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Viewpoint: US propane production to recover in 2021

  • Market: LPG
  • 28/12/20

US propane production is expected to grow in 2021 as crude and natural gas output begins to recover from Covid-19-related shut-ins while overseas demand remains strong.

US crude oil and natural gas production fell as prices crashed in the early months of the pandemic, but propane demand remained high. China and India accounted for a larger portion of global LPG demand for both the residential and petrochemical sectors early in the first quarter, and demand remained elevated as those countries began reopening in the summer.

The Energy Information Administration's December Short-Term Energy Outlook estimated the US will produce 1.66mn b/d of propane from gas plants in 2020, compared to 1.59mn b/d produced in 2019. The agency forecasts 1.6mn b/d in propane production volumes from gas processing in 2021, although midstream operators have a more optimistic view.

Houston-based midstream operator Enterprise Products Partners in July reported natural gas processing inlet volumes in the Permian basin had recovered by as much as 98pc from March lows. Enterprise in a December investor presentation predicted that US production will begin to recover in 2021 as some of the previously shut-in volumes return.

Conway, Kansas, propane is expected to remain at a discount relative to Mont Belvieu, Texas, propane in the first quarter of 2021 as high inventories and weakness in seasonal demand pressure midcontinent in-well propane prices.

Conway propane averaged a 4¢/USG discount to Mont Belvieu, Texas, LST propane in December compared with about a 2¢/USG discount in December 2019. High midcontinent inventories, more southbound pipeline capacity and warmer-than-normal weather were the major factors pressuring midcontinent propane lower, while US Gulf coast propane prices are supported by export demand.

Propane inventories in the US midcontinent remain above the five-year average and higher than in 2019, while the National Weather Service's Climate Prediction Center expects the midcontinent to have near-average to above-average temperatures in the first quarter of 2021.

A slow start to the US heating season kept midcontinent inventories elevated, which stand 13pc above last year and the five-year average at 23.1mn bl for the week ended 18 December, according to the EIA.

In 2020, midcontinent natural gas liquids (NGL) production, particularly propane, was shipped south to the higher-priced market in Mont Belvieu on Oneok's Sterling and Arbuckle pipeline systems. Additional pipeline capacity that came on line in 2020 has kept the north/south propane arbitrage wider in 2020.

Oneok brought its Arbuckle II NGL pipeline on line in April, adding 400,000 b/d to the existing capacity on the Arbuckle North pipeline of over 200,000 b/d. Both Arbuckle pipelines carry unfractionated NGLs from the midcontinent to Gulf coast storage and fractionators.

Commissioning of the Arbuckle II pipeline has freed more space on Oneok's Sterling pipeline system for purity products to be sent to Mont Belvieu. The Sterling I, II and III systems, which carry NGLs from Medford, Oklahoma, to the Gulf coast, have a total capacity of about 445,000 b/d.


