Distributors drew on stocks to prevent shortages after the fatal floods, but commercial and industrial demand is yet to fully rebound, writes Betina Moura
LPG supply and distribution in Brazil's Rio Grande do Sul state have largely returned to normal following massive flooding in May, but demand may take some time to return fully.
The LPG market in the southern state was operating at about 90pc capacity in late May after heavy rains since the end of April devastated the region and heavily disrupted flows, according to mines and energy minister Alexandre Silveira. LPG is a basic need in Brazil as it is widely used as a primary cooking fuel — of the country's 7.6mn t/yr of consumption, about 68pc comes from the residential sector.
The emergency in southern Brazil reached a critical moment when the main producer of LPG in the state, the 32,000 m³/d Alberto Pasqualini Refinery (Refap) operated by state-controlled Petrobras, was on the verge of shutting down in early May because of flooding around the complex, Silveira says. Copa Energia, the largest LPG company in the southern region with one-third of the market share, says the situation in Rio Grande do Sul has yet to fully recover but it is now able to supply 100pc of demand in the area. Copa Energia's main operations centre in Canoas on the outskirts of Rio Grande do Sul's state capital Porto Alegre is closed, but the company continues to deliver to its residential, commercial and industrial customers at normal rates after adopting contingency plans, it says.
But images in local media of empty floating LPG cylinders being swept away by floodwaters in Canoas symbolised the level of disruption. Copa Energia in early May began sourcing LPG from less-affected cities such as Pelotas and Passo Fundo, and in the neighbouring states of Santa Catarina and Parana. Distributors were supplying around 10pc less LPG than normal in the first few days of May but were able to draw on stocks to meet demand and prevent a shortage. Demand for 13kg cylinders ― mainly used for cooking ― was rebounding by late May but had yet to reach typical levels, according to Brazilian LPG distributors' association Sindigas.
The Refap refinery is operating at slightly lower loads than planned, at 82pc of capacity and a nominal load of 26,000 m³/d, Petrobras said in late May. LPG production at the facility has been stable over the last few days at around 1,700 t/d, the firm said. Brazilian oil regulator ANP has meanwhile assured customers that no reports of LPG shortages have been made, which is reflected in the official price for a 13kg cylinder remaining roughly stable at 104.10 reals ($20.20) on average over 19-25 May, compared with R105.27 between 28 April and 5 May.
Narrow escape
The outlook for the LPG sector in the region seems positive, but some market participants say it was a narrow escape considering the enormous impact the floods had, including at the Refap refinery. Generators had to be quickly brought in at Refap to keep it operational as problems with water intake began to affect its electricity supply, Silveira said during a visit to Porto Alegre on 28 May. The flooding also led to labour shortages as employees could not travel, although "we registered situations of pure heroism with workers leaving their family still in fragile situations to show up and keep distribution going", Sindigas president Bandeira de Mello says.
LPG deliveries are increasing in the region, with the supply coming from storage sites in other states such as Sao Paulo, Parana and Santa Catarina, Sindigas says. Demand for bulk LPG from the commercial and industrial sectors, including agribusiness, is still heavily suppressed compared with cooking demand, but gradually picking up again.
As of 31 May, the floods have impacted more than 2.3mn residents, with 169 fatalities, 806 injured and 44 missing, according to the government.
