TOKYO: Japan liquefied petroleum gas (LPG) imports from the United States are expected to double in 2017 to a record and account for around for around half of its total purchases, government and shipping data showed. The surge comes as shale oil and gas output lifts overall US production to rival that of Saudi Arabia and Russia.
As with crude oil, the American exports displace LPG from the Middle East, where regional top producer of crude and LPG Saudi Arabia is losing market share, not least due to knock-on effects from the efforts led by the Organisation of the Petroleum Exporting Countries (Opec) to cut production in order to prop up prices.
LPG, a byproduct of crude oil and natural gas production, is a mixture of propane and butane and is used for cooking and as a transport fuel.
With the United States not participating in any cuts, its LPG exports to Japan could hit almost 6mn tonnes by the end of 2017, shipping data in Thomson Reuters Eikon showed, virtually doubling the volumes within just one year. “US imports are good for Japan from the energy security and diversification points of views,” said Akira Yanagisawa, senior analyst at Institute of Energy Economics, Japan (IEEJ).
American LPG now meets half of Japan’s total supplies, pushing the Middle East out of the top spot.
And with US oil output soaring by 80% since 2010 to almost 10mn barrels per day (bpd), and production expected to rise further, more American LPG is set to flood markets.
The US Energy Information Administration (EIA) expects US crude output to exceed 10mn bpd next year. Many analysts believe as well that US production could rise further than the EIA’s outlook, potentially rivalling levels of top producers Russia and Saudi Arabia, who currently pump 11mn and 10mn bpd, respectively.
The US has become increasingly price competitive, with propane at the Texan Mont Belvieu hub at 96 cents per gallon, roughly $500 a tonne, not including freight for the voyage to Asia. Taking freight into account, Japanese government data shows US LPG prices to be on par with, or slightly below, the cost of Middle East supplies.
Asia is the world’s biggest importer of LPG, with China, India, Japan and South Korea together taking a third of globally shipped LPG, according to trade data.