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16/07/24

Q&A: Petredec pushes LPG to drive Africa clean cooking

Q&A: Petredec pushes LPG to drive Africa clean cooking

London, 16 July (Argus) — LPG trading company and shipowner Petredec was recently unveiled as one of the founding members of the World Liquid Gas Association's (WLGA) Cooking For Life Africa Task Force (CFLA), following the in May. The company was one of the early international entrants to the sub-Saharan African LPG market and continues to pursue opportunities in the region. Argus' Oliver Binks spoke with Petredec's head of downstream, James Bullen, about the company's plans to help expand LPG's use across Africa: Why did Petredec join the CFLA? The task force is a direct response to the IEA's call to action following its summit in Paris in May. The IEA's ambition is to end cooking fuel poverty by making cleaner fuels accessible to all, thereby saving lives. The WLGA created the task force to focus on LPG's role in addressing this challenge. Although the problem itself is acknowledged to be surmountable, and not even particularly costly — in relative terms — the WLGA believes that LPG can largely solve the issue of clean cooking in Africa now. This is a belief that we not only share, but also through our work on the ground in Africa, fully understand first-hand. LPG is well-suited to developing markets, such as those being highlighted as particularly problematic within Africa by the IEA. We believe that LPG's inherent benefits of being accessible, easy to deploy, well-understood and affordable make it the unparalleled choice for meeting the IEA's objectives. What projects are the company involved in within the region? Our strategy onshore has been to invest in markets where LPG is established and understood but market growth is in some way hindered. This is typically owing to a lack of investment in infrastructure, especially import infrastructure. We base our investment decisions on long-term opportunities for LPG and how we can alleviate these bottlenecks to facilitate growth. Affordability is a significant barrier to fuel switching, so being able to import the cheapest possible product is a fundamental pillar of any investment plan we develop. And central to this is the necessity to select locations where the largest LPG carriers, VLGCs, can be accommodated to discharge cargoes. Big ships mean better freight economics, which means cheaper import prices and more affordable LPG for the consumer. We have not announced the specific details of our new investments and are not in a position to do so yet, but the type of projects will come as no surprise to anyone familiar with our record. We have invested more than $200m in the past decade on medium to large-scale LPG infrastructure and it's fair to assume we will do more of the same. What are the challenges to developing infrastructure in sub-Saharan Africa? While working in each developing market has its own specific challenges, there are often common issues to navigate when large-scale infrastructure projects are under development. These include planning and permitting , environmental adherence and acceptance and navigating local bureaucracy, which can be multi-layered and onerous. Delays are common and projects such as designing and constructing import terminals, distribution systems and break-bulk hubs are complicated and time-consuming. The key to overcoming these is consistency, perseverance, patience and commitment. Projects run late, budgets require amendments and remits change, but good opportunities are often difficult by nature. Keeping the end goal in sight and taking a long-term view are key. What specific infrastructure in the supply chain needs the most investment? Different regions and markets have different needs. Some countries have focused on one specific type of infrastructure investment while ignoring other key elements. Other countries are in need of modernisation across their entire supply chains. A problem we frequently come across is outdated and insufficient infrastructure stifling market growth. While market participants' intentions to support the growth of LPG might be there, their efforts can be in vain if they are working with 50-year-old-plus import terminals with inadequate capacity to meet market demands, or an antiquated cylinder filling and distribution system. How much LPG does Petredec supply to sub-Saharan Africa, and where does it source it from? Petredec has supplied LPG to Africa since the 1980s, first in north Africa and then elsewhere around the coast of the continent. Annual quantities vary with supply contracts, but for many years now we have supplied significant volumes to South Africa, which we then distribute via road tankers across the southern part of the continent. From our import hub in Richards Bay, South Africa, our local subsidiary, Petregaz, transports LPG to nine countries across the region, often more than 2,000km in each direction. We have always used our global trading, supply and shipping system to ensure that the most appropriate product is supplied to each market. This means as arbitrage opportunities open and close, product can originate from a number of locations, but for South Africa, we typically utilise our large offtake positions in the US Gulf to supply the market. What other clean cooking options do Africans have apart from LPG, and why not pursue these over LPG? We aren't aware of any alternatives as compelling as LPG when considered holistically as a "through the transition" energy option for developing markets. The IEA itself, in the report A Vision for Clean Cooking Access for All, identifies LPG as the primary solution to deliver clean cooking access, representing nearly half of the households gaining access by 2030. That is not to say that LPG is the answer to every problem in every market. During the summit, we encountered new cooking stoves powered by solar energy and recycled pellets, both intriguing but reliant on electric power as a back-up fuel or for flame acceleration. Where we are talking about markets with limited access to electricity, neither of these are practical. The summit also highlighted a number of biofuels, some of which appear interesting, but developments are very early and at this point unproven. We do not believe that LPG's ready availability, low-cost set-up and easy scale-up can be bettered by any current alternative. Which countries are the company focusing on for LPG market expansion across the region? We are focused on expanding operations in our existing markets and new territories. We already deliver LPG to nine sub-Saharan African countries by road so fully understand the importance of multi-modal logistics. But we are keen to improve supply chain operations and are examining opportunities to utilise alternative forms of transport and enhance existing logistics in order to improve productivity and, most importantly, lower costs. Reduced logistic costs means cheaper deliveries resulting in improved affordability, which is crucial as we and our partners strive for market growth. What are the company's objectives in terms of inland African LPG distribution this year? The current project focus, particularly in South Africa, is on further optimisation of the supply chain to better serve our customers. Having acquired one of South Africa's largest dedicated LPG road logistics operators in 2023, we have now fully integrated that business into our operations and have set about further expanding the freight aspect of our offering. We expect to announce further developments in due course that will improve that level in terms of speed, cost and reliability. Targeting new usage opportunities for LPG is also a key current focus, as we look to leverage the strong foundations we have laid since commissioning the Richards Bay terminal in 2020. Acute shortages of alternative energy options and an ongoing electricity crisis in South Africa have thrust LPG into the limelight as a viable substitute for power generation. We are engaged with several industrial and commercial businesses looking for energy security that are, for the first time, considering using LPG. The company divested its Reunion business in 2023. Why and what lessons were learnt? The business ran profitably throughout our 14 years of ownership, and together with our local partner, we had gradually managed to grow our market share and overall volumes. However, with our investment focus in the region shifting from the southern Indian Ocean to continental Africa, Petregaz Reunion had become somewhat isolated in our longer-term strategic growth plan. With their own growth strategy focusing on market consolidation and integrating operations, the business was a natural fit for Vivo Energy and a transaction suited all parties. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Heavy rain, wind expected in Houston from Beryl: Update


