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Commodities 2022: Middle East LPG exports seen higher as contest heats up for Asia demand

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Commodities 2022: Middle East LPG exports seen higher as contest heats up for Asia demand

Highlights

Middle East exports to rise almost 7% to near 39 mil mt

Saudi Arabia to export more in first 4-5 months

US spearheads competition against Middle East producers in Asia

LPG exports from major Middle Eastern producers in 2022 are expected to increase 6.6% from 2021 as competition for the growing Asian markets intensifies amid expanding supply from other producers, led by the US, traders, producers and analysts said.

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Total exports from Qatar, the United Arab Emirates, Saudi Arabia, Kuwait and Iran are estimated to rise to 38.9 million mt in 2022, from 36.5 million last year, the sources said.

Most of these are committed under term contracts, they added, though Qatar occasionally offers spot LPG.

Of these, Qatar's 2022 exports are expected to hold steady at around 10 million mt; UAE at 9.9 million mt, from 9.4 million mt in 2021 and Saudi Arabia at around 8.6 million mt from 7 million mt, they said.

Kuwait's LPG exports are estimated at 5 million mt in 2022, a source familiar with the matter said. This would be up from around 4.6 million mt in 2021, other sources said.

"[Kuwaiti] Production is around 5.2 million-5.3 million mt [in 2022]. Exports will be around 5 million mt; around 250,000 mt to 300,000 mt is local demand," the source familiar with the matter said. "There are bigger term volumes this year, much bigger, almost all of the production."

The source said unlike 2021, not many spot offers and exports are expected this year. "Only a few may be seen in the second half of this year."

Last June, Kuwait Petroleum Corp. sold via a semi-term tender three 44,000 mt mixed propane/butane cargoes for July-September loadings.

This followed five spot export tenders which KPC awarded consecutively.

"It [2021] was a unique year," the source said, referring to the higher spot volumes. Sources said this could be due to Kuwait's fifth gas train coming on stream and adding 440,000 mt/year, or nine to 10 cargoes/year, in Q2 2021.

An industry analyst projected Saudi Arabia, Kuwait, UAE, Qatar and Oman to raise exports by 1.5 million mt this year, adding that Saudi Arabia is expected to export more in the first four to five months.

Trade sources said India would remain the main lifter of Middle East term cargoes to secure supply for steady growth in residential/commercial demand, stoked by subsidy support and limited piped gas supply.

S&P Global Platts Analytics estimates India's LPG demand to grow 1.93% to just above 28 million mt in 2022.

Explore this topic: Commodities 2022

Steep discounts

Iran's 2022 LPG exports are projected to edge up to 5.6 million mt, from 5.5 million in 2021, trade sources said.

But analysts said Iran is expected to boost exports by 1.9 million mt this year.

Iran, whose energy sector has been subjected to US sanctions since 2018 when former President Donald Trump's administration withdrew from a nuclear pact, aims to bring online 130 million cu m/d of additional gas production capacity in 2022. This includes gas from the delayed phase 11 of the offshore South Pars field and emergency onshore operations as domestic consumption surpasses production, Mohsen Khojastehmehr, managing director of National Iranian Oil Co., was quoted saying by the students news agency ISNA in December.

Between 2018 and 2020, Iran added 3.2 million mt of LPG production capacity mainly from the South Pars gas field and by September 2021 it was projected to add another 2.2 million mt.

China has been the biggest buyer of Iranian LPG, importing 4.94 million mt in 2019, 3.85 million mt in 2020, and 1.965 million mt over January-May 2021, industry data showed.

Some trade sources said Iranian cargoes have been attractive to Chinese buyers, with discounts steeper than $100/mt to Saudi Contract Prices.

The previous round of Western sanctions in 2012 saw Chinese buyers buying Iranian LPG at discounts of $40-$50/mt, sources said.

FOB Middle East propane averaged $645.72/mt in 2021, from $371.06/mt in 2020, while FOB Middle East butane averaged $627.79/mt in 2021 and $376.63/mt in 2020, Platts data show.

Iran and the US are holding an eighth round of EU-mediated talks on salvaging the 2015 nuclear deal, with France's foreign minister reported to have said Tehran and world powers remained far from any agreement despite making some progress at end-December. Iran has insisted on a long-term agreement, rejecting the possibility of an interim deal.

Alternative supply

China imported 7.195 million mt of LPG from the UAE, Oman, Qatar, Kuwait and Saudi Arabia over January-November 2021, down from 9.094 million mt a year ago, Chinese customs data showed.

While imports from Saudi Arabia plunged 32% over the 11 months to 631,119 mt, Saudi flows to China in November rebounded 243.3% on the month to 165,356 mt, the customs data showed.

With the decline in Middle East imports, US shipments jumped 81.3% over the 11 months to 7.772 million mt. Imports from Nigeria rose almost 22% to 618,666 mt, though inflows from Angola fell 13.4% to 631,119 mt.

Imports from Australia, which are making a mark with cargoes from the Ichthys project, jumped 18.3% over the 11 months to 1.204 million mt.

Overall, Chinese imports rose nearly 26% during the period to 22.621 million mt, propelled by demand from the growing propane dehydrogenation sector, comprising 14 plants with combined propylene production capacity of 9.17 million mt/year and requiring up to 11 million mt/year of propane as feedstock at full capacity.

This year, nearly 4 million mt of new PDH capacity is expected, up from 2.5 million mt of added capacity in 2021, industry sources said, with most of the new capacity scheduled to start in H1 2022.