Overview

FGE’s annual LPG Forecast provides a comprehensive summary and assessment of the global LPG market, divided into two main geographical areas: East and West of Suez. In this year’s report, FGE examines the industry dynamics on a country, regional and global level and then derives an assessment of LPG trade and shipping balances, as well as an outlook on prices, margins and shipping rates.

Last year (2022) geopolitical tensions boiled over into an all-out conflict between Russia and Ukraine, which began in late February. Increased price volatility and a reshuffling of global commodity trade flows have been some of the main economic impacts of the war to date.

Last year also revealed some of the shortcomings of China’s zero-COVID policy. Initially seen as an effective way to manage the COVID-19 virus in 2020 and 2021, continued city-wide lockdowns and movement restrictions dented China’s economic growth in 2022.

Partly as a result of the slowdown in China, petrochemical margins in Asia fell in 2022. Many PDH and swing cracker operators were forced to curtail run rates and feedstock demand growth was weaker than expected.

Other notable features of the oil and gas markets in 2022 included:

• OPEC+’s decision to gradually unwind all of the COVID-related cuts to its crude production (albeit with a recent reversal in November) led to a huge (nearly 6 mmt) increase in LPG exports out of the Middle East.
• In Europe, very high natural gas prices led to North Sea gas producers re-injecting more NGLs back into the gas stream. Also, refineries in Europe increased the recycling of fuel gas to power their operations.
• C3+ output in the US rose by some 9% in 2022, buoyed by a favorable WTI price environment, which boosted upstream drilling activity. The rise in production resulted in higher US propane and butane inventories in 4Q 2022.
• A tight VLGC market pushed the benchmark Baltic VLGC index up to a record high in November 2022.
• Shipowners finally showed their cards for 2023, with a record VLGC orderbook for the year.

What will 2023 have in store?

The ongoing conflict between Russia and Ukraine shows no sign of ending any time soon. The start of EU sanctions on imports of all Russian oil products on 5 February will lead to increased trade friction and any resulting supply shortages could add support to product cracks.

Furthermore, with an upcycle in US shale, we believe North American NGLs growth should remain high in 2023. In Asia, when China eventually gets back to business as usual, could there finally be a recovery in global petrochemical margins? And we should not forget the green Energy Transition, which is now in full swing.

For example, more shipowners are adopting LPG as the fuel solution to future-proof their fleets. In Africa, aspirations are coming to fruition as import and storage infrastructure plans move forward. In Latin America, dreams of LPG becoming a widely-adopted auto fuel have started to become a reality.

However, real challenges are emerging on the supply side as lackluster funding from banks for oil and gas projects makes it increasingly difficult to support supplies needed to sustain LPG as a competitive fuel and feedstock globally.

Outlook For 2023

• An in-depth look at the potential for US upstream NGL supplies in 2023, mapped from gas plant to terminal.
• An in-depth look at Asia’s demand growth in 2023, analyzing how the rescom sector could bounce back in a post-COVID world.
• Could petrochemical margins improve or is the industry still trapped in an olefins downcycle? We look at the wave of olefin capacity additions in Asia.
• We are projecting a potentially ‘long’ year for LPG as supply growth exceeds demand growth.

Beyond 2023

• What will slowing US export growth and the rise of Middle Eastern supply in the mid-2020s mean for the future structure of global LPG markets?
• A long-term look at feedstock demand in Asia, the US and Europe over the next 25 years.
• What is the realistic potential of BioLPG as a fuel source over the next 20 years?
• With many newbuild VLGC deliveries due in 2023, is it all doom-and-gloom for shipowners or could there be another upcycle by the mid-2020s?

Deliverables