Speaking to Shana on the sidelines of an LPG conference arranged by Argus here in Tehran on May 9, the Argus official said the LPG productions are to keep the petrochemical industry happy and other sectors as well.
He said, "There is a flood of LPG coming to the market over the next ten years and that is coming from investments in upstream, not particularly from Iran, but elsewhere; it's coming from investments in refining and in parallel we also see a lot more naphtha being produced and the two products are already competing specially in petrochemicals to be the feedstock of choice."
There is expansion coming in petrochemicals with new Propane Dehydrogenation (PDH) amounts coming on-stream, Shaw said, adding if the trend continues, there is going to be plenty of LPG around to keep the petrochemical industry happy and other sectors as well.
"So I don't think it's particularly bad news. Sometimes the LPG market suffers from uncertainty around supply. If you talk to consumers and you talk to the needs to make investments in order to make consumer LPG, they want certainty that there will be abundant supply for the next ten years," he added.
"If I were a producer of LPG, what I would do was to secure long-term clients and also make sure that I am producing products which can be used in multiple sectors. So there is an interesting conversation today about LPG quality. That is not just to do with sulfur, although it is a part of it, but it has to do things with methanol content and consistency. If you want to sell methanol to the petrochemical sector, they what they want is consistency of quality and there are some qualities that are important to them that are just less important if you want to sell it to the domestic market. If you have LPG coming to the market, and you want to make sure there is manageable methanol and other qualities, you need to make investments at the wellheads to begin a new project which is a difficult thing to do once the product is being produced."
He expressed concern that there is a challenge for LPG producers to secure value from the product.
Shaw said there is no need to worry about selling LPG in the market as "it will always find the home because ultimately it is a fuel and refineries could burn it instead of gasoil or fuel oil and if the prices rise companies will use it as feedstock. But I think there could be competition in some other sectors."
He said LPG is a fantastic fuel for road vehicles; it is clean; it is cheap; the conversions are easy to do but you need to have the infrastructure there, if you want to encourage LPG as a road fuel.
"On the one hand, there are lots of LPG around, and, on the other hand, there are lots of opportunities that needs encouragement," he added.
"They compete with gasoline. The majority of diesel is being used in long-whole trucking. We are a long way from running trucks off electrics engines. There have been experiments with injecting LPG into diesel engines with some success. I don't think that renewables are a massive threat to LPG because they operate in different sectors," he said.