In October, some 45 MMbbl of liquefied petroleum gases (LPGs) were loaded onto ships and sent out from U.S. ports, more than 80% of it from Texas Gulf Coast terminals. Most propane and normal butane exports are tied to long-term deals between U.S. suppliers and overseas buyers, but a substantial share involves third-party LPG traders who cut deals to buy LPG, arrange for shipping and terminaling, then sell the LPG to buyers in distant lands. How exactly does all this happen? Today, we continue a series on how U.S.-sourced LPG makes its way to Asia, Europe and other key export markets.
In Part 1, we reviewed the U.S.’s 2012 flip from net LPG importer to net exporter, and the rocket-like rise in export volumes over the past seven years. We noted that, in any given month, it’s now common for 55 to 60 big, fully laden Very Large Gas Carriers, or VLGCs, some capable of transporting more than 550 Mbbl of propane and/or normal butane, to set sail out of Gulf Coast ports, including Enterprise Products Partners’ and Targa Resources’ export terminals on the Houston Ship Channel, Energy Transfer’s facility in Nederland, TX, and Phillips 66’s docks in Freeport, TX. And we said that we expect LPG exports to increase further with the ongoing start-up of an expansion at Enterprise’s terminal and planned or likely expansions elsewhere.
The guts of Part 1, though, was a primer of sorts on LPG trading — an important but largely opaque part of the energy business — and a laying out of a fictitious but plausible example of a Gulf-Coast-to-Japan deal that will help us walk you through how real-life trades happen. To recap, our virtual deal involves a shipment of 550 Mbbl, or ~44,000 metric tons (MT), of export-quality propane from Houston to Chiba, Japan, a roughly 25-day voyage of about 9,400 miles via the Panama Canal. The price of the propane at the Mont Belvieu NGL hub is based on the November Non-TET (a.k.a. Non-LST, a.k.a. Enterprise) index price reported by IHS OPIS (for more on TET vs. Non-TET, see The Differen(tial) Between Us). Our virtual terminaling agreement with a reseller holding an Enterprise cargo has us paying 11.75 cents per gallon (c/gal), or $61.22/MT, to load the propane onto a ship during a late-November loading window — the targeted loading dates are November 28-29. We’ve chartered a VLGC for $120.55/MT, which means it will cost us a total of $181.77/MT ($120.55 plus $61.22) to load the ship and transport our cargo to Chiba.
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About the song
“(Let’s Get) Physical” was written by Steve Kipner and Terry Shaddick — actually with Rod Stewart in mind. Stewart passed on it, as did Tina Turner after her manager Roger Davies presented it to her. Davies also managed Olivia Newton-John, who recorded the song and made it the focus of her next album. "Physical" was the first cut on side two of Newton-John's ninth studio album of the same name. It was released as the first single from the album in September 1981, and went to #1 on the Billboard Hot 100 chart. The video of the song received heavy rotation on MTV, and won a Grammy Award for Video of the Year in 1983. Personnel on the song were: Olivia Newton-John (lead and backing vocals), John Farrar (guitar and backing vocals), Steve Lukather (guitar solo), David Hungate (bass), Bill Cuomo (synthesizer), Robert Blass (keyboards), Carlos Vega (drums), Lenny Castro (percussion) and Gary Herbig (horns). "Physical" would become Newton-John's biggest hit in her career.
The Physical album was produced by John Farrar and recorded at Record One, Ocean Way Recording, and David J. Holman Studio in Los Angeles between October 1980 and June 1981. It was released in October 1981, where it went to #6 on the Billboard Top 200 Albums chart. It has been certified 2x Platinum by the Recording Industry Association of America. "Make a Move on Me" was released as the follow-up single to "Physical," and went to #5 on the Billboard Hot 100.
Olivia Newton-John is an English-born Australian singer, songwriter and actress. She has released 28 studio albums, six live albums, 17 compilation albums, four soundtrack albums and 71 singles. She has appeared in 14 motion pictures and 24 television shows. Newton-John has won one Academy of Country Music Award, 10 American Music Awards, nine Billboard Awards, one Country Music Association Award, one Daytime Emmy Award and four Grammy Awards. Due to health issues, Newton-John is not currently recording or touring.
