Impact of the Panama Canal widening on U.S. LPG exports · 18/10/2016 · U.S. Energy Information Administration Independent Statistics & Analysis Impact of the Panama Canal widening

www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis

Impact of the Panama Canal widening on U.S. LPG exports

ForNew York Energy ForumOctober 18, 2016 | New York, NY

ByWarren WilczewskiIndustry EconomistPetroleum, Natural Gas, and Biofuels Analysis

LPG UsesEnd-use products End-use sectors

Ethane Petrochemical feedstock for ethylene production; power generation

Plastics; anti-freeze; detergents

Industrial

Propane Fuel for space heating, water heating, cooking, drying, and transportation; petrochemical feedstock

Fuel for heating, cooking, and drying; plastics

Industrial (includes manufacturing and agriculture), residential, commercial, and transportation

Butanes: normal butane and isobutane

Petrochemical and petroleum refinery feedstock; motor gasoline blending

Motor gasoline; plastics; synthetic rubber; lighter fuel

Industrial and transportation

New York Energy Forum | The Opening of the Panama Canal: LNG and LPG ShippingOctober 18, 2016 | New York, NY

Not all LPG is created equal

2

HGL production by sourcemillion barrels per day

The road from net LPG importer to world’s No. 1 exporter runs straight through a gas processing plant

Source: EIA U.S. Refiner & Blender Production and U.S. Natural Gas Plant Field Production; Short Term Energy Outlook Sept. 2016

3New York Energy Forum | The Opening of the Panama Canal: LNG and LPG ShippingOctober 18, 2016 | New York, NY

0

1

2

3

4

5Gas plantRefinery

Forecast

0.5

1.0

1.5

2.0

2.5Natural gas plant liquids productionNatural gas marketed productionCrude oil production

Forecast

natural gas, crude oil, and natural gas plant liquids production, indexed to Jan. 2008

8.7% annual Δ

6.6%7.5%

http://www.eia.gov/dnav/pet/pet_pnp_refp_dc_nus_mbbl_m.htm

http://www.eia.gov/dnav/pet/pet_pnp_gp_dc_nus_mbbl_m.htm

International crude prices dictate U.S. LPG prices, and the great compression has not been kind to U.S. producers

New York Energy Forum | The Opening of the Panama Canal: LNG and LPG ShippingOctober 18, 2016 | New York, NY 4

Selected HGL pricesdollars per million Btu

Source: U.S. Energy Information Administration based on Bloomberg.

0

5

10

15

20

25Ja

n-13

Apr

-13

Jul-1

3

Oct

-13

Jan-

14

Apr

-14

Jul-1

4

Oct

-14

Jan-

15

Apr

-15

Jul-1

5

Oct

-15

Jan-

16

Apr

-16

Jul-1

6

Oct

-16

Natural GasolineIsobutaneButanePropaneNGPL CompositeNatural GasEthane

Calculated fractionation spreaddollars per million Btu

Note: All prices are daily end-of-day spot prices; natural gas is Henry Hub, and NGL components are Mt. Belvieu. NGPL Composite calculated based on calorific contribution of each purity to total NGPL barrel heat value

0

2

4

6

8

10

Jan-

13A

pr-1

3Ju

l-13

Oct

-13

Jan-

14A

pr-1

4Ju

l-14

Oct

-14

Jan-

15A

pr-1

5Ju

l-15

Oct

-15

Jan-

16A

pr-1

6Ju

l-16

Oct

-16

Sources: EIA and Bloomberg

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0 EthaneNatural gasolineIsobutaneNormal butanePropane

Estimated revenue generated by NGPL productionmillion dollars per day

NGPL productionmillion b/d


Despite continuously growing production, U.S. producers have not seen consistent growth in revenue generated by natural gas liquids

5

0

30

60

90

120

150

Company Location

Terminal capacity

(1,000 b/d) Startup

Investment ($bil)*estimated

Total Pre-2013 United States 196 pre-2013 --

Enterprise Channelview, TX 115 2013Q1 0.3*

Targa Resources Galena Park, TX 120 2013Q3 0.24

Petrogas Energy Ferndale, WA 30 2014Q2 0.24

Targa Resources Galena Park, TX 120 2014Q3 0.24

Sunoco Logistics Marcus Hook, PA 40 2014Q3 0.27*

DCP Midstream Chesapeake, VA 8 2014Q4 0.1*

Sunoco Logistics Nederland, TX 197 2015Q1 0.4*

Enterprise Channelview, TX 49 2015Q2 0.1

Occidental Ingleside, TX 66 2015Q3 0.4

Enterprise Channelview, TX 230 2015Q4 0.5*

Buckeye/Trafigura Corpus Christi, TX 50 2016Q1 0.35*EnLink Riverside, LA 6 2016Q2 0.2Phillips66 Freeport, TX 150 2016Q3 0.8*

