The so-called shale boom is creating much more domestic production of oil and gas, but some of the key byproducts are liquefied petroleum gas, like propane and butane.
Houston-area LPG producers, traders and more all are set to benefit more from propane and butane exports as more Caribbean, Central American or South American nations turn to the cleaner LPGs, said Ram Sunkara, a Houston energy partner with Sutherland Asbill & Brennan LLP.
“In the past, LPG was — I’ll probably say — neglected,” Sunkara said, but now companies and nations are valuing the shale byproducts for potential assistance with national power grids, as well as for traditional cooking and heating uses.
Many Central and South American nations are struggling with the costs of importing fuel oil or diesel, and are looking for cheaper and cleaner gas products, he said.
Liquefied natural gas exports have gotten most of the attention, Sunkara said, and there is much growth to be seen there. But LPGs like propane and butane are even cheaper and easier to ship.
“LPG is the one most are looking at in South America now,” he said.
The energy cost of LNG is very expensive, Sunkara said, because of the liquefaction process. LPG is cheaper to produce and it’s cheaper to provide for export.
Houston-based Phillips 66 (NYSE: PSX) is moving forward with its $1 billion Freeport LPG Export Terminal, at the site of the company’s existing marine terminal in Freeport, to supply petrochemical, heating and transportation markets globally. Its initial export capacity will be 4.4 million barrels per month, and start up is expected in mid-2016. The liquefied petroleum gas export terminal — Phillips 66’s first ever — will export fuel from its Sweeny complex in Old Ocean and its Gulf Coast Fractionators facility in Mont Belvieu, Texas.
Likewise, midstream companies such as Houston-based Enterprise Products Partners LP (NYSE: EPD) are rapidly increasing their LPG export capabilities.
There will be a lot of competition for the LPG “excess capacity” and for LPG tankers, Sunkara said.
“There’ll be a boom for a lot of LPG traders,” he said. “There’s been a boom in LPG trading and LPG trading hiring in Houston.”
LPG trading companies — such as Switzerland-based Vitol SA, South Korea’s SK Gas Co. Ltd., BP PLC (NYSE: BP), Swiss Glencore Xstrata Plc and more — are increasing their LPG trading desks in Houston with more commodities traders, he said.
“It’s rapidly becoming a very large play,” Sunkara said.
Sourced by Bizjournals.com on May 22, 2014.