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Petrochemical use of LPG on the rise

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Hydrocarbon Engineering,

Global petrochemical use of LPG will expand by 140 000 bpd this year, according to ESAI Energy’s newly published ‘Global NGL Outlook’. Last year, scarcity and high prices caused petrochemical demand to contract by 50 000 bpd and encouraged steam crackers to up their naphtha intake.

This year, ESAI Energy has been forecasting an increase in LPG supply that will soften LPG prices relative to naphtha and encourage steam crackers to turn back to LPG. The latest data bear out this prediction. Consequently, robust petrochemical demand will help steer the market toward balance, averting a more bearish tilt into surplus.

The report details that this turnaround in petrochemical LPG demand is already underway. Approximately 30% of global LPG use is used for petrochemical purposes, where demand is volatile due to feedstock-switching. North Asia, comprised of Japan, South Korea and Taiwan, is the growth market for the petrochemical sector. In 4Q17, petrochemical demand in Taiwan and South Korea plunged, dragging down overall North Asian petrochemical demand to just 170 000 bpd, 70 000 bpd less compared to a year earlier. However, monthly data provide evidence that petrochemical demand already recovered. Given ESAI Energy’s outlook for favourable LPG pricing, North Asia will drive a 140 000 bpd increase in global petrochemical demand for LPG this year, which will contribute to overall LPG consumption growth of 340 000 bpd.

“Due to existing and anticipated supply growth in 2018, the LPG market has quickly transitioned from scarcity to abundance,” explains Andrew Reed, ESAI Energy’s Head of NGLs. “Our analysis shows that there is plenty of discretionary petchem demand out there to balance the market. Therefore, we expect to see a balanced market rather than a glut.”

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