Sage Midstream Longview, WA 47 2016Q4 0.28*

Kinder Morgan Fairless Hills, PA 25 2017Q1 0.4*

Pembina Portland, OR 37 2018 0.5*

Total United States 1,234 1,181 2013-2018 4.8 4.1

Seeing higher net-backs, producers and midstream companies are looking to the export market for additional demand

Source: EIA based on news reports and company filings


Propane/butane export terminal projects HGL pipelines and export terminals

××

×

-

200

400

600

800

1,000

1,200

1,400IsobutaneNormal butanePropane Exports

Non-Ref Export CapacityRefrigerated Export Capacity

U.S. total exports of propane and butanesthousand b/d

After major terminal capacity build-out 2013 to 2016, exports of propane and butanes no longer constrained by terminal capacity

Source: Dept. of Commerce, EIA


Exports restrained by terminal capacity

Volumes dictated by market demand

-

200

400

600

800

1,000

2010 2011 2012 2013 2014 2015 2015to Jul

2016to Jul

OtherAsia-PacificEuropeSouth AmericaCaribbean & Cent. AmericaNorth America

-50

0

50

100

150 To N.W. EuropeTo E. AsiaTo Edmonton

U.S. propane exports by destination1,000 b/d

price spread between Mt. Belvieu and export destinationscents per U.S. gallon


After saturating Latin American market, U.S. exporters reached Europe, then Asia, where petrochemical feedstock consumes most incremental LPG barrels

Source: EIA, Dept. of Commerce

8

Source: Bloomberg

Panama Canal – the past and the future for LPG carrier transits


Source: Panama Canal Authority, picture taken June 17, 2012

The Ronald N, one of three currently-serving VLGCs capable of passing through the old Panama Canal locks, transiting the Miraflores Locks

Panama Canal size restrictions and estimated product tanker capacity

Source: U.S. Energy Information Administration

Panamax (old locks)

Neopanamax(new locks)

Note: Ship capacities vary based on hull design, draft limitations, and types of product carried

http://www.eia.gov/petroleum/weekly/archive/2016/160622/includes/analysis_print.cfm


Ship-to-ship transfers off of Panama are history. Is the canal expansion to blame?

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100

120

140

2010 2011 2012 2013 2014 2015 2016

Aruba

Panama

Dominican Republic

Monthly U.S. propane exports to potential ship-to-shiptransfer destinationsthousand barrels per day

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

Propane ship-to-ship transfer patterns

http://www.eia.gov/todayinenergy/detail.php?id=25992

http://www.eia.gov/todayinenergy/detail.php?id=25992

crude oil

distillate

gasoline

jet fuel

kerosene

LPG

petroleum coke


Panama Canal has seen a marked increase in LPG transits, nearly all Pacific-bound

Source: U.S. Energy Information Administration, based on Panama Canal Authority

11

2.6

0.2

1.3

0.7

0.2

0.04

1.1

10 8 6 4 2 0

NorthboundPacific to Atlantic(million long tons)

3.0

9.5

9.1

0.3

0.2

4.1

4.1

0 2 4 6 8 10

SouthboundAtlantic to Pacific(million long tons)

Note: A long ton is equal to 2,240 U.S. pounds, used in shipping to denote cargo volumes

Petroleum traffic via the Panama Canal, 2015 Panama Canal and lock system

http://www.eia.gov/petroleum/weekly/archive/2016/160622/includes/analysis_print.cfm

India

Malaysia

Indonesia

Singapore

Thailand

Southern China

Taiwan

Northern China

South Korea

Japan

Chile

Ecuador

0

0.076923

0.153846

0.230769

0.307692

0.384615

0.461538

0.538461

0.615384

0.692307

0.76923

0.846153

0.923076

0.999999

0 10 20 30 40

Approximate voyage time from U.S. Gulf Coast to major ports in selected countriesdays

South America

Asia

Panama CanalSuez Canalother

The expanded Panama Canal significantly reduces transit times to East Asia and Pacific South America

Source: U.S. Energy Information Administration


https://www.eia.gov/todayinenergy/detail.php?id=26892

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Jan-

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ay-1

3S

ep-1

3Ja

n-14

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-14

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Jan-

15M

ay-1

5S

ep-1

5Ja

n-16

May

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Sep

-16

Spot Freight USGC-Asia (basis COGH)

1 Year Time Charter Freight Equivalent

VLGC current fleet and orderbookNo. of ships

U.S. Gulf Coast to East Asia (basis COGH)$/tonne


As VLGC fleet grows, rates decline, allowing U.S. LPG to travel longer distances with lower arbs

