The Outlook for the Global
LPG Market
International LP Gas Seminar 2013
Ken Otto
February 28, 2012
Dai-Ichi HotelTokyo, Japan© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

1Global LPG/Energy Market Highlights• Many important issues exist in the global economy:• Euro-zone debt crisis• High unemployment levels in several regions• Currency issues/trade imbalances• Commodity price volatility• Political instability• Others• Global oil & gas demand is rising—thisis leading to higher LPG production.
• High LPG prices continue to exert pressure on several important LPG

market sectors (incl. res/com) in Asia and in other world markets.

• Shale gas & shale oil development in North America continues

to proceed at a fast pace—ethane & propane supply is rising fairly rapidly.
• Interest in new oil, gas & NGL supplies from unconventional resources

continues to gain momentum around the world.

© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

2

Crude Oil Prices Remain Strong In Spite of the
Weak Global Economic Activity
Spot Brent Crude Oil Pricing, US$ per Barrel
150
125

111.3

110.6

2011

2012

97.3

100

79.5

72.4
65.1

75

61.7

54.5

50
25
0

2005

2006

2007

2008

2009

2010

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3

Natural Gas Prices Remain Weak in the U.S. andReached Very Low Levels in 2012
Spot Henry Hub Price (USA), US$ per Million BTU
14
12
10

8.85

8.80

8

5.62

6.76

5.85

6.94

6

3.89

4.39

4.01

4

2.75

2
0
2003

2004

2005

2006

2007

2008

2009

2010

© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

2011

2012

4

Global LPG Supply Growth is Linked to Changes
in the International Oil & Gas Industry• LPG (Propane & Butane) is a BYPRODUCT—It is not an“on-purpose” product like crude oil or petrochemicals.
• Thus, the LPG industry is LARGELY SUPPLY-DRIVEN,

that is increases in supply will stimulate development of
new markets for LPG.
• The growth rate of LPG supply depends on developments

in segments of the oil & gas industry—LPG is producedfrom:• Processing of associated gas (from crude oil wells)• Processing of non-associated gas (from gas wells)• Refining• Changes in these industries will directly influence the availability of LPG supply.

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5

Global LPG Supply Continues to Rise—Led by
Growth in LPG Production from Natural Gas
World LPG Supply by Source, Million Tonnes
300
Refining
Nonassociated Gas
Associated Gas• LPG extracted from associated gas

should rise by about 5.5 million
tonnes/yr through 2016 (1.9%/yr) as
crude oil production rates rise.

250• Production from processing of non-associated gas is the fastest growing
source of LPG supply

200• Should increase by about 11 million

tonnes/yr by 2016 (3.0%/yr).

150• Refinery expansions are also

contributing to higher LPG production
but at a slower growth rate

100

• Expected to rise by around 6.8 million

50

tonnes/yr through 2016 (1.7%/yr.).

02000 2005 2008 2010 2011 2012 2013 2014 2016

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6

LPG Supply Is Expanding in Most Regions—Led by
the Middle East, Asia & North America
LPG Supply, Million Tonnes
350

300

North America

Asia/Pacific

Europe/CIS

Middle East

Latin America

Africa• Global LPG production has

generally been expanding since
2000—with year to year variationin the growth rate.

• Global LPG production declined

250

in 2009 and grew fairly slowly in
2010—but is growing faster now.

200

• Total growth in global LPG supply

by 2016 is projected to be about
28 million tonnes/yr.

150• Strong growth is anticipated in the

Middle East and Asia

100

• Supply is also expanding rapidly

in the U.S.—due to shale gas
development.

5002000 2005 2009 2010 2011 2012 2013 2014 2016

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7

Middle East LPG Supply will Continue to Expand in
the Future
Mideast LPG Supply by Source, Million Tonnes
70
60

Refining
Nonassociated Gas
Associated Gas

50• Middle East LPG production generally

expanded between 2000 and 2008.

• However, production was curtailed in2009 due to cuts in crude oil production.

• Most of the LPG production in the Middle

East is linked to oil.

40

• However, gas (non-associated gas) is

now a key driver of LPG production in theregion—accounting for over 50% of the
supply growth since 2009.

