blended into LPG for fuel ‒ Naphtha – Feedstock for ethylene cracking ‒ Below are the other major oil refined products ‒ Gasoline ‒ Aviation / Jet Fuel ‒ Kerosene – for domestic cooking, heating, and lighting ‒ Diesel – fuel for trucks, trains and heavy industrial equipment ‒ Bunker oil – fuel for power generation / large vessels ‒ Lube oil / grease for industrial use ‒ White oil – clear, odourless liquid used in the pharmaceuticals industry ‒ Bitumen / Asphalt – used for roads and manufacture of building materials Page 3  © 2024 MB Shipbrokers K/S. All rights reserv ed. LPG Value Chain Page 4  © 2024 MB Shipbrokers K/S. All rights reserv ed. Global LPG Trade Flows US to China/Asia is the dominant trade route 2023 – Top 10 LNG Exporting Countries (by USD bil) 2023 – Top 10 LNG Importing Countries (by USD bil) Million mt Million mt Russia Belgium Australia Italy Norway Netherlands Algeria Indonesia Kuwait United States Saudi Arabia Mexico Canada South Korea Qatar India UAE Japan United States China USD 0.00 USD 5.00 USD 10.00 USD 15.00 USD 20.00 USD 25.00 USD 30.00 USD 0.00 USD 2.00 USD 4.00 USD 6.00 USD 8.00 USD 10.00 USD 12.00 Page 5  © 2024 MB Shipbrokers K/S. All rights reserv ed. Global LPG Trade Flows Long haul trade routes carried on VLGCs with shorter trades on smaller units Cross Basin Trades Intra Basin Trades ‒ LPG trade flows reflect the dynamic nature of export and import ‒ Inter-Asia Trade: markets. The primary trade routes reflect the distribution of LPG Within Asia, there is a notable trade of LPG, primarily driven by production and consumption globally differing capacities for production and consumption among countries. Japan, South Korea, and China are significant importers, sourcing LPG for both energy and industrial uses. ‒ From the Middle East to Asia: ‒ Europe as an Importer: The Middle East, particularly Qatar, Saudi Arabia, and the UAE, is a Europe's demand for LPG, though relatively stable, relies on imports significant LPG production hub, with Asia being the primary from the U.S., North Africa, and the Middle East. The region's destination for its exports. This trade route is crucial for meeting consumption patterns influence LPG shipping, especially during Asia's growing demand for LPG, used both for energy and as a peak demand periods in winter. feedstock in petrochemical manufacturing. ‒ U.S. Exports: The surge in shale gas production in the early 2000s, notably gaining significant momentum around 2005-2006, has positioned the U.S. as a major LPG exporter. The expansion of the Panama Canal has facilitated larger LPG carriers, enhancing the U.S.' ability to export to Asia and Europe. This shift has introduced new dynamics in trade flows, impacting shipping rates and vessel demand. Page 6  © 2024 MB Shipbrokers K/S. All rights reserv ed. VLGC Trade Routes Page 7  © 2024 MB Shipbrokers K/S. All rights reserv ed. LPG Market Dynamics Supply/Demand External Influences ‒ Several key factors profoundly influence the LPG shipping market, ‒ Geopolitical Events: driving its volatility and growth. These factors include global Political instability in key LPG-producing regions, such as the Middle ‒ LPG production East, can lead to fluctuations in LPG shipping rates by affecting supply chains and trade routes. Sanctions and trade policies also ‒ Demand from key consuming regions play a critical role, influencing trade flows and opening or restricting ‒ Geopolitical events, markets for exporters and importers. ‒ and the regulatory environment. ‒ Regulatory Factors: Environmental regulations, such as those targeting sulfur emissions, impact the LPG shipping industry by necessitating investments in ‒ Global Production and Supply: cleaner fuels or retrofitting vessels with emission reduction The production of LPG is closely linked to the oil and gas industry, technologies. These regulations can affect operational costs and with increases in shale gas production, particularly in the United market competitiveness States, significantly impacting global LPG supply. The U.S. has emerged as a leading LPG exporter, reshaping trade flows and affecting shipping demand. ‒ Demand Dynamics: Asia, led by China and India, continues to be the largest consumer of LPG, primarily for residential use and as a petrochemical feedstock. The growth in demand from these regions necessitates increased shipping capacity to transport LPG from key production areas, notably the Middle East and the U.S. Page 8  © 2024 MB Shipbrokers K/S. All rights reserv ed. Take away Questions Think about the following ‒ What are the three base commodities that make up LPG? ‒ Where does LPG come from? ‒ Where does is rank alongside other energy sources from an emissions point of view? ‒ What sort of end uses to they provide? ‒ Who is the largest exporter/importer of LPG Page 9  © 2024 MB Shipbrokers K/S. All rights reserv ed. Any questions? Give us a call. +45 3344 1400 [email protected] Name Title [email protected] +45 3344 1400