FocusUS Gulf propane projects to relieve propane supply glut

21 June 2012 19:00  [Source: ICIS news]

HOUSTON (ICIS)--The US propane supply glut has influenced decisions for new projects to expand propane export capacity and construct on-purpose propylene plants on the US Gulf in coming years for a cheap source of propylene, said consultants and analysts.

“[Our] outlook over the near to medium term has US propane supply outpacing demand through 2017,” said principal Susan Starr with Muse & Stancil.  This would result, she said, as "dehydrogenation plants start to come on-stream. Therefore, these propane export projects are expected to be highly utilised.”

Two companies, Enterprise Partners and Targa, announced plans to expand propane export facilities, and Vitol along with ConocoPhillips are considering building ports to handle propane exports.

President Dan Lippe of Petral Consulting Company said the number one reason propane prices are so weak “is the huge inventory surplus in propane.”

Propane prices fell to a low of 69.50 cents/gal on 1 June, the lowest prices since 58.75 cents/gal traded on 10 July 2009.

According to the US Energy Information Administration (EIA), propane and propylene inventories were at 59.6m bbl for the week of 15 June, compared with 37.5m bbl the same time last year. The inventories are at a 59% increase from last year, the EIA report said.

Exports of propane are more than double those of two years ago. The EIA reported exports at 149,000 bbl/day for the week of 15 June, compared with 72,000 bbl/day two years ago.

Consultant Ron Gist with Purvin & Gertz said that much of the propane supply glut is also the result of an extremely warm winter, which cut down on propane demand.

During Dow Chemical’s 2012 first quarter conference call, company president Andrew Liveris said: “What happens is [propane] has to be exported, but there’s not enough export terminals being built.”

Dow spokeswoman Kasey Anderson said the company has no plans to reverse its liquefied petroleum gas (LPG) import terminal to export LPG products, such as propane.

Enterprise Products has the only facilities capable of exporting significant volumes of propane. Their project will increase export capacity to 3.5m barrels per month, and is expected to be completed at the end of 2012.

Starr said Targa Resources currently has limited capabilities, but is expanding to add significant export capacity.

The Targa $250m project at its Galena Park terminal in Texas will provide export capability for more than 5,000 barrels per hour of fully refrigerated, low ethane propane for export. The project is scheduled to complete in the third quarter of 2013.

“The export terminal expansions at Targa and Enterprise are long-term projects based on the aggressive view of continued strong growth in gas plant [natural gas liquids] production, plus the ongoing decline in demand for propane in the retail markets,” said Lippe.

In addition, Occidental Petroleum purchased an option on some property near Corpus Christi, Texas, from the local port authority, Lippe said. The company has announced plans to build a 75,000 bbl/day raw mix fractionator and export terminal at the location.

Vitol subsidiary Coastal Caverns also announced, in the past six months, interest in building an export terminal.

“Europe imports propane from several sources,” Gist said. “Thus cheap propane from the US would be welcome for a variety of uses - primarily home heating and ethylene production.”

He added that the expansions should help relieve the current propane supply glut, particularly in the US Gulf.

Lippe agreed, saying, “Targa and Enterprise expansions will definitely be enough to swing propane markets from surplus to balanced or tight by the end of next year.”

Recent announcements for on-purpose propylene production facilities will also serve to eat away at the propane inventory. Liveris said the propylene arbitrage, from this production and the low feedstock costs for propylene, “will be a competitive advantage for many years to come.”

In December 2011, Dow Chemical and UOP, a Honeywell company, signed an agreement to construct propane dehydrogenation plants (PDH) units for a world-scale propylene production facility, Anderson said.

Dow Chemical plans to construct two PDH plants, with the one starting operations in 2015 at its Freeport complex in Texas.

On Wednesday, Enterprise Products announced plans as well to build one of the world’s largest PDH plants on the US Gulf, with the capacity to consume up to 35,000 bbl/day of propane and produce up to 1.65 bn lbs/year (750,000 MT/year or 25,000 bbl/year). The expected start-up of the facility is the third quarter of 2015.

Formosa Plastics also announced plans in February to build a PDH unit at its Point Comfort facility in Texas as part of a $1.7bn project at the site in capital investments.

By: Sheena Martin
+1 713 525 2653

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