Natural Gas Shortages Do Not Affect LPG - Is there an LPG Shortage?
There is no LPG shortage. Worldwide, the supply of LPG exceeds demand. Much of this is the result of the shale oil boom, in the US, which has produced a lot of LPG along with the oil. Any localised shortages are the result of local policies.
LNG is not the same as LPG. In fact, they are completely different gases.
But people are getting confused when they hear about LNG exports.
The news of late has been filled with stories about LNG exports, natural gas shortages and rising prices.
However, the media seems to be very confused when it comes to LPG, lumping it in with natural gas.
Just as natural gas (LNG) and LPG are very different, so is the supply situation for LPG.
In fact, it could not be more different.
There is No LPG Shortage
Just to clear up any confusion - there is no LPG shortage.
LPG gas and Autogas are available in ample quantities.
In Australia, and worldwide, the supply of LPG exceeds demand.
It's true in 2018 and in the foreseeable future.
The misconceptions come from confusion regarding the acronyms LNG and LPG.
People hear talk of shortage caused by LNG exports and they confuse it with LPG.
The Underlying Cause of the Natural Gas Shortage
Natural gas production in Australia is at an all-time high – up 56% in the last 5 years -- driven by off-shore and CSG production.
At the same time, the natural gas industry is warning of shortages and price increase.
And it’s not because of domestic consumption.
So, how can this be?
LNG Exports are the Problem
Natural gas exports, in the form of Liquefied Natural Gas (LNG) exports, are driving the projected shortages and the price escalation.
Australia’s LNG industry is rapidly expanding and, combined with growing worldwide demand, powering increases in natural gas exports.
According to The Office of the Chief Economist, LNG exports are up 85% for the same 2010-2016 time period.
This expansion will only increase as currently under construction LNG facilities are completed.
Before the LNG capacity grew, there was no real way to export natural gas.
Converting it to LNG for Shipping
Shipping natural gas in its gaseous form is not economical so it is liquefied into LNG by chilling it to -161°C.
Since the volume of LNG is 600 times smaller than natural gas in its gaseous state, it is more efficiently transported over long distances, making natural gas exports viable.
Now 3 major LNG export facilities in Gladstone QLD are at or near completion, driven by CSG production.
Globalisation of Natural Gas Pricing
Now, instead of just contending with a domestic market, Australian consumers are being forced to compete with LNG consumers around the world.
We are now experiencing the globalisation of our natural gas pricing.
It is this dynamic that is driving up Australian natural gas exports, creating potential shortages and price increases for domestic users.
The upward pressure on natural gas pricing is a direct reult of this imbalance between supply and demand.
This is the case within Australia and in the global marketplace.
LPG is Unaffected
Contrary to the confused reporting on the subject in the media, LPG is not affected by this new natural gas reality.
Australia is completely self-sufficient in LPG.
In 2016, Australia produced 3,060 Million litres of LPG, satisfying a local demand of 2940 million litres.
So, Australian domestic LPG supply and demand are in balance.
Worldwide, in 2015, LPG consumption was up 284M tonnes whilst production was 292M tonnes, with LPG supply and demand essentially in equilibrium.
So, this is true both domestically and worldwide.
The Australian LPG market completed the transition to globalisation long ago.
The domestic price of Australian produced LPG was deregulated back in 1990.
Fortunately, the LPG consumers have already gone over this bump in the road.
As a result, there is no natural upward pressure on LPG pricing.
Assuming no geo-political upheaval in the world, there is nothing, aside from the normal seasonal variations, on the LPG pricing horizon.
The media, in general, has done a poor job of researching and describing the current natural gas situation.
Describing the LPG and natural gas markets as a homogeneous situation is just incorrect.
Creating high levels of concern for LPG consumers has been needlessly upsetting.
While the magnitude of natural gas shortages and price increases is unknown, the occurrence of both problems was almost inevitable.
There is no short term relief for natural gas consumers in sight.
On the other hand, LPG is under no such pressure.
The LPG market fundamentals are stable and LPG consumers have little reason for concern.
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The information in this article is derived from various sources and is believed to be correct at the time of publication. However, the information may not be error free and may not be applicable in all circumstances.