The prospects for an ever-expanding boom in propane exports from the U.S. Gulf Coast are dimming, even as export volumes stand at near-record levels and as new export capacity continues to come online. Why? It comes down to supply and demand. With oil and NGL prices at today’s levels, propane production is leveling off, not rising, and U.S. Gulf Coast domestic demand for propane will be increasing—from new propane dehydrogenation (PDH) plants and propane’s use in ethylene steam crackers—at the same time that export volumes out of the East Coast are quadrupling. In today’s blog we consider the possibility that what goes up must come down.
There’s a Woody Allen quote that’s relevant here: “If you want to make God laugh, tell him about your plans.” Not so long ago, the general expectation was that through the latter half of the 2010s, the U.S. would be awash in ethane, propane and other natural gas liquids (NGLs). To take advantage of these plentiful (and presumably inexpensive) supplies, petrochemical companies planned ethane-only ethylene steam crackers and PDH units, and midstream companies planned NGL pipelines and export terminals to expedite the delivery of NGLs to international markets, including increasing amounts of liquefied petroleum gas (LPG, mostly propane with some butane) and previously unheard of waterborne ethane exports. The thinking behind all this planning–and building—was that the new, domestic NGL consumers (the ethane-based steam crackers and the PDH units) and the export market would absorb all those “surplus” NGLs and keep NGL markets in near-perfect balance—the sweet spot of moderate prices and healthy demand. Well, it is now looking like things might not work out as planned.
We’ve talked a lot about propane exports serving as a relief valve for growing propane production and falling prices since the early years of the Shale Revolution. Back in 2012 we posted Exports Prescribed For Propane Relief. In 2013, we covered export volumes beginning to surge in She Don’t Lie, She Don’t Lie, Propane. Exports Take Off! , and in 2014 we highlighted propane export volumes as they ramped up to over 400 Mb/d in Sail Away – Propane Exports Exceed 400 Mb/D For The First Time. Now, Figure #1 below brings us up to present day and shows Gulf Coast (left) and East Coast (right) propane exports from July 2015 through March 2016, based on RBN’s ship tracking data.