Asian countries to see LPG shortages in short-term: Analysts
Asian countries to see LPG shortages in short-term: Analysts
SINGAPORE (Reuters): Asia is likely to face a shortage of liquefied petroleum gas (LPG) in the next two to three years with suppliers unable to meet soaring demand from industrializing countries, analysts and industry sources say.
As economic expansion continues in the region, more and more people are expected to use LPG for cooking or motor fuel, and consumption as an industrial feedstock is also predicted to rise.
High-growth buyers such as China and India will be forced to seek out new supply sources and pay higher prices to cover demand as traditional suppliers -- Australia, Indonesia and Malaysia -- scramble to cope with rising consumption, analysts say.
In the longer term, the regional demand-supply balance will depend on how fast current net LPG importers meet expectations to develop their industries to become exporters.
"While we expect countries east of the Suez to be net importers of LPG in the short term, more countries will become net exporters by 2005," a Hong Kong-based analyst said.
Industry players will discuss tapping new market opportunities in Indochina and South Asia and changes in supplies from the Middle East, the world's largest LPG producing area, when they meet next week in Ho Chi Minh, Vietnam for the 8th Asia LPG Forum.
According to energy consultants Purvin & Gertz Inc., Asian LPG demand is expected to exceed 45 million tonnes in 2005, up from about 40 million tonnes in 2000.
China is forecast to account for the lion's share of growth with LPG demand projected to increase to about 8 million tonnes by 2005 due to rapid economic expansion and the gradual phasing out of coal use.
Chinese LPG consumption was 5.6 million tonnes in 1999. In India, LPG requirements are projected to breach three million tonnes in the next five years as domestic and commercial consumption increases.
A major chunk of India's LPG demand growth could come from the transport sector. The Indian parliament recently passed an amendment to the Motor Vehicles Act which allows LPG to be used as motor fuel.
LPG offers substantial cost savings over gasoline and industry sources say that Indian LPG consumption in the transport sector could skyrocket once other hurdles such as specification and design and testing of LPG tanks are cleared.
Several Asian countries are expected to switch in the next few years from net LPG importers to exporter status. This will lead to a major shift in trading patterns, analysts say.
According to Purvin & Gertz, Thailand and Vietnam will become LPG exporters by 2005 to join Malaysia and Indonesia as key LPG suppliers in Southeast Asia.
In Northeast Asia, Taiwan is expected to become a net exporter within the next five years.
A Taiwanese refiner said that Taiwanese LPG producers will be forced to seek overseas markets due to a domestic supply overhang brought on by the deregulation LPG imports in 1999.
A slow down in local demand growth had exacerbated the overhang, he said.
By the year 2001, Taiwan's total LPG supply is expected to reach 2.86 million tonnes, more than one million tonnes over forecast domestic demand of 1.55 million tonnes, the source said.
He added that much of the incremental supply will be exported to China through traders.