08/07/24
News
08/07/24

Heavy rain, wind expected in Houston from Beryl: Update

Houston, 8 July (Argus) — Tropical storm Beryl is expected to regain hurricane strength before coming ashore near Matagorda, Texas, early Monday, bringing heavy rain and wind to the Houston area. As of 8pm ET Sunday, the center of the storm was about 120 miles east-southeast of Corpus Christi, Texas, with maximum sustained winds of 70mph, moving northwest at 12mph, according to the National Hurricane Center (NHC). The storm track forecast has shifted to the north of Corpus Christi, likely sparing that city's refining and oil export industries from the most severe conditions, although Citgo said its 165,000 b/d Corpus Christi refinery is running at reduced rates as part of its hurricane preparedness plan. Peak storm surge of 4-7ft is expected between Matagorda Bay and San Luis Pass, including at Freeport, home to a number of petrochemical plants and an LNG export terminal. Galveston Bay, which includes numerous refineries and oil export terminals along the Houston Ship Channel and Texas City, is expected to see 4-6ft of storm surge. The ports of Houston, Galveston, Freeport and Texas City were closed to all traffic at 5pm ET Sunday, according to the US Coast Guard. The Port of Corpus Christi has been closed since Saturday afternoon. US Gulf coast refiners appear to have robust fuel inventories for this time of year should the storm lead to operational issues. The four-week average of Gulf coast gasoline inventories in the week ended 28 June was up by over 4pc from the same period in 2023 and up by 6pc from 2022, after hitting a near six-month high in the penultimate week of June. Residents and businesses in the Houston area may see power outages Monday from the high winds, according to local emergency management officials. Rainfall is expected to range between 6-10 inches with 15 inches in some isolated areas, according to NHC. Little oil, gas production disruption Disruptions to US Gulf of Mexico oil and gas operations appear to be limited given Beryl's approach to the west of most US offshore oil and gas operations, although some platforms were evacuated late last week. Chevron said it has already started to send non-essential workers who were evacuated back to offshore facilities. Mexican offshore operations were halted late last week when the storm first entered the Gulf after passing over the Yucatan Peninsula. Early last week Beryl was a Category 5 storm, which made it the strongest on record for the month of July, as it left a trail of destruction in the Caribbean . The second named storm of the 2024 Atlantic hurricane season, Beryl followed tropical storm Alberto, which came ashore in northeastern Mexico late last month. This year's Atlantic hurricane season is expected to be more active than normal, according to the US National Oceanic and Atmospheric Administration, with 4-7 major hurricanes that pack sustained winds of 111mph or higher possible. By Tom Fowler, Nathan Risser and Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Beryl aims between Corpus Christi, Houston


