What Is LPG and Why It Matters
LPG is a by-product of the oil and gas industry and meets 3% of the world’s energy needs. It is a high calorie, easily transportable, low emission transition fuel which has a critical role to play in reducing use of biomass and wood in developing markets. More than a billion people around the world rely on LPG for cooking, heating or light. It is clean burning, produces less CO2 than coal, heating oil or petrol, emits virtually no black carbon or other particulates and is as clean as natural gas.
LPG is made up of light hydrocarbons, predominantly propane (C3) and butane (C4). It is different from Liquefied Natural Gas (LNG), which is mostly methane (C1). LPG is a supply-driven by-product, with about 60% derived from crude oil production (Associated Gas) and natural gas production (Non-Associated Gas), and 40% from the refining of crude oil (40%).
The supply of LPG as a commodity is growing year on year, with global seaborne trade almost doubled in the past ten years.
Storage and transportation of large volumes of LPG is in a fully refrigerated state, whilst smaller volumes are generally transported in pressurised vessels such as those owned by BW Epic Kosan. LPG is delivered by ‘last mile’ tanker, train, pipeline or road to cylinder filling plants and intermediate-size storage areas. Cylinders and bulk road tankers are filled with butane and propane at bottling plants for flexible delivery to retailers as well as to private and professional customers.
The LPG market has been growing at an annual rate of approximately 5-6% in recent years. The USA is now a leading LPG producer and exporter, backed by a strong shale gas industry. The Middle East region remains a principal producer, with Russia, Iran and China gaining ground. On the demand side, China and India have been in the forefront, but other Asian countries like Indonesia, Bangladesh, Vietnam and Pakistan have strong growth potential with high populations and developing infrastructure. LPG is versatile and can be used in a wide range of applications:
- Residential/Domestic and Commercial: cooking (kitchen and barbecues), heating and lighting.
- Chemicals and Refinery: petrochemicals feedstock.
- Industry: furnaces, fuel for power generators.
- Transport: low-emission alternative to gasoline and diesel for taxis, buses and private cars.
- Agriculture: crop harvesting and drying, heating and power for farm equipment.
The residential/domestic sector accounts for 44% of global LPG use. This demand is highest in remote towns and villages that are not connected to a pipeline gas grid. India and Indonesia have adopted policies that have transformed domestic LPG consumption as a replacement for kerosene, wood and other biomass substances. Demand in other sectors like petrochemical feedstock especially propane dehydrogenation (PDH) plants, autogas, fuel for power generation plants and very recently as a fuel for ship engines, lends further support to a robust and developing clean energy market.