Low prices not slowing US LPG exports

Energy logistics firm notes bigger share of Asia's LPG market, but crude exports not viable.

Despite weak prices across much of the world, LPG export demand out of the US remains strong, thanks to high inventories and declining freight rates, according to Enterprise Products, which operates the largest LPG loading facility in the US.

On its fourth quarter earnings conference call, Enterprise said LPG export loadings increased 19% in the fourth quarter to 299,000 barrels per day (27,000 tonnes) thanks to two expansions last year at Enterprise’s export facility.

 “We are very pleased (with the LPG expansion projects),” said chief executive Jim Teague. “They have exceeded our expectations.”

Teague said export capacity is over 90% subscribed and Enterprise has signed two long-term export deals with Asian customers, one in Japan and one in South Korea. Teague said Asia will be an important demand driver for US exports. But more than half of Enterprise’s LPG exports head to Central and South America, and Teague doesn’t anticipate that changing much.

Asian customers “are looking to diversify their supply away from the Mideast,” Teague said. The US Gulf “provides a transparent price point as alternative to the Saudi Aramco contract price out of the Mideast.”

Freight rates lower

One analyst asked whether US LPG exports make sense given weak prices across much of the world, and strong spot freight rates. Teague said many export customers have ships under time charter, which makes US exports still economic.

“We haven’t had a single cargo cancelled,” Teague said.

Teague also noted LPG shipping costs have come down sharply from a year ago, further helping exports. Teague estimated it cost about $40 to $50 per tonne to ship LPG to Europe, down from $125 per tonne a year ago. Moreover, Enterprise expects that shipping costs will low as more ships scheduled to hit the water this year.

Likewise, Enterprise says demand appears good for US ethane exports. Teague said Enterprise’s US Gulf Coast ethane export terminal should be ready by the third quarter, with current export commitments running at 180,000 barrels (15,650 tonnes) per day.

Enterprise saw strong gains in its refined products business thanks to high US refinery utilisation providing more supply for export markets. Refined products and petrochemicals terminal volumes were up 85,000 barrels per day to 355,000 barrels per day.

Slow growth in US crude exports

Yet the decline in US crude oil imports means less business at the company’s Houston Ship Channel crude oil terminal, which saw volumes drop 237,000 barrels per day to 680,000 barrels per day in the fourth quarter.

Although Enterprise terminals have loaded two aframaxes with US crude for export markets, Teague says the current price environment does not “support significant US crude oil exports.” However, once prices move back up, he anticipates more customers will want to diversify their supply to the US.