30
20• Regional growth in LPG production will

average around 2.6%/year through 2016.

1002000 2005 2008 2010 2011 2012 2013 2014 2016

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8

Most of the Increase in Middle Eastern LPG
Production Will Come from Iran, Qatar & the UAE
Mideast LPG Supply, Million Tonnes
70
60

OthersIran, Qatar & UAE
Saudi Arabia• Total Middle East LPG production has

increased around 13 million tonnes
since 2008 (Growth of over 28%).

• Most of this increase has occurred in

Qatar and the UAE.

50

• In the future, LPG supplies should

40

expand the most in the UAE, Iran and
Qatar.

30• Of course, Iranian production could besignificantly impacted by future
geopolitical developments.

20
10• LPG production will probably rise fairly0
2000 2005 2008 2010 2011 2012 2013 2014 2016

slowly in Saudi Arabia—unless crude
rates are higher than expected.

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9Asia LPG Supply Continues to Expand Due toStrong Economic Growth
Asia LPG Supply by Source, Million Tonnes
60

50

Associated Gas
Nonassociated Gas
Refining• Refining is the largest source of LPG

production in Asia—accounting for over
80% of total regional production.

• Natural gas production is limited in Asia—

only a relatively small quantity of LPG issourced from gas processing in theregion.

40• Significant refinery expansions have30

occurred since 2000 to meet risingdemand for transportation fuels—gasoline
and distillates.

20• Refinery expansions will continue to beneeded—this will lead to growth inregional LPG production.

10• Regional supplies are expected to grow02000 2005 2008 2010 2011 2012 2013 2014 2016

by about 5 million tonnes/yr by 2016.

© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

10

Asia LPG Supply Is Expanding Rapidly—Led by
Growth in China
Asia LPG Supply, Million Tonnes
60

50

China
Other Far East
Southeast Asia
Indian Subcontinent• Regional LPG production has

expanded by 20 million tonnes/yr (4.2%/yr) since 2000.

• China has accounted for around 67%of the total growth in Asia.

40• China will continue to expand fasterthan most countries in the region.

30• LPG production will continue to expand

20

in the region—rate will depend on
economic growth & need for additional
refinery expansions.

10• In spite of this supply growth, Asia willremain a large net importer of LPG—
due to strong demand.

02000 2005 2008 2010 2011 2012 2013 2014 2016

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11

There Are Numerous Shale Gas and Tight Oil Plays in the
U.S.—Leading to a Rapid Rise in Gas & NGL Supply© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

12

The Development of Shale Gas and Tight Oil Is Having
a Dramatic Impact on the U.S,. Natural Gas Market

35
30
25

U.S. Natural Gas Supply from Shale Gas/Tight Oil, BCF/D
Barnett

Marcellus

Eagle Ford

Haynesville

Fayettville

Others20• Shale gas and associated gas

from tight oil has significantly
altered the U.S. natural gas
market.

• These supplies are already amajor portion of overall U.S. gas
supply and production is climbing
rapidly.

• The U.S. has gone from “gas15
10

short” to a “gas-long” position andplans for LNG exports are wellunderway.

• This shift in market fundamentals
5

has huge implications for natural
gas liquids (NGLs) markets—
including LPG.

02000 2002 2004 2006 2008 2010 2012 2014 2016
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13

U.S. NGL Supply Will Continue to Expand as More Shale
Gas and Tight Oil Is Developed
3.0

U.S. NGL Supply from Gas Processing, MMBPD• Currently, NGL production fromshale gas and tight oil fields
represents around 24% of total U.S.
supply.

2.5
Shale Gas &Tight Oil

2.0

propane, butane and natural
gasoline.
• Most of the future growth in NGL

1.5

1.0

• Note that NGL includes ethane,

supply is tied to continued
development of shale gas and tightoil fields.
Other
Sources

0.5• The significant in ethane production

is driving a wave of new olefin
plants.
• Increased propane supplies will

0.0
2000 2002 2004 2006 2008 2010 2012 2014 2016

support new PDH capacity andincreased exports.

