The U.S. became a large producer and an exporter of propane, the main component of LPG, primarily as a result of the large volumes of shale gas being processed, said Ajey Chandra, Vice President and managing director of Muse, Stancil & Co. from Texas on Sunday.
According to Chandra, the U.S. is now the largest exporter of natural gas liquids in the world and has surpassed Saudi Arabia, Qatar and other countries that typically export large volumes of propane and butane.
Since 2000, shale gas changed the shape of the U.S' energy mix. In 2000 shale gas was providing only 1 percent of the U.S. natural gas production while it became more than 20 percent in 2010 and expected to increase to 46 percent by 2035, according to figures from the U.S. Energy Information Administration.
LPG is a hydrocarbon consisting of propane and butane. Propane is a gas that can power cars as LPG, as well as having the capability to heat homes.
Chandra stated that currently propane in storage in the U.S is at over 85 million barrels and still growing due to the surplus.
'The U.S. has the largest storage capacity in the world for LPG and this has helped U.S. deal with much of the surplus,' he said adding that the chemical industry is trying to build new plants to take advantage of this cheap feed stock, but there is a time lag until these plants are built.
As a result, world prices for propane and butane have fallen, but this is also due largely to the drop in oil prices, Chandra noted.
'Propane is directly priced in relation to crude oil and indirectly priced in relation to natural gas prices. There is not a straight and direct relationship, but prices move in a band within the range of these two other commodities,' he added.
- 'Turkey may be a market for US propane'
On the other hand, a Turkish LPG expert Sureyya Goksu said that, Turkish market tries to buy the U.S. propane for a while however, the country prefers mainly the Algerian LPG from Mediterranean.
Goksu explained that there are three main propane markets in the world, the U.S., Northern Europe and Far East markets.
According to figures there are 3 different prices due to three different markets.
A ton of propane is $209-219 in the U.S, while $340 in Northern Europe and $467 in the Far East. It means that, there is $131 price difference between the U.S and the Northern Europe and $258 price difference between the U.S and the Far East.
'We can say that the U.S sells propane cheaper than the others. But there is another point that, it may be cheap but it needs very large ships to transfer propane and it also means that there will be a fee for transport,' Goksu said.
The biggest LPG storage terminal's capacity is around 30,000 tonnes in Turkey.
'We are talking about ships which will take around 40,000 tonnes of propane from the U.S and transfer it to Turkey at once. Conditions don't seem OK for this transfer for now,' he said adding that some companies in Turkey may not prefer importing LPG from US due to high costs transport.
- Algerian LPG imports dominate Turkish market
On the other hand, Algeria, the main LPG supplier of Turkey, may not want Ankara to buy propane from any other market than Mediterranean,' Goksu said.
According to Goksu, it was expected Algeria to increase LPG prices by $25-35 in July but on contrary it decrease prices per ton by $5-10.
'August is a question mark for the prices. We will see what will be changed. Turkey makes its LPG trade based on Algerian LPG company Sonatrach. In the Black Sea market, LPG prices are stable and don't change and this creates an advantage for Algeria about prices as they may keep the prices lower than the Black Sea market in Mediterranean market
In 2014 Turkey exported 111,382 tons of LPG, while imports of LPG increased by 1.4 percent and reached 3 million tons compared to 2013.
Switzerland became the first importer country from Turkey while it imported most of its LPG requirements from Algeria. Turkey has never imported LPG from the U.S.
By Murat Temizer