Sanctions failed to cut down LPG

The sanctions have not led to any catastrophic consequences in the Russian market of LPG production and export. Russian gas is still being successfully exported to the markets of both Asia and Europe, although export directions have changed a little.

By sea and by land

Russian LPG terminals are located in the ports of Ust-Luga, Taman and Temryuk. Portenergo terminal in Ust-Luga handled 856 thousand tonnes of LPG in 2022, up 42%, year-on-year (hereinafter based on data of RF Ministry of Transport). According to Novatek, its Ust-Luga based Gas Condensate Fractionation and Transshipment Complex handled 78 thousand tonnes.

LPG shipments from Taman port by OTEKO’s Tamanneftegaz rose by 4%, year-on-year, to 313 thousand tonnes. However, Maktren-Naphta terminal in Temryuk decreased its throughput by 40% to 144 thousand tonnes.

According to Impexneftehim Group, Russia’s exports of LPG in 2022 totaled 3.5 million tonnes, in the first quarter of 2023 – about 1 million tonnes (-12%, year-on-year).

As Georgy Zobov, Director of the Strategic Development Department of RM Retail, said at the industry focused conference “LPG market: new reality” held with the participation of IAA PortNews, railway transportation of LPG in 2022 rose by 2% to 15.3 million tonnes including 10.6 million tonnes of internal transportation, up 14%, year-on-year. Meanwhile, exports fell by 14%. The leader in the market of railway transportation is NKHTK (27% of the fleet). The share of trans-containers is estimated at 3.5-4.5%.

Thus, sea terminals accounted for 37% of total LNG exports in 2022, in the first quarter of 2023 – for about one third.

When speaking at the “LPG market: new reality” conference, Leonid Kruchinin, Deputy Director for Marketing at Impexneftehim, the restrictions imposed by the external market have not led to any catastrophic consequences for LPG resource base.

“In 2023, it has fully recovered to the level of 2021 (and also exceeded it slightly). In general, there are still logistical problems but they have faded. The most "acute" problem today is the poor traffic of tank railway cars in the south. Over the year, we saw a non-trivial price dynamics, but survived it somehow ... At the initial stage, the market was balanced by the consumption growth in the segment of petrochemicals, then the volumes fell by no more than 10%, and after the redirection of export flows, there was a partial recovery of the previous market structure,” said the expert.

According to Leonid Kruchinin, amid export restrictions in 2022, the volumes were redistributed between the public utilities and petrochemicals. In the first quarter of 2023, showed a recovery to a level not below that of 2021, consumption growth in the domestic sector and the return of petrochemicals consumption to the previous level.

The directions of Russian gas flows

The directions of LPG exports from Russia are changing. When speaking at the conference, Sergey Kondratyev, Head of the Economic Department of the Institute of Energy and Finance: Research and Consulting Center, total LPG supplies from Russia to Europe (including the Western Balkan countries and Turkey) decreased by 3.1% in 2022, but supplies to Turkey alone surged sevenfold.

At the same time, exports to Finland, Romania and Ukraine were lost last year. Meanwhile, supplies to Poland remain stable: the country is still the main exporter of Russian LPG (65% of total exports to Europe).

Nevertheless, the policy of Poland is focused on diversification of supplies and seeking of alternative suppliers from other countries. To do this, however, it will have to rebuild the infrastructure, but the work is already underway.

Meanwhile, in 2022-23, Russia entered new sales markets: Central Asia, Turkey, China, Afghanistan, which, in turn, shifts logistics routes to the South and the Far East. In the South, there are sea terminals for LPG export (Tamanneftegaz and Maktren-Naphta) but everything is still difficult in the Far East. There is a project to create an LPG terminal of the East Arctic Oil and Gas Corporation LLC in the Far East Basin. A feasibility study of the project is underway, the project’s specific parameters are still unknown.

Speaking in general about the prospects of LPG handling in the Far East, it should be noted that they are limited by the carrying capacity of railway approaches.

Since major sales markets of LPG are in Asia we can expect the growth southern ports’ share in LPG exports and the appearance of dedicated port facilities in the Far East.

Sabrina Mukfi.

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