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Q&A: DCC Energy eyes further LPG and low-carbon growth

  • Market: LPG
  • 18/06/24

Dublin-based DCC Energy continues to expand and diversify, completing 15 acquisitions over the past year that included two in the LPG sector. The company, which owns several LPG retail subsidiaries in Europe, the US and Hong Kong, bought Germany's Progas and the US' San Isabel Services Propane at the same time as it increasingly moves into low-carbon energy markets such as solar, biofuels and energy management services. Argus' Oliver Binks spoke with DCC Energy chief executive Fabian Ziegler about the company's 2023-24 results and its future plans:

DCC Energy has been moving into new markets as part of the energy transition. What share of the company does LPG represent?

We launched our Cleaner Energy in Your Power strategy last year, aiming to double our profit [and halve carbon emissions] by 2030. We think backwards from the customer, helping them through the energy trilemma, and provide energy solutions consisting of molecules — increasingly green — and often self-generated renewable electrons. We are ahead of schedule. LPG is about half of our profits but only 15pc of our carbon emissions. We believe in LPG's longevity. It is a societally very useful fuel. Like the World LPG Association renaming itself to World Liquid Gas Association, we now move our own definitions from LPG to LG — liquid gas.

DCC Energy has said it plans to grow its LPG offering by 50pc by 2030. Which areas geographically and sectorally is the company targeting?

Our LG journey took us from Ireland to [the UK], to Europe and to the US. We have just strengthened our position in Germany with the acquisition of Progas. A key growth region is the US. We made a small acquisition there last year. We are currently focused on making our business operationally excellent, namely around serving our customers. For now, the strategy places more emphasis on strengthening in each market rather than expansion into new territory.

We like our residential businesses, but we are targeting more growth in the commercial sector, where the case for multi-energy packages is greater. Overall, we aim to grow our LG business, but we need to create more sustainable credibility for LG. We are scaling up biopropane sales across Europe and trialling rDME [renewable DME] in the UK and Sweden, particularly with commercial and industrial customers, to enhance LG's relevance as a long-term low-carbon solution for Europe.

DCC Energy's profit rose strongly in the 2023-24 fiscal year ending in March, but overall sales volumes dropped slightly. How much did the LPG segment fare?

LG is often a mature market in Europe, however our LG sales volumes increased modestly in the year and we believe they can keep growing. We continue to drive the move from oil to gas for commercial and industrial customers. Many customers really appreciate the ability to make affordable CO2 reductions and having their own energy in a tank reliably supplied by DCC companies.

LPG sales in the UK and Ireland came under pressure from a warm winter but still grew on expanding commercial and industrial deliveries. What drove this?

Our businesses in Ireland and the UK continue to grow owing to diverse customer segments that are not all weather dependent. Under our Cleaner Energy in Your Power strategy, we act as an energy transition partner. Customers recognise the fiscal and carbon benefits of LG over heavier forms of fuel, driving growth in the transition. And some customers are investing in new off-grid facilities and choosing LG as their fuel sources. And it helps that we can provide broader energy packages entailing electron solutions. We also aim to increase our supply resilience with storage access at Teesside and our Avonmouth terminal project.

DCC Energy also reported strong profit growth in Scandinavia driven by LPG. What are your plans in this region?

We saw significant LG sales growth [in Scandinavia] last year when natural gas prices skyrocketed and customers wanted security of supply. Our Scandinavian business aims to lead the energy transition, with a focus on understanding our customers' needs and helping them reduce their carbon emissions. We aim to support large-scale production of rDME in Sweden and Norway and to see 50pc of sales coming from a wide range of renewable products by 2030. We have successfully run pilot tests in Sweden with rDME-LG blends at customers' sites, we invested in a rDME-LG blending facility, aiming for first customer deliveries in 2024, and received government funding for replacing LG with 100pc rDME at Bjorneborg Steel.

DCC has acquired Germany's Progas and the US' San Isabel Services Propane over the past year. Do you have plans for further takeovers in the LPG sector?

We have been one of the most active global buyers of LG businesses for several decades and will continue to pursue attractive acquisitions that strengthen our existing businesses, expand our markets and bring other important capabilities. We see a lot of potential in the US, where our DCC Propane business has achieved significant growth through many acquisitions since we entered that market in 2018. We continue to see many interesting opportunities in the US, which is far more fragmented than most European markets, with the top 20 propane retailers accounting for 40pc of the market and over 4,000 independent [firms accounting for 60pc].

Progas owns the Brunsbuttel and Duisburg LPG terminals in Germany. Given Poland faces a looming supply deficit when EU imports from Russia are banned from December, is DCC Energy looking at supplying Poland from these sites?

The Brunsbuttel and Duisburg terminals were welcomed into DCC's portfolio in northwest Europe, where their primary role remains unchanged — to provide supply security to our customers. Spare capacity might be used to support the Polish market. We see the capacity of our existing infrastructure in Germany to be sufficient to support our business there. Earlier this year, we created a central supply and trading team out of Amsterdam, called DCC LPG Procurement, which will look at more infrastructure plays. But we are not in the supply business for the sake of it. Our strategy focuses on our customers and providing them with sustainable solutions. Germany is a good example. Our priority in Germany is a seamless integration of Progas and Tega, [acquired in 2018], that is good for customers and our employees. And building out a leading energy management services business.

Flogas recently commissioned the Teesside LPG terminal near to Dimeta's upcoming rDME plant. Does Flogas plan to distribute DME or other renewable gases from the site?

Being at an energy hub clearly opens possibilities for sourcing low-carbon energy sources such as rDME that can be unlocked for our customers. With the likelihood that rDME will need to be blended with propane to achieve supply without changing infrastructure and equipment, it will be important for rDME sources to be logistically close to sources of propane. Teesside is well placed to offer this solution.

At what stage is the Avonmouth terminal project at?

The first 17,000t tank is fully refurbished and two truck racks have been put in place such that Avonmouth terminal now already plays an important role in providing supply security to our customers in southwest England. A further 17,000t tank will be refurbished and a connection will be made to the Bristol port to enable midsize LPG carrier imports. We expect first imports in 2026-27.


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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
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08/07/24

Heavy rain, wind expected in Houston from Beryl: Update

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Beryl aims between Corpus Christi, Houston


07/07/24
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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
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05/07/24

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

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US services contract in June, signal broad weakening


03/07/24
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03/07/24

US services contract in June, signal broad weakening

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