US midstream firm Targa Resources and shipowner BW LPG are two leading participants in the global LPG industry, the former providing a significant share of supply and loading capacity from the US that many of the latter's vessels collect and ship to core importing markets. Argus' David Appleton spoke with Targa senior vice-president Rob Donaldson and BW LPG chief executive Kristian Sorensen on stage at the Argus Middle East LPG Forum in Abu Dhabi on 15 January to get their take on the challenges the industry faced last year, and on other market trends:
How were your respective segments of the LPG supply chain affected by the disruptive events experienced last year?
Sorensen (BW LPG): We had four major geopolitical and market events last year that affected both freight and underlying commodity markets. The first in April was the retaliatory tariffs that China imposed on US LPG, which essentially halted US-China and US-Asia flows overnight. We ended a Friday with rates at $40,000-45,000/d, and by the following Wednesday they were down to $8,000/d — a dramatic collapse in just a few days. We took a deep breath in the office and, based on our view that LPG is a supply-driven commodity market, knew it would eventually start moving again at one point... but we didn't know how long freight would sit at $8,000–10,000/d or how long US exports to China and Asia would be halted. But about 10 days later, the market was active again and rates were back in the mid-$40,000s and climbing.
This market is phenomenal at adjusting to geopolitics, where it can reprice itself within a week. Freight took the first hit, then the terminals and US prices. Once prices recalibrated, you're suddenly back in the game, with Middle Eastern players stepping in and Japanese and South Korean buyers returning. The US Trade Representative's port fees on China-linked vessels, retaliatory Chinese port fees on US vessels, the 10-day Iran-Israel war, and [state-controlled] Saudi Aramco's repricing of its October contract price also had significant impacts. But every time, the market bounced back within a couple of weeks. And that shows how resilient the market is.
Donaldson (Targa): The days of simple market behaviour and the days of LPG being under the radar are long gone. I'm always an optimist — I do believe the market eventually works itself out. That said, the challenges in 2025 were substantial, and it's taking longer for issues to work through the supply chain. In the US, we have a tremendous amount of storage and that gives us a buffer against global supply and demand swings. We've also had a tremendous amount of investment in shipping, with more on the way. And when something hits the market, like the tariff war, the vessels don't stop. They keep coming, they keep lifting cargoes, and the volumes keep moving, which is what we experienced at our docks. On the US production side, especially in the Permian basin, we continue to see impressive efficiency improvements, reinforcing that this is a supply-driven market as our producers remain active. The tonnes traded on the water today compared with 15 years ago are completely different, and prices under $600/t in the east support adoption. There are some great initiatives in sub-Saharan Africa and southeast Asia to get LPG into homes for clean cooking, which will take time but should be very positive for all of us.
It's been interesting to watch how the market responded to the unprecedented challenges we faced in 2025. I know there was pain in this room. We were hoping it would be a nice, easy market under US president Donald Trump's second administration — anything but. We should expect the remainder of his term to bring more unanticipated dynamics. I do believe the market will respond.
Does the growth in US export capacity create concerns of overcapacity, and how does this affect Targa's strategy?
Donaldson: This doesn't create a concern. The Mont Belvieu price has to do the heavy lifting [in balancing the market] and it will over time. How quickly it responds, we'll see. We've focused a lot on China as a demand solution and that won't always be the case. There will be challenges but it still worked out in 2025. From a US perspective, it's about access to markets. Propane is a by-product so we have to keep responding. As a terminal operator, our view and the view of others who invest in export terminals is that you invest to ensure flow assurance. We're ultimately here to serve our producers — we move their products to end-users and let the market sort itself out. Targa takes low-pressure wet gas from the wellhead through to the gas plant, the natural gas liquids (NGLs) pipeline, the fractionator and eventually to export. So our view is driven by our volumes, whereas others may focus on third-party US volumes while maintaining connectivity to global demand.
We'll continue to see investment in export capacity as long as production grows. It could become overbuilt but only if production flattens. WTI crude has sat in the mid-to-upper $50s/bl for months, and production is still growing. And even if oil growth slows, gas and NGLs will grow faster. At 3pc/yr oil growth, gas could grow by 5–6pc/yr, and NGLs can grow in the high single digits. So we see a strong future for continued production growth and that output has to find overseas markets.
Is the shipping market ready for more dynamic and varied LPG trading routes?
