<article><p><i>Companies are better positioned to take advantage of LPG, but many barriers to fuel switching remain, write Emma Reiss and Waldemar Jaszczyk</i></p><p class="lead">Many industrial energy consumers turned to LPG as an alternative fuel source last winter in response to deep concerns over supply security and soaring prices for natural gas. There is less sheer panic heading into the forthcoming winter, but LPG seems to have regained enough favour to suggest that its long-term decline as an industrial fuel in Europe could be stalled or even reversed — provided certain obstacles can be overcome.</p><p>The extent of the switch to LPG last winter was restricted by a variety of issues that stymied a further expansion of industrial use of the fuel, many of which remain. These include a complex permitting process, compliance with fire and hazardous materials regulations, steel procurement for building the tanks needed by industrial users, and lower confidence in the logistics of less-reliable truck delivery of LPG compared with the seamless flow of pipeline gas.</p><p>Some businesses that started shifting to LPG last year switched back as natural gas prices fell, but enough were awakened to the potential benefits of fuel flexibility to invest in adding an LPG option. Germany's industrial demand for LPG in 2022 grew by almost 30pc year on year, according to national LPG association DVFG, and there was a sharp increase in orders for propane-air mixing systems that enable users to completely or partially replace natural gas, German LPG equipment manufacturer Flussiggas-Anlagen director Alexander Schneider says.</p><p>Europe's new LPG customers come from a mix of sectors, ranging from drinks firms and glass producers to metals plants and hygiene product manufacturers. Poland's Luzyce glassworks says its December investment in replacing natural gas with LPG paid for itself within three months — the firm switches back to natural gas when it becomes the cheaper option, but can switch again within 24 hours now that it has the LPG infrastructure in place. And fellow Polish firm ITGAS Inter Tech Gas, which specialises in industrial installations, points out that only LPG or synthetic natural gas "offer an automatic switch from natural gas to an alternative source without any changes to gas burners". </p><p>German hygiene products manufacturer Hartmann-Rico has invested 20mn koruna ($932,930) in diversifying energy sources at its three production plants in the Czech Republic. Work began in the second quarter of 2022, but permitting delays held up completion from December into early 2023. "The speed and pragmatism of the permitting processes… almost discouraged us from completing the investment," board member Pavel Fuchs says. But the company pushed on and had switched two plants to LPG before the end of the first quarter, with the third able to switch since early June. "Diversification had ethical and economic reasons," Fuchs says. "We wanted to get rid of our dependence on Russian gas and at the same time ensure a stable source of heat for our plants."</p><h2>Ahead of the curve</h2><p class="lead">A glance at the competing fuels' forward price curves suggests that those who have taken the plunge should see a swift return on their investment this winter. How this winter's weather plays out will determine the precise outcome, but any cold spells that boost LPG prices will do the same for natural gas.</p><p>That leaves logistics as the likeliest bottleneck to wider industrial deployment of LPG. Global LPG supply exceeds demand, but infrastructure constraints make getting this surplus to new users in Europe difficult. The continent is increasingly dependent on US imports arriving at a few large terminals, mostly in the Amsterdam-Rotterdam-Antwerp area. In addition, replacing pipeline flows of natural gas for bigger industrial users involves almost daily truck deliveries, requiring more trucks and drivers. And in winter, when the incentives for switching might be strongest, icy conditions could further restrict fuel movements by road and rail.</p><p><div class="picture"><div><span class="pic_title">Cif ARA propane vs TTF gas</span> <span class="units">Cif ARA propane vs TTF gas</span></div><img src="https://argus-public-assets-us.s3.amazonaws.com/2023/08/01/p7acifarapropanevsttfgas01082023124752.jpg"></div></article>
