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LPGSummitNigeriaNovmber 2019AlanHayesVPBusiness DevelopmentLPG&OlefinsArgusMedia
illuminatingthemarkets
MarketReportingConsulting
Events
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 2
ArgusMediaGroupNotices§ TheArgusMediagroup(referredtohereinas“Argus”)makesnorepresentationsorwarrantiesorotherassurance,expressorimplied,abouttheaccuracy
orsuitabilityofanyinformationinthispresentationandrelatedmaterials(suchashandouts,otherpresentationdocumentsand recordingsandanyothermaterialsorinformationdistributedatorinconnectionwiththispresentation).
§ Theinformationoropinionscontainedinthispresentationareprovidedonan“asis”basiswithoutanywarranty,conditionorotherrepresentationastoitsaccuracy,completeness,orsuitabilityforanyparticularpurposeandshallnotconferrightsorremediesupontherecipientsofthispresentationoranyotherperson.Dataandinformationcontainedinthepresentationcomefromavarietyofsources,someofwhicharethirdparties outsideArgus’controlandsomeofwhichmaynothavebeenverified.
§ Allanalysisandopinions,data,projectionsandforecastsprovidedmaybebasedonassumptionsthatarenotcorrectorwhich change,beingdependentuponfundamentalsandotherfactorsandeventssubjecttochangeanduncertainty;futureresultsorvaluescouldbemateriallydifferentfromanyforecastorestimatesdescribedinthepresentation.
§ Tothemaximumextentpermittedbylaw,Argusexpresslydisclaimsanyandallliabilityforanydirect,indirectorconsequentiallossordamage,claims,costsandexpenses,whetherarisinginnegligenceorotherwise,inconnectionwithaccessto,useorapplicationofthesematerialsorsufferedbyanypersonasaresultofrelyingonanyinformationincludedin,oromissionfrom,thispresentationandrelatedmaterialsorotherwiseinconnectiontherewith.
§ Theinformationcontainedinthispresentationandrelatedmaterialsisprovidedforgeneralinformationpurposesonlyandshouldnotbeconstruedaslegal,tax,accountingorinvestmentadviceortherenderingoflegal,consulting,orotherprofessionalservicesofanykind.Usersofthesematerialsshouldnotinanymannerrelyuponorconstruetheinformationorresourcematerialsinthesematerialsaslegal,orotherprofessional adviceandshouldnotactorfailtoactbasedupontheinformationinthesematerials.
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 3
Agenda
1 Globaloverview
1a Supply
1b Demand
2 Tradeandprice
3 FocusonME
4 Developmentsinlocalmarkets
5 Someuncertainties
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 4Copyright©2018ArgusMediagroup.Allrightsreserved.
AtlanticBasisandARA• Propanestandardcontract• LargeCargotradethroughoutAtlanticBasis
• Barge&CoasterTradinginARA
ConnectingtheAsiancontinent• UsedextensivelyAcrossAsia• Twolargestimportmarkets• Millionsoftonsofphysical• Deepandwidederivativesmarket
ArgusLPGbenchmarksfacilitateglobaltrade
ArgusLargeCargoCIFARA
ArgusFarEastIndex
MainpricingbenchmarkformainlandEurope• RefineryproducedLPG• Robustbasis• DerivedfromcifARA(last5daysminusyearlyfreight
KeybenchmarkforRussian&CentralEuropetrade• AllRussianrailcartrade• Central,EasternandBalticRegion
• Russiantaxcalculations
ArgusdafBrest
ArgusNorthSeaIndex
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 55Copyright © 2019 Argus Media Ltd. All rights reserved.
