Spot Naphtha, Propane and Butane Prices for Northwest Europe & the Mediterranean
Cargoes of Liquefied Petroleum Gas (LPG) from the United States are flooding into northwest Europe as North Sea output dwindles amid processing plant maintenance and soaring natural gas prices, according to OPIS data and shipbroker reports.
Northwest European imports of LPG from the United States hit a record 600,000 metric tons in June, plugging the gap left by falling levels of North Sea supply. That's the highest monthly import tally since at least 2017, according to OPIS data. By comparison, northwest Europe imported an average of some 215,000 mt/month of LPG from the U.S. in 2021, OPIS data showed.
North Sea supplies of LPG have been curbed by a double whammy of gas processing plants undergoing maintenance and marketers re-injecting LPG-containing Natural Gas Liquids (NGLs) into the natural gas stream in Europe, enticed by rocketing natural gas prices, further reducing supply. North Sea LPG supply for June currently stands at an estimated 150,000 mt, compared to a monthly average of 380,000 mt in 2021, according to OPIS data.
Planned and unplanned maintenance at the Karsto gas processing plant in Susort, Norway, was expected to cap supplies of North Sea LPG until June, according to plant operator Gassco data in May. Karsto is the largest gas processing plant in Europe and is connected to around thirty oil and gas fields across the North Sea.
Although some portion of propane is stored in two caverns near the site with a capacity of 145,000 mt, the backwardated propane market in Europe, despite flattening considerably in recent weeks, has discouraged storing LPG across the region since late summer 2021. Karsto is the world's third largest producer of LPG, according to technical service provider Equinor's website.
Production data from the Norwegian Petroleum Directorate for March 2022 shows that Norwegian gas production rose by 6% on year to 336.7 million standard cubic feet/day. NGLs production, of which LPG is one component, fell by almost 33% year over year to 208,000 b/d, most likely due to the re-injection of some NGLs into the natural gas stream.
Additionally, LPG prices remain below those of natural gas, incentivizing the re-injection of NGLs into the gas stream. LPG has fallen below the price of natural gas on a heat equivalent basis since the fourth quarter of 2021.
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