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Philippines' JG Summit launches wholesale LPG trade with Peak Fuel Corp. unit

Highlights

Peak Fuel Corp began LPG trading in August

JG Summit has term LPG import contract, also buys spot cargoes

High Saudi CPs, COVID-19 measures impact Philippine demand growth

Philippine petrochemical and energy company JG Summit Petrochemicals Group has launched a new subsidiary, Peak Fuel Corp., focused on wholesale trading of LPG, widening its business from importing LPG for co-cracking with naphtha to produce petrochemical products, the company said.

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Peak Fuel Corp was established as a fuels trading company and began LPG trading in August 2021, with its first sale of LPG delivered to a customer in southern Luzon, the company said recently.

The unit was first organized in January 2020 to supply LPG to re-fillers and marketers, who in turn service dealers, retail outlets, and end users from residential, commercial, and industrial sectors across the Philippines.

JG Summit Petrochemicals Group, through JG Summit Olefins Corp., has been importing LPG for co-cracking with naphtha since 2015 to produce petrochemical products.

JG Summit has a term LPG import contract for supply security and buys spot cargoes for additional requirements, the company told S&P Global Platts.

Peak Fuel Corp. currently buys from traders for its requirements and sells these to the local market, it added.

The company operates a naphtha-fed steam cracker in Batangas, and Peak Fuel Corp. leverages the site's existing assets and facilities, which allows the business to add high-value commodity fuels including LPG to its portfolio.

Peak Fuel imports refrigerated LPG through Very Large Gas Carriers received through the complex's jetty facility. The LPG is stored in two refrigerated tanks with a combined capacity of 32,000 mt.

But JG Summit does not operate its own VLGC fleet, and currently buys on delivered at place, or DAP basis, or cost and freight, or CFR basis, the company said. Peak Fuel can supply customers via land- or sea-based channels through its facility inside the JGSPG complex in Barangay Simlong, Batangas City.

Peak Fuel's first LPG shipment was received through the jetty facility at the JGSPG Complex in Batangas City.

For customers with land-based channels, it has two LPG bullet tanks designed for truck loading with a combined capacity of 900 mt. To serve its domestic and export customers with sea-fed terminals, it can fill pressurized gas carriers from its two spherical tanks, with combined capacity of 8,000 mt. With these facilities, Peak Fuel currently has the largest storage capacity in a terminal among domestic players, it said.

Challenging market

Samuel Co Chan, general manager of Peak Fuel, said in statement the company aims to "establish itself as a reliable LPG supplier in the country, contributing to the domestic market by making LPG readily available and more affordable.

Peak Fuel Corp. projects the country's annual LPG demand growth within 3% to 5%, considering the market movement from 2017-2020 had an average growth rate of 4.3% versus 2018-2020 with an average growth of only 2.5%.

"The end result of the 2021 market share data would still be critical in determining how the market will go forward and on how fast it can recover," it said in response to Platts' questions.

Another trade source said the country's LPG demand growth is expected to be flat this year versus 2020, with an upside of about 3% based on H1 2021 figures. But given the Saudi Contract Prices hovering at seven-year highs, driving up imports costs and the country being under lockdowns to manage the COVID-19 spread, demand growth seen in the first half might not sustain, the source said.

In terms of LPG market share based on H1 2021 performance, Liquigaz leads the pack, followed by South Pacific Inc., Petron Corp., Pryce Gases Inc., Isla LPG Group, and Phoenix LPG Philippines Inc.

Being the latest entrant, trade sources estimate JG Summit's volume around 10,000 mt/month, or about 7% of the total market. It is expected to eat into Liquigaz and SPI's market share, trade sources said.

JG Summit operates a naphtha-fed steam cracker in Batangas, which can produce 216,000 mt/year of pyrolysis gasoline, 320,000 mt/year of ethylene, 190,000 mt/year of propylene; and 110,000 mt/year of mixed C4.

It has new projects underway at the Batangas complex, to expand its olefins capacity and produce aromatics. The company plans to complete a 250,000 mt/year high density polyethylene plant by Q4 2021, while the capacity of an existing polypropylene plant at site will be upgraded to 300,000 mt/year from 190,000 mt/year.