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.