Asian LPG pricing & development

Market Reporting

Consulting

Events

Asian LPG pricing & development

Argus ShanghaiMarch 2021

Argus Media group notices

Copyright © 2021 Argus Media group. All rights reserved.

• The Argus Media group (referred to herein as “Argus”) makes no representations or warranties or other assurance, express or implied, about the accuracy or suitability of any information in this presentation and related materials (such as handouts, other presentation documents and recordings and any other materials or information

distributed at or in connection with this presentation).

• The information or opinions contained in this presentation are provided on an “as is” basis without any warranty, condition or other representation as to its accuracy, completeness, or suitability for any particular purpose and shall not confer rights or remedies upon the recipients of this presentation or any other person. Data and

information contained in the presentation come from a variety of sources, some of which are third parties outside Argus’ control and some of which may not have been verified.

• All analysis and opinions, data, projections and forecasts provided may be based on assumptions that are not correct or which change, being dependent upon fundamentals and other factors and events subject to change and uncertainty; future results or values could be materially different from any forecast or estimates described in the presentation.

• To the maximum extent permitted by law, Argus expressly disclaims any and all liability for any direct, indirect or consequential loss or damage, claims, costs and expenses, whether arising in negligence or otherwise, in connection with access to, use or application of these materials or suffered by any person as a result of relying

on any information included in, or omission from, this presentation and related materials or otherwise in connection therewith.

• The information contained in this presentation and related materials is provided for general information purposes only and should not be construed as legal, tax,

accounting or investment advice or the rendering of legal, consulting, or other professional services of any kind. Users of these materials should not in any manner rely upon or construe the information or resource materials in these materials as legal, or other professional advice and should not act or fail to act based upon the information in these materials.

• Copyright notice: Copyright © 2020 Argus Media group. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, you will not copy or reproduce any

part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus.

• Trademark notice: ARGUS, the ARGUS logo, Argus publication titles, and Argus index names are trademarks of Argus Media Limited. For additional information, including details of our other trademarks, visit argusmedia.com/trademarks.

A view of Argus


• One of the world’s leading PRAs, Argus has more than 1000 staff members and offices in the world’s principal commodity trading and production centres

• Publishing more than 11,000 daily spot and forward price assessments, plus market intelligence for world commodities markets

• Coverage includes:

◦ Energy, including oil, natural gas, power, coal, asphalt, base oils, biomass, emissions and more

◦ Agriculture/Fertilizers

◦ Petrochemicals

◦ Metals

• Services

◦ Price reporting and indexation

◦ Consulting

◦ Conferences

• Indexation examples

◦ US crude oil

◦ European gasoline

◦ Asia-Pacific LPG

◦ Coal

◦ US and European environmental markets

Argus covers the international LPG market daily

• Argus International LPG services include daily coverage of the global LPG market (Asia, Middle East, Europe, Americas), including prices, terminal fees, freight and more

• Markets rely on Argus for market-moving news, analysis and insights

• Argus assesses international LPG prices each day, including the key European indexes and benchmarks.



Argus LPG World Argus LPG Outlook Argus International LPG Forward Curves

Argus LPG Analytics Argus International LPG

Argus LPG Data: Prices, fundamentals, forecasts, analysis

• US vs. Middle East LPG supply: US is increasingly important in Asia

• LPG prices in Asia: Argus Far East Index (AFEI) and Saudi CP

• New price indexes for China: CFR Ningbo and PRD index

Agenda


Key LPG trade flows into Asia: US competes with Mideast Gulf in 2020


Key US LPG export flow

Key Mideast Gulf export flow

US Exports: 50 mn t/yrMideast Gulf

Exports 39 mnt/yr

Algeria Exports: 6.8 mn t/yr

Other major export flow

Russia Exports: 3.6 mnt/yr

Australia Exports: 3 mn t/yr

China: 20 mn t

Japan: 10 mn tKorea: 7 mn t Indonesia:

6 mn t

India: 15 mn t

Top 5 Global Importers’ Supply Origin

US

Mideast Gulf

Other

Norway Exports: 5 mn t/yr

Where does US LPG go?


• Asia-Pacific is now home to more than half of US Exports

0

40

2015 2016 2017 2018 2019 2020

Asia-Pacific0

40

2015 2016 2017 2018 2019 2020

Europe

0

40

2015 2016 2017 2018 2019 2020

Latin America

2.8

29.89.4

12.1

US Seaborne Exports by Destination, 2020

Africa

Asia-Pacific

Europe

Latin America

— EIA/Argus

0

10

20

30

40

2015 2016 2017 2018 2019 2020

Africa

Nederland, Energy Transfer

HSC, Enterprise

HSC, Targa

Freeport, P66

Marcus Hook，EnergyTransfer

ChesapeakeNGL Energy Partners

• Altagas Ridley Island

• Pembina Watson Island

• Petrogas, Ferndale WA

• Pacific Traverse

North American LPG export terminalsTerminal expansion (incl. ethane), ‘000b/d

Company2019

capacity2020

expansionTotal by end

of 2020Future plan

Enterprise Houston, TX 835 835 260

Targa Houston, TX 233 267 500

Philips 66, Freeport, TX 200 200

Energy Transfer, Nederland, TX

265 235 500

Energy Transfer Orbit, Nederland, TX (ethan)

