CEH Report

Table of Contents

Abstract

Propane, supplied by refinery and natural gas companies from the public and private sectors, is used mainly for fuel and as a petrochemical feedstock. Fuel uses include residential/commercial fuel for cooking and heating, plant/refinery fuel, agricultural fuel and motor engine fuel. Feedstock use is mostly in the production of ethylene, where it competes with other natural gas liquids, naphtha and gas oil.

For many regions of the world, separate data on propane supply/demand are not available. Published information often includes the entire liquefied petroleum gas (LPG) stream, from which propane can be extracted. LPG is made up of primarily propane and butanes.

During 2008–2009, ethylene operating rates declined drastically in many regions, even with the idling and closure of units, as a result of the global economic recession (weakening demand in almost all sectors). In response to this, LPG (propane, butane) production and demand were also reduced. The state of the future olefins industry will, to some extent, determine future output and use of LPGs.

Propane prices reached their highest levels ever during mid-2008 because of high LPG prices resulting from high crude oil and natural gas prices. A considerable drop in propane prices occurred in late 2008/early 2009 as a result of the fall in crude oil prices, supplanted by the global economic recession and financial collapse (the crude oil price decreased as the speculative premium burst and demand weakened dramatically). Propane prices actually reverted and stabilized to 2004/2005 levels. Future propane pricing will fluctuate according to the rise or fall of crude oil prices along with natural gas competition.

The following pie chart shows world consumption of LPG:

LPG demand is expected to show higher growth rates in Asia (excluding Japan), Latin America, the Middle East, and Central and Eastern Europe. Asia has overtaken North America as the world’s leading consumer of LPG, accounting for 31% of the total LPG consumed in 2008. In addition, North America, the Middle East and Africa remain as the largest suppliers of LPG from natural gas processing, because of these regions’ vast natural gas reserves. In contrast, Japan and China have no proven essential natural gas reserves, and thus focus mainly on refinery operations (China) and imports (Japan).

The Middle East remained the largest exporter of LPG and Asia remained the largest importer in 2008. More than half of the world’s LPG demand in 2013 will be in the residential/commercial market and a quarter in the petrochemical (ethylene) sector, with ever-increasing usage of autogas in certain parts of the world.