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Philippines look to international, Chinese suppliers to feed growing LPG market

Singapore — The Philippines' annual LPG demand is expanding at around 8% with 2019 imports estimated at 1.5 million mt from 1.4 million mt last year, and importers are sealing term contracts with Western trading houses as well as Chinese traders, trade sources said recently.

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This is up from around 1.126 million mt in 2014, after growth had been largely flat between 2003 and 2010 at an annual rate of 1%-2%, before rising to almost 3% year on year in 2014, an industry executive told S&P Global Platts.

Major buyer and supplier Liquigaz has renewed its annual term import contract for 2019 with European trading firm Vitol, for 40,000 mt/month of refrigerated LPG, a company official said Friday.

The contract for January-December was done by direct negotiations and concluded at an undisclosed premium to the Saudi Contract Price, on a CFR basis, with each cargo comprising 30%-50% of propane and the rest butane, depending on sellers' options, he said.

Liquigaz had a similar contract with Vitol for 2018 supplies.

Further growth of Liquigaz's imports are limited by its storage capacity, the company source said, even after the firm started up its second LPG import facility at Sariaya, Quezon, around third-quarter 2017.

The storage facility, fully owned by Liquigaz, has a capacity of 17,100 mt and has a berth deep enough to accommodate a Very Large Gas Carrier, another source had said previously. With this facility, the company can import half-cargoes of around 11,500 mt compared with partial lots of about 10,000 mt before.

Coupled with Liquigaz's existing Bataan terminal in Mariveles, the supplier is estimated to have a total LPG storage capacity of near 30,000 mt.

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PHILIPPINES ATTRACTIVE TO CHINESE TRADERS

Chinese traders have also been working on getting a slice of the growing Philippine market in recent years, such as Wanhua Chemical and Jovo Energy, market sources said.

"We are active in the Philippines since last year. The Philippines is a very good market," a source with Wanhua Chemical, which operates a propane dehydrogenation plant in China and has term purchase contracts with several Middle Eastern suppliers, said.

Wanhua has sealed a term contract with South Pacific Inc., which has an LPG terminal in the Phoenix Petrochemical Industrial Park in Calaca, Batangas.

The contract for 2019 supply is estimated at 300,000-400,000 mt of refrigerated LPG, the source, who declined to reveal the precise volume, said.

The contract, the volume of which is about the same as last year's, was concluded at an undisclosed premium to the Saudi CPs, CFR basis, he added.

South Pacific Inc. is owned by the local Ty Family and Phoenix Petroleum Philippines Inc.

Wanhua also supplies to Liquigaz and JG Summit Petrochemicals -- part of the JG Summit Holding Group -- which in late 2015 was able to co-crack naphtha with LPG. This was made possible by its ability to receive a VLGC via its main jetty and discharged LPG into a converted refrigerated tank.

Shanghai-listed Wanhua Chemical operates a 750,000 mt/year propane dehydrogenation plant and a PO-MTBE plant at Yantai. The PDH plant is able to process 900,000 mt/year of propane, while the PO-MTBE plant is able to process 600,000 mt/year of butane.

The company is building its phase two petrochemical project in Yantai, eastern Shandong, which will lift its LPG demand by 2.4 million mt/year, the company has said. The project include a 1 million mt/year steam cracker, a 400,000 mt/year PVC unit, a 60,000 mt/year ethylene oxide unit, a 350,000 mt/year high density polyethylene unit and a 80,000 mt/year butadiene unit.

Other than also supplying the Chinese domestic market, Wanhua uses its surplus LPG for trading in the Singapore spot market and exports to South East Asia, the company source said.

Another major Philippine importer Petron last month bought via a term tender pressurized LPG for January-December from international trading firm Petredec. Petron has not fixed any volume, but a market source said it could be around 100,000-150,000 mt, comprising 30%-50% propane and the rest butane.

--Ramthan Hussain, mohd.ramthan.hussain@spglobal.com

--Edited by Norazlina Juma'at, norazlina.jumaat@spglobal.com