175 175

Energy Transfer, Marcus Hook, PA (LPG & ethane)

340 340

Occidental, Corpus Christi, TX

100 100

Buckeye Partners, Corpus Christi, TX

70 70

Petrogas, Ferndale WA 30 30

Altagas Ridley Island 50 50 30

NGL Energy Partners, Chesapeake, VA

12 12

Pacific Traverse 45

Pembina Pipeline 25

Permico, Corpus Christi, TX

130

Total capacity 2,135 677 2,812 230

Copyright © 2021 Argus Media group. All rights reserved.— Argus


Argus Far East Index Saudi Aramco Contract Price

Daily Monthly

Cfr Fob

Assessed on deals/bids/offers“Black box” Producer price – uses CP term customer recommendations

Propane: 132mn tonnes swaps in 2020, 9% up from 2019

Propane: 64mn tonnes swaps, 4% down from 2019

Asia has two benchmarks: AFEI and the Saudi CP

Argus Propane Far East Index: Basics of Methodology

• Location: Japan, Chiba/Kawasaki

• Size: 23,000t (half VLGC)

• Delivery timing 25-40 days forward

• Specifications – in line with the Ginga Forward Contract


AFEI assessment: example


Step 1: assess AFEI swaps at 5:00pm Singapore time Step 2: assess physical transactions for delivery at same time period

AFEI assessment: example


Step 3: calculation to arrive at AFEI for the day of publication.

AFEI is increasingly used as an LPG pricing basis around Asia and beyond


• AFEI has become widely widely used in recent years —for both spot and term contracts

• AFEI netback is used for both Canada exports and by most producers in the Middle east.

• New production such as off-shore Australia

• Saudi Arabia uses internally for LPG sales to the petrochemical sector

• All alongside core usage in Japan, Korea, China.

North American exports

African exports

Some examples of pricing on AFEI

AFEI offers value vs the Saudi CP


• The Argus Far East Index was at a flat discount to the CP for most of 2020 – a reflection of the competing sources of LPG into Asia-Pacific

• The final quarter price rise has changed the picture somewhat,mainly due to therising freight.

0

100

200

300

400

500

600

700

800

Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21

Propane Argus FEI & Saudi CP

Propane Argus Far East Index (AFEI) Propane Saudi Aramco CP month 1

$/t



• Factoring in freight, LPG is offering exceptional value on a cfr Japan netback basis

$/t



AFEI Saudi CP AFEI-CP

Jan-Dec 2016 $343.86 $323.04 $20.82

(AFEI = CP +$20.82)

Jan-Dec 2017 $484.07 $467.24 $16.82

(AFEI = CP +$16.82)

Jan-Dec 2018 $549.79 $542.08 $7.71

(AFEI = CP +$7.71)

Jan-Dec 2019 $451.54 $434.58 $16.96

(AFEI = CP +$16.96)

Jan-Dec 2020 $387.24 $398.23 -$10.99

(AFEI = CP -$10.99)

Linking to the US: AFEI tends to lead pricing at Mont Belvieu

• Demand in Asia-Pacific clearly links back to the US – as demonstrated by the link between the Argus Far East Index and USGC prices.


The alignment of prices is clearly shown in the lack of a consistent arbitrage since 2014

• The opening and closing of arbitrage opportunities demonstrates the high interconnectedness of Asian markets to the US.


China LPG storage capacity is booming, mostly in east China


Start-up time

Company name LocationStorage capacity

2021 Honggang Petrochemical Lianyungang, Jiangsu 80

2021 Oriental Energy Ningbo 2 Ningbo, Zhejiang 500

2021 Wanhua 2 Yantai, Shandong 600

2021 Huatai Shengfu Ningbo, Zhejiang 80

2021 Fujian Meide 2 Fuzhou, Fujian 150

2021 Formosa Ningbo Ningbo, Zhejiang 80

2021 Grand Resources 2 Dongguan, Guangdong 60

2021 Qingdao Jinneng Qingdao, Shandong 300

2021 Gulei refinery Zhangzhou, Fujian 120

2021 Zhenhai Refinery Ningbo, Zhejiang 60

Total 2,030

— Argus

Unit: ‘000t

Unit: ‘000t

*Note: Only count refrigerated or underground storage capacity.

Argus CFR Ningbo index reflects delivered price value into China, and differs from AFEI in the following:

• CFR Ningbo is based on a full VLGC size

• Delivery point is Ningbo, with freight deviation calculated for discharge within SG-Japan range

• CFR Ningbo index is based on Argus Ningbo contract which can be downloaded at:

view.argusmedia.com/cfr-ningbo-LPG-contract.html

• CFR Ningbo is available on Argus Open Markets

Launch of CFR Ningbo


• Assessed daily CNY spot wholesale prices

• Weighted average of 6 terminal’s daily spot prices

• Residential grade propane-butane mix

• Assessing import/gas field produced LPG prices

Pearl River Delta index

PRD index includes prices at 6 major terminals in Guangdong:


Shenzhen Sinobenny

Dongguan JovoGuangzhou Huakai

Zhuhai SiamgasZhuhai New OceanZhuhai CNOOC

Celia ChenSenior LPG analyst, Argus Shanghai

[email protected]

www.argusmedia.com

mailto:[email protected]

Documents

Asian LPG pricing & development