Sorensen: As long as you pay, you can move the ships wherever they're needed. The market is very open for business in that sense. If you look at the very large gas carrier (VLGC) market today, it's trading at around $70,000/d, which is historically very strong. And that reflects the supply and demand balance in the freight market from the US and the Middle East, inefficiencies in the market — typically surrounding the Panama Canal — and changing trade patterns. When you ship a US cargo to India or southeast Asia, it consumes a lot of shipping capacity, and we see that directly in freight rates. Export volumes from the US and the Middle East are growing, and you have those inefficiencies combined with new trade patterns that simply absorb more freight capacity.
The big question is what will happen in the second half of this year and in 2027 as newbuild deliveries accelerate. You weigh that against projected export growth from the US and the Middle East, plus inefficiencies around bottlenecks like the Panama Canal. But the drivers of the VLGC market repeat themselves — they just play different roles at different times. So yes, the freight market can support these new trade patterns but they are absorbing more capacity, which is reflected in higher freight rates.
You mention the Panama Canal — we have reported on a potential investment in a pipeline connecting one side of the canal to the other. Do you expect this project to materialise and what might it mean for shipowners?
Sorensen: It raises a lot of logistical questions — how you'd use the canal, how you'd handle the bill of lading and so on. The capacity they're talking about for the pipeline is similar to the current number of VLGC transits — a little more than three ships a day. The question is whether the pipeline would be in addition to existing transits or whether it is intended to free up capacity for LNG carriers, container ships or other shipping segments. If the idea is to move LPG through the pipeline instead, that could be bullish for shipping. VLGCs would have to take the long route around South Africa to move between the US and Asia-Pacific. And you'd effectively need a shuttle fleet in the Caribbean moving LPG from the US to the Atlantic side of the canal, and another fleet on the Pacific side. That's an inefficient set-up and inefficiency absorbs shipping capacity. And that generally supports higher freight demand.
The US benefits from a large amount of underground cavern storage space, some of which is flexible NGL space. How does this storage capacity influence market dynamics?
Donaldson: Mont Belvieu is a global hub because there's this massive, pure salt dome where the unique few that have a position can easily create a cavern shaped like a bottle. Each bottle can hold about 4mn bl and costs about $45mn–50mn to complete. Many of you [in the audience] have above-ground tanks, which are far more expensive per barrel or tonne. And within the Mont Belvieu area, there are many caverns and more that can be added. We probably are at 200mn-250mn bl of NGL storage capacity now, and these caverns are flexible — you can have one that services ethane one season and butane the next. The challenge is that as fractionation capacity grows, you need to move products in and out faster. There is capacity and room to add more, so having US inventory levels at 110mn-115mn bl of propane isn't an issue. It's about how to deal with products like ethane, the largest part of raw NGL supply, which may need more storage depending on usage.
Ethane exports are becoming a bigger part of the picture as well. One of the biggest issues last year was the US government's requirement for a licence to export ethane to China. Storage was key in managing the delays experienced in exporting ethane, and the flexibility of US storage will continue to support strong trade growth. Enterprise Products and Energy Transfer have invested heavily in export capacity. Globally, ethane demand is growing. And no matter which NGL — ethane, propane, butane, natural gasoline — the next buyer is increasingly outside the US. Targa sells ethane domestically, some of which eventually gets exported — that's simply how the market works. Mont Belvieu operators are very interconnected.
Is ethane shipping something BW LPG is interested in participating in?
Sorensen: The very large ethane carrier and ethane markets operate very differently from the LPG market. It's not as commercialised, it's largely long-term time-charters — similar to how the LNG market was structured a decade ago. For us as a listed company, we operate a different business model. Our investors want exposure to the upside potential in the VLGC market. If we started adding ethane carriers, it would disrupt the business model we've presented to them, so it's not something we're considering at the moment.
BW LPG's dual-fuel vessels have been a big part of the company's recent strategy. How have they affected operations?
Sorensen: Dual-fuel technology has worked very well despite early teething issues. We took a slightly different approach from other shipping companies by retrofitting about 15 of our vessels and then adding four more through the Avance Gas transactionback in 2024. You save about $3,000–5,000/d burning LPG compared with compliant marine fuel, and you reduce your environmental footprint by roughly 20pc on CO2 and even more on other particulates. It's also effective to use the commodity you're shipping as fuel. That's something many alternative fuel and propulsion technologies still struggle to offer. It has essentially become the industry standard now. It's commercialised, which is important because it means there is scale — in production, spare parts, maintenance capacity and so on. So overall, the technology has proven to be a success.
