The global LPG market will grow by 325,000 b/d each of the next two years, as big gains in NGL supply are matched by an expansion in petchem capacity, according to ESAI Energy's newly published Global NGL Two-Year Outlook. Last year, scarce supplies led to a contraction of petchem demand, slowing the expansion of the LPG market. As the outlook to 2019 describes, new gas projects in the Middle East, Russia, and Australia will ensure another big year for global LPG supply growth next year, even as growth in the Permian slows from this year's breakneck pace. An equally impressive increase in petchem demand will help balance the market this year and next.
The report highlights key olefins investments and their consequences for feedstock demand. New ethane crackers in the U.S. Gulf Coast will boost NGL-fed olefins production this year and next. Chinese investment in PDH capacity will make also waves in the NGL market. China has gone from having no PDH capacity five years ago to 5.9 million tons of capacity today, out of a global total of 15.8 million tons. With new investments concentrated in the mid-2018 to mid-2019 period, China's PDH capacity will climb to 8.6 million tons by the end of next year. All of this will help China spearhead a 130,000 b/d increase in global propane use for PDH from 2017 to 2019. China's PDH investment and its expanding use of butane for gasoline units will make it the locomotive of global demand growth.
“LPG will be a fast-moving market for the next couple of years,” comments Andrew Reed, ESAI Energy's Head of NGLs. “The LPG market is prone to imbalances, so one might expect the expansion of supply to lead to a glut that would hamper prices and U.S. exports. But China will soak up more and more LPG in 2019, keeping exporters happy.”
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