Hydrocarbon Processing - August 2021 - GP-10

INDUSTRY FOCUS
The Netherlands, Japan and Australia-some of the oldest
and most reliable autogas markets-saw declines in demand
averaging 10%.
LPG shipping. While 2020 figures are still being collected,
2019 saw a breakthrough in freight rates. Spot rates on the
very large gas carrier (VLGC) benchmark Mideast Gulf-Japan
route averaged $58/metric t compared with around $30/
metric t in the last 3 yr. Time charter rates for the 12-mos
period were also higher in all sectors. Amid high freight rates,
favorable arbitrage conditions meant that there was some maneuvering
room for those lifting from the U.S. Gulf Coast and
delivering to Asia-Pacific.
The LPG fleet capacity increased further in 2019 and
stood at 35 MMm³ at the end of the year. The semi-refrigerated
sector accounted for most of the rise. Around 18 VLGCs
entered the fleet in the past 2 yr, following 46 in 2017 and 69
in 2016-an indication that the freight market is rebalancing-as
reflected on stronger freight rates. This took the LPG
fleet to 1,494 vessels.
The International Maritime Organization (IMO) regulation
on bunker fuels went into effect on January 1, 2020,
effectively increasing operating costs in the form of higher
bunkering costs for low-sulfur fuels. Shipowners were wellprepared
for this change, and the impact on freight rates was
largely shrugged off.
Climate change considerations. The past 24 mos have
provided an opportunity for the LPG industry to review
and reposition itself in the present and future role of climate
change. Industry-wide efforts to adapt, innovate and engage
in mitigation practices have proven positive, both internal to
the industry and externally. Innovations like bio-LPG (or renewable
propane, as it is known in the U.S.), have kicked off
discussions in key markets like Europe and North America.
As a byproduct of renewable diesel and jet fuel production,
renewable propane chemical and physical properties
are identical to propane produced from traditional sources;
however, it is carbon neutral. Additionally, renewable propane
producers are eligible for subsidies through California's
Low Carbon Fuel Standard and the U.S.'s federal Environmental
Protection Agency (EPA) Renewable Fuel Standard
(RFS) program.
Beyond renewable propane, the LPG industry is investing
in technology and product development toward a net
zero future. This includes research and development efforts
in the transportation and industrial engine market sectors,
such as advanced spark-ignited engine technology, propane
hybrid drive systems and advanced exhaust catalyst systems.
Similarly, LPG projects and products are beginning to
play a role in providing resiliency to the electric grid through
primary, backup and hybrid systems to support other renewables
like solar and wind installations. Distributed power
generation, grid-free and microgrid systems powered by LPG
are proving highly versatile and sustainable in areas where
the electric grid is overtaxed by current demand. These systems
not only build in some level of resiliency to the grid,
but also serve to improve energy and environmental equity.
Today, much of the developing world does not have ac10
JULY/AUGUST 2021 | GasProcessingNews.com
cess to clean cooking fuel. Black carbon emissions, such as
those emitted from the burning of firewood, dung and charcoal,
continue to be a major issue for residential air quality in
many developing countries. As proposed by the World LPG
Association, LPG could save millions of lives and support
sustainable transformation of the household sector by becoming
the go-to residential cooking fuel source.
Sector outlook. Mid-term LPG market forecasts suggest
strong supply and continued growth worldwide. Global
LPG production is expected to exceed 370 metric MMtpy
by 2030, roughly a 14% increase from 2019 global production.
Trade flows will continue to expand; however, they will
likely become more complex with continued geopolitical and
geoeconomics issues among the key market movers. Significant
trade routes, like the Mideast Gulf to Asia-Pacific, U.S.
to Asia-Pacific, and U.S. to Europe, are likely to make up a
significant portion of global movements in LPG.
Continued demand in traditional residential heating and
cooking segments is expected. Market projections suggest
15% growth from 2019-2030, culminating in more than
150 metric MMtpy of global demand. The cooking sector in
Asia-Pacific will see the largest gain in incremental LPG demand.
Alongside India, growth is forecast in several smaller
markets in the region, including Bangladesh, Vietnam and
the Philippines.
Continued expansion of the natural gas grid, rising energy
efficiency and legislative pushes toward renewables and " carbon-free "
sources will continue to impact the North American
market. Similar impacts will be felt in northwest Europe
and northeast Asia, based on current projections. Demand in
South America, however, will continue to grow and be a consistent
source for U.S. LPG exports.
Similar demand growth is expected in the global petrochemical
market, primarily coming from Asia-Pacific markets,
as well. Construction of new propane dehydrogenation plants
will see global demand for LPG as a petrochemical feedstock.
Recently published global scenarios include the newest International
Energy Agency (IEA) roadmap for the global energy
sector.1
Such studies tell much the same story: The focus
of government and business leaders must be on those solutions
already in hand today, rather than on technology breakthroughs
that may not come in time, or that may never come.
As centralized energy systems become more brittle and system
upgrades become more expensive, LPG is increasingly seen
as a key distributed energy resource made attractive by its wide
availability, lower relative cost and small carbon footprint. GP
LITERATURE CITED
1
International Energy Agency, " Net zero by 2050: A roadmap for the global energy
sector, " May 2021, online: https://www.iea.org/reports/net-zero-by-2050
GORDON FELLER has been writing about energy, particularly
oil and gas, since his first magazine article was published in
1978, and he has been published in more than 50 industry
magazines. He has undertaken numerous research and writing
projects for large institutions, including the World Economic
Forum, the World Bank, and the governments of Germany,
the UAE (Abu Dhabi), Japan and Canada. He has also won
more than two dozen competitive fellowships. Mr. Feller graduated with a
master's degree from Columbia University in New York City, New York.
https://www.iea.org/reports/net-zero-by-2050 http://www.GasProcessingNews.com
Hydrocarbon Processing - August 2021

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