RegionalLPGtradeflowshaveincreased
US
Exports:+14pc
Imports:+9pc
Mexico
Imports:-7pc
Europe
Exports:+6pc
Imports:-4pc
Russia
Exports:-0.2pc
China
Imports:+15pcJapan
Imports:-1pc
India
Imports:+13pc
Australia
Exports:-1pc
Algeria
Exports:-5pc
Brazil
Imports:-20pc
SouthKorea
Imports:-16pc
Qatar,SaudiArabia,UAE
Exports:-3pc
Thailand
Imports:+41pc
Annualimport/exportchanges,2017/18
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 6
Keytakeawaysfromglobalreview§Strongsupplygrowthtocontinue,ledbytheUS§Asiawillcontinuetodrivedemand– particularlyinthepetchemanddomesticsectors
§Asaresultofsupplyoverhang,priceswillcontinuetobeheldatrelativelylowlevelsversuscrudeandnaphtha
§LPGwillneedtocontinuetopriceatalevelsthatsupportsgrowth
§ThereisanOpportunitytodevelopNewMarkets
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 7
Productioninkeyregionsbeyondthenextdecadeisforecasttogrow
0
50
100
150
200
250
300
350
400
2010 2015 2020 2025 2030
mnt
Africa Europe LatinAmerica
MiddleEast NorthAmerica Asia-Pacific
RussiaandCentralAsia
— ArgusConsultingServices
LPGproductionbyregion,2010-30
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 8
GasprocessingwillberesponsibleforthemajorityofincrementalsupplyLPGproductionbysource,2010-30
0
50
100
150
200
250
300
350
400
2010 2015 2020 2025 2030
mnt GasProcessing Refinery
— ArgusConsultingServices
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 9
ThesourceofLPGvariesfromregiontoregionLPGproductionbysourceandregion,2017
Europe
25%
75%
LatinAmericaAsia-Pacific
36%
RussiaandCentralAsia
18%
82%
18%
Africa
82%
NorthAmerica
79%
21%
16%
64%
84%
MiddleEast
91%
9%
Refineryproduction
Gasprocessing
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 10
USshaleefficienciesareadriverforincreasedUSexportsUSshalerigcount,productionandefficiency,2007-18
-
200
400
600
800
1.000
1.200
1.400
1.600
1.800
2.000
-
200
400
600
800
1.000
1.200
1.400
1.600
1.800
Jan13 Jan14 Jan15 Jan16 Jan17 Jan18
Rigstomaintainlegacyproduction(leftaxis) Rigcount(leftaxis)
Productionperrig(b/d,rightaxis)
— EIA;ArgusConsulting
Rigs b/d
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 11
GrowthinUSNGLproductionConsensusUSCrude&NGLProductionGrowth,2010-2030
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 12
Agenda
1 Globaloverview
1a Supply
1b Demand
2 Tradeandprice
3 FocusonME
4 Developmentsinlocalmarkets
5 Someuncertainties
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 13
Globally,theresidential&petchemsrepresenttwo-thirdsofdemand
LPGdemandbysector,2018
40%
26%
9%
7%
7%
11% Residential
Petrochemical
Transport
Industrial
Commercial
Other
— Argus ConsultingServices
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 14
Asia,alreadythelargestdemandregion,isforecasttoseecontinuedstronggrowth
Incrementalchangesindemandbyregion,2015-2030
-5.000
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
2015-20 2020-25 2025-30
'000t
Africa Europe LatinAmerica MiddleEast NorthAmerica AsiaPacific RussiaandCentralAsia
— Argus ConsultingServices
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 15
TwosectorsdriveglobaldemandIncrementalchangesindemandbysector,2015-2030
-5.000
0
5.000
10.000
15.000
20.000
2015-20 2020-25 2025-30
'000t
Residential Petrochemical Transport
Industrial Commercial Other
— ArgusConsultingServices
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 16
DemandinAsiaisunderpinnedbygrowthintheresidentialandpetchemsectors
LPGAsiandemandbysector,2010-30
0
20.000
40.000
60.000
80.000
100.000
120.000
140.000
160.000
180.000
200.000
2010 2015 2020 2025 2030
'000t
Residential Petrochemical Industrial Commercial Transport Other
— ArgusConsultingServices
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 17
Thedemandsplitisforecasttoremainrelativelystable
Globalsplitofdemandbetweenpropaneandbutane(est.)2010-30
0
50
100
150
200
250
300
350
400
2010 2015 2020 2025 2030
mntPropane Butane
— ArgusConsultingServices
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 18
Agenda
1 Globaloverview
1a Supply
1b Demand
2 Tradeandprice
3 FocusonME
4 Developmentsinlocalmarkets
5 Someuncertainties
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 19
NorthAmericanexportsforecasttoriseLPGavailableforexportbyregion,2010-30
0
20
40
60
80
100
120
140
160
180
2010 2015 2020 2025 2030
mnt Africa Europe LatinAmerica
MiddleEast NorthAmerica Asia-Pacific
RussiaandCentralAsia
— ArgusConsultingServices
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 20
Asianimportrequirementsareballooninganddiversifying
WeforecastasignificantincreaseinLPGdemandinAsia,andacorresponding
increaseinimportrequirements.
In2010,JapanandKoreaaccountedforalmost60pcofLPGimportrequirements.By2030,theywillaccountfor
around15pc
Combinedsmallermarketswillneed19mntofLPGin2030–threetimesmorethan2010
LPGimportrequirementinselectedAsiancountries,2010-30
0
20
40
60
80
100
120
2010 2015 2020 2025 2030
mnt Japan Korea China India OtherAsia
Other Asiaincludes:Bangladesh,Indonesia,Pakistan,Philippines,SriLanka,Taiwan,Thailand,Vietnam— ArgusConsultingServices
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 21
LPGisforecasttoremainstructurallylongthroughthenextdecade
SupplyOverhang
Moreinvestments
ininfrastructure
Upgradesand
newbuilds
Growthinpetrochemical
demand
GlobalnetLPGbalance,2010-2030
-50
0
50
100
150
200
250
300
350
400
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
mntTotalConsumption TotalProduction NetPosition
— Argus ConsultingServices
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 22
Thedifferenceinmarketlengthisforecasttonarrowoverthemedium-term
-0,8
-0,6
-0,4
-0,2
0,0
0,2
0,4
0,6
0,8
1,0
2005 2010 2015 2020 2025
kb/d
LPGtradebalance Naphthatradebalance
— ArgusConsultingServices
LPGandnaphthabalance,2005-2025
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 2323Copyright © 2019 Argus Media Ltd. All rights reserved.
