• 2015 November 19

    Far East to embark on LPG projects

    Recent years have seen the development of LPG transshipment infrastructure in Russia. However, the Far East region has not been involved in the process yet. Meanwhile, market players and experts forecast the demand for LPG to grow in the Asia-Pacific region.

    Gas prospects

    Some years ago Russia had only one LPG terminal - Maktren Nafta in Temryuk. Then, in 2013, SIBUR terminal was launched in Ust-Luga and LPG transshipment via Tamanneftegas terminal commenced in the south of Russia.

    In 2014, LPG production in Russia totaled 12.3 mln t. According to CDU TEK and Russian Railways, LPG exports totaled 5.3 mln t. As SIBUR told IAA PortNews, major gas customers are the countries of the North-Western and Central-Eastern Europe, Turkey and the Mediterranean region.

    According to information provided to IAA PortNews by Reuters, Russia exported 4,323,000 t of LPG in January-September 2015.

    Market participants say that current surplus of LPG is likely to remain in Russia in the medium term. Therefore, companies producing LPG are interested in diversification of export markets. APR countries are among the most promising regions for LPG sales but there are logistic-related limits hindering organisation of stable LPG supplies – primarily, absence of points for transshipment of liquefied gas.

    LPG imports are interesting, first of all, for China – the largest consumer market. LPG consumption shows fast growth. According to HIS, it totaled 32.5 mln t in 2014, up 16%, year-on-year. Apart from China, considerable growth of LPG consumption is shown by S. Korea and Japan. At the same time, China accounted for only 0.15% of Russia’s exports in 2015, hence a high potential of this market.

    Major LPG producers in Russia are SIBUR, Gazprom, Rosneft and LUKOIL. 

    In terms of logistics, it is reasonable to export LPG to APR from production facilities located in the Far East Federal District. SIBUR has already practiced exporting large batches of LPG from its plant in Nyagan (Nyagangazpererabotka). The Company says organisation of stable large-scale supplies of LPG is mostly challenged by the absence of LPG transshipment points at Russia/China border. SIBUR supplies LPG in tank containers with further transportation by trucks across China. Test shipments have proved economical efficiency of this chain. The Company is not going to initiate projects on construction of maritime terminals but is willing to cooperate with project investors.

    Meanwhile, Gazprom and Remstal Company LLC have plans on construction of LPG terminals in the Far East. 

    Gazprom is looking into construction of a maritime terminal within the project on construction of Amur gas processing plant in the Svobodnensky District of the Amur Region. The terminal will be used for supply of GPP products, including LPG, to the international market. Amur GPP is supposed to produce 2 mln t of LPG (propane, butane, propane-butane). The first phase of the plant is to be put into operation in 2019.

    The terminal of Remstal Company LLC is supposed to handle gas produced by SIBUR and Irkutsk Oil Company.

    Besides, a tripartite memorandum of understanding over cooperation in supplies of propylene and various types of LPG to China was signed by Rosneft, Avestra Chemical and Far East Gas during the Eastern Economic Forum.  60,000 to 200,000 t of product is supposed to be supplied through the border crossing Zabaikalsk – Manchuria. The terminals can be built at Vanino, Vladivostok or Sovetskaya Gavan.

    Some experts think initial supplies of East Siberia gas can be arranged with the use of BAM and Transsib which implies the construction of gas plants and LNG/SPG transshipment terminals at Ust-Kut and Angarsk.

    According to Damir Khalmetov, LPG market expert (Thomson Reuters), LPG exports from Russia to APR countries seems to be promising in both variants – via maritime terminals yet to be built in the Far East and via border crossings being used today. The expert believes LPG supplies by land routes can be boosted with the launch of LPG transshipment terminal in Manchuria (Zabaikalsk – Manchuria crossing). The interest in this terminal capable of handling 3 mln t of LPG and propylene was expressed by SIBUR, Rosneft and Irkutsk Oil Company.

    So, in the near future the Far East is likely to see the construction of new sea terminals intended for LPG exports to APR countries.

    Vitaly Chernov