LPG World Editorial: Eye of the storm?

The LPG industry in 2021 was able to recapture the losses from 2020 and build upon levels in pre-pandemic 2019

Global LPG supply and demand had been growing steadily at more than 3pc/yr during the pre-pandemic decade of 2010-19, before being brought to a sudden halt in 2020 when Covid-19 hit. But the industry returned to growth last year, even managing to exceed the demand seen in 2020, as restrictions were unwound.

Global consumption rose by 3.7pc on the year to 332mn t in 2021, and by 2pc from 2019, according to the latest Statistical Review of Global LPG — prepared by Argus on behalf of the World LPG Association. Output also firmed, by a slighter 1.7pc from 2020 to 333mn t, putting it almost at parity with levels in 2019. The results show yet again that the LPG industry was able to largely withstand a global crisis and recapture smaller losses faster than other important fuel markets, such as those for gasoline, diesel and especially jet fuel.

The US continued to be the engine of LPG supply growth, with its output rising by 4.3pc to above 90mn t for the first time — accounting for 27pc of the global total. Most of this came from still-rising flows of natural gas liquids from upstream shale fields. Production in China, the world's second-largest LPG producer, rose even more strongly — by 7.4pc — in line with the country's continuing refinery expansion, with all of its supply coming from such facilities.

Other notable output rises occurred in Iran and Oman — up by 15pc and 20pc to 9mn t and 1mn t, respectively — as well as in France, Italy and the Netherlands, where refineries ramped back up after drastically cutting rates in 2020. All three European countries' output rose by more than 16pc to 1mn-1.7mn t. But major Mideast Gulf producers and exporters Saudi Arabia, the UAE and Kuwait posted significant losses in output owing to Opec+ production restraints that were lifted in August 2021 but continue to bear down on yields. Saudi Arabia's output fell by 4.9pc to 25.1mn t, UAE's by 9.6pc to 10.5mn t and Kuwait's by 3.3pc to 5.6mn t.

China extended its dominance in terms of demand, with consumption rising by more than 8mn t to 71.1mn t. The country's expanding petrochemical sector, and in particular its growing fleet of propane dehydrogenation plants, remained the catalyst for this growth. China's petrochemical demand for LPG grew by a staggering 26pc to 17.2mn t. And the expansion is far from over, although weak margins are likely to soften the ascent in 2022. US demand was relatively stable, while India's huge cooking fuel market pushed its needs up by 2.6pc to 29mn t.

Azerbaijan and Serbia experienced standout growth, with demand rising by 53pc and 52pc to 278,000t and 197,000t, respectively — the former's backed by petrochemical use nearly doubling to more than 250,000t and a new autogas market emerging at 22,000t. Venezuela's demand partially recovered from historical lows in 2020, up by 86pc to 927,000t but still a long way from the 4.5mn t/yr five years earlier. Key emerging markets like Bangladesh and Kenya grew strongly at 13pc and 17pc, respectively. Nigeria's market expansion continued to slow, with demand rising by 3.9pc to 1.7mn t. Kazakhstan's swelling autogas sector pushed use in the country up by more than a fifth to 1.5mn t. But demand in Austria, Spain and the Netherlands fell by 14-15pc on dwindling use in the petrochemical sector, similar to Taiwan, which saw the largest fall, at 32pc to 1.2mn t.

Whatever next!

Last year's recovery was encouraging, but could it have been brief respite before the tumult of 2022? The global economy is teetering, Covid-19 rates are on the rise again and international relations are strained. This is without mentioning the energy transition that puts the future of all fossil fuels in doubt. Tough times are ahead, but the LPG industry will be confident that it can continue to prosper among the maelstrom.