LPGpricehasdotheheavyliftingtobalancethemarket
RelativepriceofLPGhasundergonehugechanges
Supplyrevolutionpushedpricesdownto50%0f
naphtha
Demandbuildoutquicklypusheditbackcloseto
historicalnorms
Enteringanotherperiodofweakness
PropanevNaphthaPrices2010-2025
40%
50%
60%
70%
80%
90%
100%
PropaneRelativePriceStrength
AsiaPropane/NaphthaRationNWEuropePropane/NaphthaRatio(blue)
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 24
Agenda
1 Global overview
1a Supply
1b Demand
2 Tradeandprice
3 Developmentsinlocalmarkets
4 Someuncertainties
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 25
Pricesareconnectedmorethanever
200
250
300
350
400
450
500
550
600
ButaneUSGCexportHoustonclose,USD/t
ButaneARA/UKlargecargoLondonclose,USD/t
ButaneArgusMiddleEastIndexSingaporeclose,USD/t GlobalRegionsare
connected• Pricesreflectthisinter-connectivity
• Pricestrendacrosstheglobe
IncreaseinseaborneLPGtrade
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 2626Copyright © 2019 Argus Media Ltd. All rights reserved.
§ Africasitsataninterestingpoint– between2bigtradinghubs,andabletotradewithmultipleregions.The“logical”pricesshouldbethelowestdeliveredpricelogisticallyachievable.
§ Moreoftenthannot,pricesinNigeriaareheavilyinfluencedbyimportprices.
§ Therefore,ArgushaslaunchedanewWestAfricaLPGIndex– basedonthelowestpriceofLPGdeliveredtoLagosfromeithertheUSGCorNWE.
Alongmarketleadsto“delivered”pricing
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 2727Copyright © 2019 Argus Media Ltd. All rights reserved.
NewAfricaPriceIndices
Copyright © 2019 Argus Media group. All rights reserved.
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 2828Copyright © 2019 Argus Media Ltd. All rights reserved.
LPGproductioninNigeriaisforecasttorise
RisinggasproductionwillsupportNigeria’s
LPGoutput
WeforecastLPGproductiontoriseto5milliontby2025
Risingproductionfacilitatearisein
exports
NigerianLPGproduction2010-2030
0
1.000
2.000
3.000
4.000
5.000
6.000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
NigerianProduction&Demand
Propane Butane Consumption
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 2929Copyright © 2019 Argus Media Ltd. All rights reserved.
Domesticdemandwillrisebutnotaheadofproduction
Nigerianexportsareforecasttoincreaseby600ktby2030
Propaneexportswillcontinuetodominatebutbutaneexportswillrisealso
NigerianLPGexportswillhavetocompete
The propane:butanemixwillhelp
NigeriaLPGexports2010-2030
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
NigeriaLPGExports
Propane Butane
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 3030Copyright © 2019 Argus Media Ltd. All rights reserved.
Nigeria’sOpportunity– Drivingdomesticdemand
ImportsTotal 515,996 MarketShareUS 226,000 44%
Other 289,709 56%
LPGImports12months
0
1.000
2.000
3.000
4.000
5.000
6.000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
NigerianProduction
Propane Butane
ShipTrackingData
‘000t
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 31Copyright©2019ArgusMediagroup.Allrightsreserved.
§ LPGsupplyanddemandcontinuestogrowinaneraofabundantgasproductionandincremental
cookingfuelandfeedstockneeds
§ Thepaceofproductionshouldseeattractivepricesrelativetonaphthaandcrude
§ Asiaislargelytheprice-settingregion,andwhenChinastopsbuying,globalpricestendtofall
§ ThereisarealneedforapricingmechanismthatgenuinelyreflectsmarketdynamicsinWAF– wehope
thatournewIndexcanbepartofthesolution.
§ Similarly,inordertoensurethatexportersfullycapturemarketvaluewhileremainingcompetitive
exportpricesmustbebasedonmarketfundamentals
BigPicture
illuminatingthemarkets Copyright©2019ArgusMediagroup.Allrightsreserved. 32
LPGmarketisprimed
TheGlobalLPGMarkethasundergoneasupplyrevolution
Globaltradehasfacilitatedopeningupnewmarkets
Opportunitytobenefitfromthismarketupheaval
Benefitswillbelonglastingandtransformational
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illuminatingthemarkets
MarketReportingConsulting
Events
AlanHayesVPBusinessDevelopmentLPGandOlefins