07/07/24
News
07/07/24

Beryl aims between Corpus Christi, Houston

Houston, 7 July (Argus) — Tropical storm Beryl was expected to regain hurricane strength today before coming ashore between Corpus Christi and Houston, Texas, early Monday. As of 11am ET today the center of the storm was about 195 miles southeast of the refining and oil export hub of Corpus Christi with maximum sustained winds of 65mph. Moving northwest at 10mph, its landfall was expected at about 2am ET Monday, according to the National Hurricane Center (NHC). The track of the storm's landfall has moved toward the east for the past two days, moving Corpus Christi out of the area likely to see the highest winds and storm surge. The most powerful winds and storm surge should be centered on areas near Matagorda Bay, according to the forecast, with 4-6ft of storm surge expected. Galveston Bay, which include numerous refineries and petroleum export terminals along the Houston Ship Channel and Texas City, was expected to see 3-5ft of storm surge. The port of Corpus Christi was closed to all traffic as of Saturday afternoon while the ports of Houston, Galveston, Freeport and Texas City were set to "Yankee" status at 8am ET today, suspending all inbound traffic, bunkering and lightering operations. The Houston-area ports were expected to close to all traffic later today as the storm nears landfall, according to the US Coast Guard. Disruptions to US Gulf oil and gas operations so far appear to be limited given Beryl's approach to the west of most US offshore and gas operations. Mexican offshore operations were halted late last week when the storm first entered the Gulf after passing over the Yucatan peninsula. Early last week Beryl was a Category 5 storm, which made it the strongest on record for the month of July, as it left a trail of destruction in the Caribbean. The second named storm of the 2024 Atlantic hurricane season, Beryl followed tropical storm Alberto, which came ashore in northeastern Mexico late last month. This year's Atlantic hurricane season is expected to be more active than normal, according to the US National Oceanic and Atmospheric Administration, with 4-7 major hurricanes that pack sustained winds of 111mph or higher possible. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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US adds 206,000 jobs in June, jobless rate ticks up


05/07/24
News
05/07/24

US adds 206,000 jobs in June, jobless rate ticks up

Houston, 5 July (Argus) — The US added a solid 206,000 jobs in June while job gains in the prior two months were revised downward and wage gains cooled. The job gains, which beat analyst estimates, followed downwardly revised 218,000 job gains in May and 108,000 gains in April, the Bureau of Labor Statistics (BLS) said today, for a combined downward revision of 111,000 for the prior two months. The US generated a monthly average of 220,000 jobs in the 12 months through May. Economists expected gains of about 190,000 in June, according to a survey by Trading Economics. The jobless rate ticked up to 4.1pc, the highest in more than two years, from 4pc. Still, the unemployment rate remains near five-decade lows. Construction added 27,000 jobs, while manufacturing lost 8,000 jobs. Gains also occurred in government, health care and social assistance. Average hourly earnings rose by 3.9pc from a year earlier, down from a 4.1pc annual gain in the prior month and the lowest in three years. Futures markets after the jobs report indicated a 71.8pc chance the Fed will cut its target rate by a quarter point from a 23-year high in September, up from 68.4pc odds on Wednesday. The Federal Reserve, after its last policy meeting in mid-June, had penciled in one likely quarter point rate cut was likely this year, paring that from a likely three cuts shown in March. Still, it also said it needs to see evidence that inflation is "sustainably" slowing towards its 2pc target before beginning to cut rates from 23-year highs. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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US services contract in June, signal broad weakening


03/07/24
News
03/07/24

US services contract in June, signal broad weakening

Houston, 3 July (Argus) — Economic activity in the US services sector contracted in June by the most since 2020 while a report earlier this week showed contraction in manufacturing, signaling a broad-based slowdown in the economy as the second quarter came to an end. The Institute for Supply Management's (ISM) services purchasing managers index (PMI) registered 48.8 in June, down from 53.8 in May. Readings above 50 signal expansion, while those below 50 signal contraction for the services economy. The June services PMI "indicates the overall economy is contracting for the first time in 17 months," ISM said. "The decrease in the composite index in June is a result of notably lower business activity, a contraction in new orders for the second time since May 2020 and continued contraction in employment." The business activity/production index fell to 49.6 from 61.2. New orders fell by 6.8 points to 47.3. Employment fell by 1 point to 46.1. Monthly PMI reports can be volatile, but a services PMI above 49 over time generally indicates an expansion of the overall economy. "Survey respondents report that in general, business is flat or lower, and although inflation is easing, some commodities have significantly higher costs," ISM said. The prices index fell by 1.8 points to 56.3, showing slowing but robust price gains. ISM's manufacturing PMI fell to 48.5 in June from 48.7 in May, ISM reported on 1 July. It was the third consecutive month of contraction and marked a 19th month of contraction in the past 20 months. Wednesday's weaker than expected ISM report, together with a Wednesday report showing initial jobless claims last week rose to their highest in two years, slightly increase the odds that the Federal Reserve may lower its target rate later this year after maintaining it at 23-year highs since last year in an effort to stem inflation. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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