CEH Report
Table of Contents
Abstract
The global butanes business is operated by oil and natural gas companies from the public and private sectors. For most regions of the world, published information on butanes is usually included as part of statistics on the entire liquefied petroleum gas (LPG) stream.
LPG consumption is forecast to grow at an average annual rate of 2.5% per year in the next five years. This growth will be attributable to increased commercial/residential use throughout the world, as well as to increased use in the Middle East as a petrochemical feedstock. In terms of global supply, natural gas processing continues to be the largest supply source of LPG, accounting for close to 55% of total worldwide production in 2008. Refineries accounted for the remaining world production of LPG. In the next few years, LPG will also be recovered from LNG. Growth in LNG facilities around the world will increase LPG production.
Butane prices reached their highest levels ever in mid-2008 because of high LPG prices resulting from high crude oil and natural gas prices. In 2008, the average Saudi Arabian contract price for butane had risen by 72% since 2006. Average Japanese butane prices also rose by 65% since 2006. A considerable drop in butane price was noticed in late 2008/early 2009 due to the fall in crude oil prices caused by the global economic recession and financial collapse (crude oil price decreased as the speculative premium burst and demand weakened). The butane price actually reverted and stabilized to 2005 levels. Future butane prices will fluctuate according to the rise or fall of crude oil prices along with natural gas competition.
The following chart shows world prices for butane during 2000–2009:
Further regulations aimed at reducing emissions of volatile gasoline components into the environment are expected to become widely adopted (especially in the United States), thus somewhat reducing butane consumption that is directly blended into the gasoline pool. n-Butane can be isomerized to isobutane, which is then dehydrogenated to isobutylene. Isobutylene in turn is used to produce methyl-tert-butyl ether (MTBE), consumption of which had been growing strongly until about 2003. MTBE use in the United States is forecast to be completely phased out by 2013. The ban on MTBE is driven by concerns about groundwater contamination. Most MTBE units in the United States will be converted to produce iso-octene, or the refinery isobutylene normally used to produce MTBE will be used to produce C4 alkylate for motor gasoline blending. Although the United States is reducing MTBE production and usage, MTBE will continue to show positive growth in other areas of the world, for example, in Asia and the Middle East.
China is currently the largest LPG producer and consumer in Asia. All of the LPG production in China is from the domestic refinery sector where existing refineries are being expanded and new refineries are being and have been built to accommodate the expanding economy and the demand for fuels in the region. LPG production in China is expected to grow by 5–6% per year from 2008 to 2013. Chinese growth in LPG demand has been relatively strong at an average annual growth rate of over 6% from 2000 through 2008. Future LPG demand is expected to grow positively, but not at the high growth rates of the past. The residential/commercial fuel sector will drive Chinese demand for LPG in the foreseeable future.