Source: Poten & Partners

13

-202468

1012141618

Q1

2012

Q4

2012

Q3

2013

Q2

2014

Q1

2015

Q4

2015

Q3

2016

Q2

2017

Q1

2018

Q4

2018

Q3

2019

Current Fleet

ConfirmedorderbookScrappings

0

50

100

150

200

250

300

Q1

2012

Q4

2012

Q3

2013

Q2

2014

Q1

2015

Q4

2015

Q3

2016

Q2

2017

Q1

2018

Q4

2018

Current Fleet

Confirmedorderbook

VLGC current fleet and orderbookNo. of ships

Loaded cost of U.S. propane in E. Asia$/bbl

Panama Canal vs. alternative routes from the U.S. Gulf Coast to E. Asia: Fully loaded spot

Sources: U.S. Energy Information Administration, Poten & Partners, Bloomberg


Assuming 33-day voyage around the cape vs. 21-day voyage through the Panama Canal

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2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3

Spot Freight USGC-AsiaCanal tollTerminaling costMt. Belvieu (non-LST) Propane

Loaded cost of U.S. propane in E. Asia$/bbl

Panama Canal vs. alternative routes from the U.S. Gulf Coast to E. Asia: Belvieu + toll and fuel



Assuming 33-day voyage around the cape vs. 21-day voyage through the Panama Canal

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2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3

Fuel CostCanal tollMt. Belvieu (non-LST) Propane

-505

1015202530354045

via Cape via Suez via Panama

-505

1015202530354045

via Cape via Suez via Panama

E. Asia propane spot less GoM commodity + transport$/b

E. Asia propane spot less GoM commodity + toll and fuel$/b


How does it all net out?


16

• Short-Term Outlook for Hydrocarbon Gas Liquids - supplement to STEOhttp://www.eia.gov/forecasts/steo/special/supplements/2016/hgl/pdf/2016_sp_01.pdf

• Energy Explained: Hydrocarbon Gas Liquidshttp://www.eia.gov/energyexplained/index.cfm?page=hgls_home

• Annual Energy Outlook Issues in Focus: Hydrocarbon Gas Liquids Production and Related Industrial Developmenthttps://www.eia.gov/forecasts/aeo/hgl.cfm

• Drilling Productivity Report Drilled but Uncompleted Wells (DUCs) Supplementhttps://www.eia.gov/petroleum/drilling/pdf/duc_supplement.pdfhttp://www.eia.gov/petroleum/drilling/


Recent EIA HGL-related data products

http://www.eia.gov/forecasts/steo/special/supplements/2016/hgl/pdf/2016_sp_01.pdf

http://www.eia.gov/energyexplained/index.cfm?page=hgls_home

https://www.eia.gov/forecasts/aeo/hgl.cfm

https://www.eia.gov/petroleum/drilling/pdf/duc_supplement.pdf

http://www.eia.gov/petroleum/drilling/

Thank you


Warren WilczewskiOffice of Petroleum, Natural Gas, and Biofuels [email protected]

• Previous approach used reported monthly data and forecasted monthly export totals, with weekly exports shown flat

• Current approach uses daily exports data shared with EIA by Customs & Border Patrol that is parsed by EIA and summed to weekly using the same cut-offs as our surveys

• Because EIA does not have early access to Canadian imports data, these exports are modeled

– U.S. exports data consist of imports reported by Statistics Canada as coming from the U.S.

Monthly propane exports for 2016Thousand barrels per day


New EIA methodology for weekly exports data in Weekly Petroleum Supply Report (WPSR)

Source: EIA, Statistical Methodology of Estimating Petroleum Exports Using Data from U.S. Customs and Border Protection

19

http://www.eia.gov/petroleum/supply/weekly/pdf/appendixd.pdf

• Initial exports moved to Canada by pipeline to feed existing petrochemical facilities in Ontario and Alberta

• March 2016, marine exports began to Norway from Marcus Hook, PA

– First shipment to Sweden in September

• September 2016, marine exports began to Norway from Morgan’s Point, TX

– Shipments will head to the U.K., Brazil, and India

• Marine exports will equal as much ethane as 3 world-scale crackers by year-end 2017

0

20

40

60

80

100MarinePipeline

U.S. exports of ethanethousand b/d


U.S. now exports ethane to petrochemical facilities abroad via pipeline and tanker, and capacity for both is growing

Source: EIA

20

U.S. ethane export terminals and announced destinations for U.S. marine ethane exports


U.S. ethane exports give new lease on life to older petrochemical facilities overseas

Source: EIA, company public filings and press releases; Photo courtesy of Enterprise Product Partners

21

JS INEOS Intrepid loading at Morgan’s Point, TX for inaugural ethane export to Europe


What are HGL?

22

Documents

Impact of the Panama Canal widening on U.S. LPG exports · 18/10/2016 · U.S. Energy Information Administration Independent Statistics & Analysis Impact of the Panama Canal widening