FocusUS propane spot prices rally on burgeoning exports

09 August 2013 16:05  [Source: ICIS news]

US propane spot prices rally on burgeoning exportsHOUSTON (ICIS)--US propane spot prices have rebounded in recent weeks, as burgeoning export markets have provided an outlet for excess supplies.

Since the beginning of 2013, propane prices have strengthened by almost 19%, going from 84.13 cents/gal in January to 99.75 cents/gal on 8 August. Prices have not reached triple digits since October 2012, and sources say it’s only a matter of time before they get there again.

The surge in exports over the past few months has played a key role in the rally.

In fact, the import/export balance for propane has made a dramatic shift over the past several years.

Since 2007, exports have grown from practically nothing to 252,000 bbl/day for the week ending 2 August, according to the US Energy Information Administration (EIA).

Accordingly, propane exports have gone from over 100,000 bbl/day to practically nothing today, according to RBN Energy.

This dramatic swing owes itself to nonstop production from the many shale gas fields popping up across the US.

While supplies are at historic levels, they may not be there for long. Domestic demand looks to strengthen over the next few years as several propane dehydrogenation plants (PDH) plants come online, also the result of the current shale era.

As more and more petrochemical companies look to low-cost ethane as a feedstock for ethylene, it means less propylene will be made as a co-product.

PDH plants are needed to make up the deficit.

Additionally, there is a growing need for propane as a petrochemical feedstock in Asia, as several PDH plants are under construction there as well.

In anticipation for these developments, a handful of companies have built or expanded export facilities, the biggest coming from Enterprise Products Partners, which finished an expansion of its export facility at the Houston Ship Channel in the spring.

The facility can handle up to 7.5m bbl/month of exports. The company recently said it is considering another project that would allow it to increase capacity fairly quickly and with little disruption or cost.

Chief operating officer AJ Teague said the export facility is performing beyond their expectations.

“We’re contracted through 2015, and we have [contracts] that extend out to 2022,” Teague said during an earnings conference call. “We’re also looking at another expansion of that that’s low cost and gets us pretty immediate capacity.”

Targa Resources also has an export facility project that is set to start service next month, with capacity ramping up to more than 3m bbl/month by October, according to CEO Joe Bob Perkins.

“We expect to bring the facility up in September, ramping up during September to that October rate,” he said during an earnings conference call. “We also expect to continue to increase our export loading capability so that we can load in excess of 5m total barrels per month sometime during the third quarter of 2014, when the second phase of our export project comes online.”

 


By: Bobbie Clark
+1 713 525 2653



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