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14

LPG Supply in North America is Ramping Up Due tothe Surge in Shale Gas Production
North America LPG Supply by Source, Million
Tonnes80
70

Refining
Nonassociated Gas
Associated Gas• LPG production was in decline in North

America until 2005/2006.

• Production has already increased by60

around 7 million tonnes/yr since 2008.

50• Another 5-6 million tonnes/yr ofadditional supply are expected by 2015.

40
30• Shale gas is providing a new source

LPG supply for domestic markets andexports.

20
10• LPG markets are not growing very fast—02000 2005 2008 2010 2011 2012 2013 2014 2016

so exports are rising rapidly.

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15

Production is Rising Quickly in the U.S.—And
Gradually Declining in Canada
North America LPG Supply, Million Tonnes
80
USA

Canada70
60• U.S. LPG production has increased byaround 7.7 million tonnes/yr (18%) since
2008.

• U.S. LPG production will continue to risein the future as more shale gas and tightoil is developed.

50
40• Canadian LPG production is slowly

declining in short term.

30
20• Over the longer term, Canadian LPG

production will start to rise as
unconventional oil and gas development
increases.

1002000 2005 2008 2010 2011 2012 2013 2014 2016

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16

The Expansion of Global LPG Supplies is Primarily
Occurring in the East of Suez Region
LPG Supply, Million Tonnes
180
160• LPG supply continues to expand
East of Suez
West of Suez

rapidly in the East of Suez region.
• Middle East, Asia

140

• However, LPG supply is expanding120

in the West of Suez region again.

100• U.S. (shale gas), CIS, Africa

80• This is important with the U.S.

becoming a new source of supply for
Asian LPG markets.

60
40• Global LPG trade patterns may shift

significantly in the future.

2002000 2005 2008 2010 2011 2012 2013 2014 2016

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17

Asia and the Middle East Are the Strongest GrowthMarkets for LPG
LPG Demand, Million Tonnes
350

North America
Asia

Europe/CIS
Middle East

• Demand growth in Asia and theLatin America
Other

Middle East has accounted foraround 75% of global LPG demand
growth since 2005.

300

250

• Asia is already the largest LPG

consuming region and demand willcontinue to expand in the region.

200• The Middle East has become a150

significant LPG consumer due
partly to the rapid expansion of thepetrochemical industry.

100

50

0
2000

2005

2008

2010

2011

2012

2013

2014

2016

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18

The Residential/Commercial and Chemical Sectors
are the Largest End-Use Markets for LPG
World LPG Demand, Million Tonnes• The residential/commercial and350
Res/Com
Refinery

Chemical
Other

Industrial

chemical sectors represent around 75%
of total global LPG consumption.

Auto Fuel300• High consumer prices & weakeconomic conditions have slowed
growth in the res/com sector in someregions.

250

200• Growth in LPG consumption in thechemical sector is expanding fasterthan most end-use markets.

150• Chemical industry serves to re-balance100

the overall LPG market by consuming
LPG as a price sensitive olefin plant
feedstock.

50

0
2000

2005

2008

2009

2010

2011

2012

2013

2015

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19

Demand Growth in the Res/Com & Chemical Sectors
will Have a Large Impact on Future LPG Markets
LPG Demand by End-use, Million Tonnes
160• Over 85% of total LPG

demand growth through 2016is expected to occur in justtwo end-use sectors—theres/com and chemicalmarkets.

2008
2012
2016

140
120
100

• Only modest growth in80

expected in the other end-use
markets for LPG.

60

• Thus, changes in the res/com
40

and chemical markets may
have a dramatic impact on
LPG trade flows and regional
prices.

20
0
Res/Com Chemical Industrial

EngineFuel

RefineryOther© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

20

Utilization of LPG as Fuel in the Res/Com Market
will Continue to Expand in Developing Economies
Residential & Commercial LPG Demand, Million Tonnes
160

140

Asia

Latin America

North America

Europe/CIS

AfricaMiddle East

• Most regions will continue toexperience demand growth in
the res/com market sector.

Oceania• The majority of the growth will

occur in developing economies
in Asia and other locations.

