By – Sultan W. Chatila
Today, the Middle East is a major source of LPG production at ~54 MTPA. This production comes mainly from gas fields with ~10% only coming from refineries. Looking forward, the production capacity of the region is expected to grow to ~85 MTPA by 2020 of which only ~25 MTPA is needed for domestic demand.
Most new natural gas production fields are coming from the UAE, Qatar and Iran given these producers’ desire to separate out and monetize LPG from natural gas.
From a demand perspective, Asia-Pacific region is the predominant importer of LPG. The demand requirement of Asia-Pacific region by 2020 is ~100 MMTPA based on current uses, (transportation, industrial and domestic uses) which is ~20 MTPA higher than it is today.
By 2020, if we look at the Middle East’s export availability taking away domestic demand compared to the import requirement from Asia-Pac, we see that there is an excess of ~21 MTPA of LPG coming out of the Middle East that can be further utilized for other purposes.
Given the global demand forecast for propylene and the associated growth projections, one ideal use for this excess ~21 MTPA LPG (~13 MMTPA of potential propane and ~8 MMTPA of butene assuming a 60:40 LPG mix) is for propylene synthesis. From a pricing perspective, our preliminary analysis suggests that a Middle East producer gets up to a 30% discount on feedstock price vs. an Asian producer. Historically, Saudi Arabia’s LPG pricing followed crude. Going forward, Saudi Arabia may lose its dominant position with UAE/Qatar taking the lead. On the other hand, given the forecasted excess supply, it is possible that LPG pricing will de-couple from crude and follow independent market-based pricing on Dubai Mercantile Exchange.
UOP continues to support our customer’s growth plans in this region and around the world. Look to future issues of Technology & More for Market Updates from other Middle East countries.