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Hold on to Your Hat, Part 3 - Canada's Overseas Propane Exports Come at the Expense of the U.S.

Canada’s propane market has quickly morphed from one characterized by abundant supply to one facing a tightening supply/demand balance, with direct exports to Asia playing an increasingly important role. This tension became evident in May 2019, when the start-up of the Ridley Island Propane Export Terminal (RIPET) in British Columbia, Canada’s first direct export connection for propane to Asian markets, effectively eliminated the usual seasonal surplus for propane in Western Canada. With rail exports of propane to the U.S. often reliant on that excess for restocking in the summer months and as a reliable fallback supply in the cold winter months, the prospect of fewer or no periods of excess supply may be signalling trouble for some U.S. regions that have come to rely on those volumes. What’s more, within a few months, another propane export terminal in BC will be starting up, further reducing what’s left for the U.S. market. In today’s blog, we conclude our series examining the Western Canadian propane market by considering the impacts of Canada-to-Asia propane sales on U.S. propane consumers and propane prices.

The Canadian propane market is transitioning into an all-new era. We don’t just mean changes wrought this year by wild oil price swings, producer spending cutbacks, and the unpredictable demand landscape generated by COVID-19 disruptions – although these have been important. The new era started to emerge in mid-2019 with demand and exports having caught up to and more frequently surpassing available supplies. The result has been a rapid tightening of a market once thought to be grossly oversupplied outside of higher demand winter heating needs.

We started exploring Western Canada’s propane market in Part 1 of this series, where we delved into the changes brought about by the start-up of AltaGas and Vopak’s jointly owned, 50-Mb/d RIPET facility 15 months ago. RIPET is Canada’s first propane export terminal providing direct access to Asian markets from its own shores and it reached its export capacity within a month of opening. It joined the only other propane export terminal operating on the West Coast, the Petrogas-owned terminal in Ferndale, WA, which sends out propane that is railed in from Western Canada and other sources.

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