120

100

• Growth has slowed in somecountries, but not in all locations.

80• Some countries are insulated

60

from market forces withsubsidizes and consumers havenot been impacted as much byhigh LPG prices.

40

20

0
2000

2005

2008

2010

2011

2012

2013

2014

2016

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21

Asia will Continue to Lead the Global Expansion of
Res/Com Demand for LPG
Residential & Commercial LPG Demand, Million Tonnes• Asia is clearly the largest user of70

LPG for residential & commercial
applications—accounting for 43% of
global res/com LPG consumption.

2008
2012
2016

60

• Between 2012 and 2016, Asian50

res/com demand is projected to
expand by about 7.3 million tonnes
per year.

40
30• This is around 65% of total

20

worldwide LPG demand growth in
this sector.

10• Latin America is the second largest

consuming region in this sector.

0
Asia

Latin
America

North
America

Europe/CIS

MiddleEast

Other• The Middle East market is growing

fairly fast.

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22

LPG Consumption as Chemical Feedstock is
Expanding Rapidly in the Middle East
Chemical LPG Demand, Million Tonnes• Worldwide chemical consumption

30

of LPG is expected to increase by
about 9 million tonnes/yr from2012 to 2016.

2008
2012

25

2016

• LPG use in the chemical industry

20

is expected to expand fast in the
Middle East and Asia.

15• Demand growth is also expected

to occur in Europe and North
America if global/regional supplies
expand as much as expected.

10

5

0
North
America

Europe/CIS

Middle East

Asia

Other

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23

Global Consumption of LPG as Chemical Feedstock
Should Increase Fairly Rapidly
Chemical LPG Demand, Million Tonnes• The quantity of LPG supply available

90
Base Demand80

for chemical feedstock markets is
expected to expand fairly quickly.

PS Demand• Thus, LPG consumption as chemical

70
60

feedstock will rise by about 9 million
tonnes/yr by 2016.

50• Base demand is rising with increased

consumption in the Middle East.

40• Increased use of propane as propane

30

dehydrogenation (PDH) feedstock to
produce propylene is also rising.

20• Price sensitive demand should

10

increase in Europe and Asia.

0
2000

2005

2008

2010

2011

2012

2013

2014

2016

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24

Global LPG Exports Are Expected to Continue to
Build Over the Next Few Years
Major World LPG Exports, Million Tonnes
8070

Middle East

AfricaNorth Sea

USA

Latin America

Other• Global LPG exports ramped up

between 2002 and 2008—thendeclined in 2009 as supplies
contracted.

60• The Middle East will continue tohave the largest impact on global
LPG trade—exports should
continue to expand.

50

40• African LPG exports are expected

to increase—but slowly.

30• U.S. exports should continue toexpand.

20• Overall, global LPG exports are

10

expected to rise around 8 to 9
million tonnes per year by 2016.

0
2000

2005

2008

2010

2011

2012

2013

2014

2016

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25

Middle East LPG Exports Will Gradually Rise Over
the Next Four Years
Middle East LPG Exports, Million Tonnes
45
40

Saudi Arabia

Qatar

UAE

Other

• Middle East exports expanded

sharply after the drop in 2009.
Exports rose by about 5 million
tonnes/yr over this period.

35• Exports will continue to rise-but only

gradually.

30
25• Saudi Arabian exports will likely

decline due to higher use of LPG in
the Kingdom.

20
15• Most of the expansion in Qatari

exports has already occurred.

10• Iranian exports are being impacted

5

by international sanctions.

0
2000

2005

2008

2010

2011

2012

2013

2014

2016

• UAE exports will continue to rise in

the future.

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26

Waterborne Exports of Propane from the U.S. Have
Significantly Expanded
Thousand Barrels per Month

6,000• Annual exports of propane totaled

Propane Exports, Thous bbl/month
Annual Average Propane Exports
Butane Exports, Thous bbl/month

only 5.5 to 7.0 million (MM) BBL
barrels (0.4-.6 MM Tonnes/yr) in
2007/08.

5,000• Propane exports soared to 37 MM

barrels (3.0 MM tonnes) in 2011 and56 MM barrels (4.5 MM tonnes) in
2012.

