The growth of U.S. LPG exports will outpace terminal capacity this winter, constraining LPG exports, according to ESAI Energy's webinar U.S. Growing Pains to Upend LPG Trade & Demand. The export constraint will temporarily cause scarcity in Asia and the international market, driving up LPG prices relative to naphtha and causing feedstock switching in the petchem sector. Meanwhile, stranded LPG in the U.S. will push down LPG prices relative to ethane in the Gulf Coast, making propane a more attractive feedstock in that market.
According to ESAI Energy, the Mariner East 2 and Altagas projects that will be completed in the next six months will enable the U.S. to export over 1.2 million b/d of propane and butane. However, that will not be enough capacity and it will not be in time to ensure the uninterrupted flow of U.S. LPG to overseas markets. Due to winter heating demand and other seasonal factors, the call on U.S. exports will climb considerably in the next couple months. The inability of the U.S. to export freely will cause scarcity in markets like Asia, pushing up LPG prices and causing discretionary petchem demand to weaken.
“Exports were already maxed out at a little over 1.1 million b/d in the second quarter of this year,” commented ESAI Energy Head of NGLs Andrew Reed. “As exports surge seasonally in a month or two, the market needs more LPG export terminals and fast. Despite setbacks to Mariner East 2, it seems the new export capacity will be operating by the end of the third quarter. That and Altagas's terminal in early 2019 will help, but they will not be enough. Growth of U.S. liquids is running into a number of growing pains, and LPG export infrastructure is one of them.”