4,000

3,000

• The driver behind this sharp jump has

been rising U.S. production and low
propane prices relative to the rest of
the world.

2,000• Exports are expected to continue torise & several new export terminal
projects have been announced.

1,000

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10Jan-10Jul-09

Jan-09Jul-08Jan-08

Jul-07

Jan-07

Jul-06

Jan-060© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

27

U.S. LPG Exports Are Rising Rapidly• U.S. propane and butane production

U.S. LPG Exports, Million Tonnes

is increasing fast due todevelopment of shale gas and tightoil resources.

1098• Domestic propane (and butane)

demand is not growing very fast.

7
6• Propane exports have alreadyexpanded by 200% since 2008.

5
4• Total LPG exports are expected toreach 9-10 million tonnes per yearby 2015.

3
2• LPG marketers and traders will

1
0
2000

2005

2008

2010

2011

2012

2013

2014

2016

need to find new markets for U.S.
exports in the future as the volumeof LPG available for export
increases.

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28

Asia LPG Imports Are Expected to Increase Over
the Next Few Years
Asia LPG Imports, Million Tonnes
45
40

Far East• Res/com demand growth shouldcause imports to increase inSoutheast Asia and the Indian
Subcontinent.

SE Asia

Indian Subcont.

35• Imports are also expected to rise in

the Far East—but this is tied tohigher levels of LPG use as pricesensitive feedstock in the
petrochemical industry.

30
25
20

• Use of propane as feedstock forpropane dehydrogenation (PDH)
feedstock in China will also
contribute to the trend of higher
import levels.

15
10
5
0
2000

2005

2008

2010

2011

2012

2013

2014

2016

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29

Crude Oil Prices Are Expected to Soften Somewhat Over
the Next Few Years—As a Result of Rising Non-OPEC
Crude Oil Production

160

Spot Brent Crude Oil Price, U.S. $ per Barrel

140
120
100
80
60
40
20
0
2000

2002

2004

2006

2008

2010

2012

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2014

2016
30

LPG Prices Are Expected to Moderate Somewhat as Global
Supplies Increase and Crude Oil Prices Weaken

1000

Middle East Contract LPG Price (60%C3;40%C4), U.S. $ per Tonne

900
800
700
600
500
400
300
200
100
0
2000

2002

2004

2006

2008

2010

2012

© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

2014

2016
31

Conclusions• Global LPG supplies are expected to grow fairly quickly—particularly in the

Middle East, Asia and the U.S.

• Middle East growth is dependent on the quantity and type of oil and gas supply

developed to meet rising world energy needs• U.S. supply growth is dependent on the pace of unconventional oil & gas resources(tight oil and shale gas) and the quality of the natural gas produced.
• Asia growth is linked to refinery expansions and refined product demand growth.

• Global demand for LPG in the res/com sector is increasing—but high prices andweakness in the economy is slowing growth in some countries.
• Low-priced natural gas is a threat in many markets.

• Use of LPG as chemical plant feedstock will rise rapidly in the future.
• Additional base demand in the Middle East
• Increased price sensitive demand in Europe and Asia
• New petrochemical plants in North America• Global trade will continue to expand as additional supply is brought on line overthe next few years.

© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

32

THANK YOU
FOR YOURATTENTION© 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

33

About This Presentation• This presentation has been prepared for the sole benefit of attendees at theInternational LP Gas Seminar 2013 (Tokyo). Neither the presentation nor any
part of the presentation shall be provided to third parties without the writtenconsent of IHS. Any third party in possession of the presentation may not rely
upon its conclusions without the consent of IHS. Possession of the presentation
does not carry with it the right of publication.
• IHS conducted this analysis and prepared this presentation utilizing reasonablecare and skill in applying methods of analysis consistent with normal industry
practice. All results are based on information available at the time of review.
Changes in factors upon which the review is based could affect the results.
Forecasts are inherently uncertain because of events or combinations of events
that cannot reasonably be foreseen including the actions of government,
individuals, third parties and competitors. NO IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE SHALLAPPLY.

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34