Exports of propane from the United States have been increasing rapidly since 2011. In April 2015 (the latest available monthly data), propane exports averaged 636,000 barrels per day (b/d), 222,000 b/d above April 2014 levels (Figure 1).
U.S. propane production and exports were 190,000 b/d and 201,000 b/d higher, respectively, in the first four months of 2015 compared to the same period in 2014. Several projects building new export facilities and expanding existing export terminals have increased waterborne export capacity by 400,000 b/d between April 2014 and April 2015, with two more projects expected to be completed by the end of the year.
The United States became a net exporter of propane in 2010, as growing production supplied additional exports (Figure 2), mainly out of the Gulf Coast. Between 2011 and 2014, annual propane production increased by 376,000 b/d, while net exports increased by 292,000 b/d. Most of the production growth resulted from increased natural gas plant production associated with expanding shale gas and tight oil development, while refinery propane production remained relatively constant. Propane imports, mostly from Canada, help supply home heating markets in the midwest and northeast but the amount of imports has trended down. The United States imported 89,000 b/d in 2014 compared with 126,000 b/d of propane in 2009.
Annual U.S. propane product supplied, a proxy for demand that includes approximately 300,000 b/d of refinery-sourced propylene, has averaged 1.2 million b/d for the past 10 years. Propane demand was elevated slightly in 2013, to 1.3 million b/d, because of strong petrochemical and agricultural consumption in addition to heating fuel use because of colder-than-average weather. Propane is used mainly for space heating and as a petrochemical feedstock, and, to a much smaller extent, for transportation and agriculture. Heating and agricultural consumption are highly seasonal and weather dependent, while petrochemical consumption is highly sensitive to propane prices. Propane is used by the petrochemical industry as a feedstock for producing primarily ethylene and propylene, building blocks for chemical and plastic manufacturing.
The United States currently has one propane dehydrogenation (PDH) plant, which processes propane into propylene, with a capacity 30,000 b/d. Dow Chemical is expected to open a new PDH plant in Freeport, Texas, in the third quarter of 2015 and Enterprise is expected to open a plant at Mont Belvieu, Texas, in 2016. While each of these plants may use 35,000 b/d, this will not automatically translate into an incremental increase in consumption. The increased propylene output at PDH plants may make it economic to reduce propane feedstock use at ethylene cracking plants, which produce propylene as a co-product. If propylene is well-supplied, ethylene plants may switch to ethane, which is a less expensive feedstock than propane and yields more ethylene without the propylene co-product.
When domestic propane production exceeds consumption, propane is put into inventories or exported. Net exports of propane increased from 42,000 b/d in 2011 to 334,000 b/d in 2014. Annual gross propane imports were fairly constant over this period, ranging from 82,000 b/d to 103,000 b/d, while gross exports increased from 124,000 b/d in 2011 to 423,000 b/d in 2014.
Between April and October 2014, combined exports of propane and butane actually exceeded the nameplate capacity of terminals designed to export either of the two products. Gulf Coast (PADD 3) inventories also saw asignificant increase during this period. A 120,000 b/d expansion of Targa's terminal at Galena Park, Texas, in late 2014; the opening of Sunoco's 200,000 b/d Nederland, Texas, terminal in January 2015; and Enterprise's 50,000 b/d expansion at its Channelview, Texas facility in early 2015 increased propane/butane terminal capacity to 863,000 b/d.
Two more large terminal expansions are expected by the end of the year. Occidental will add 75,000 b/d of capacity at its Corpus Christi, Texas, facility in the third quarter of 2015, and Enterprise plans to further increase capacity at its Channelview, Texas, facility near the Houston Ship Channel by 227,000 b/d in the fourth quarter of 2015. In the second half of 2016, Phillips 66 is scheduled to open a 145,000 b/d terminal at Freeport, Texas. These terminal expansions, new ship constructions, and the expansion of the Panama Canal scheduled for the first half of 2016, will facilitate the flow of U.S. propane to international markets.
Although many export tanker loads are already under contract, expanded capacity may not necessarily mean higher exports. Loadings are still in part dependent on the relative spot price of propane on the U.S. Gulf of Mexico coast versus the cargo's intended destination and associated shipping and storage costs. Further out, growth in global demand depends on the competitiveness of propane compared with other fuels for consumer demand, its continuing growth as a vehicle fuel, and its price relative to competing petrochemical feedstocks, especially naphtha. In addition, even committed volumes can be restricted by infrastructure bottlenecks such as the week-long closure of the Houston Ship Channel that occurred in March because of fog and a ship collision.
U.S. average gasoline and diesel prices continue to decline
The U.S. average retail price for regular gasoline decreased one cent from the previous week to $2.79 per gallon as of July 6, 2015, 89 cents per gallon less than the same time last year. The Rocky Mountain price increased to $2.81 per gallon, two cents more than last week, while the Gulf Coast price was down two cents to $2.52 per gallon. The East Coast and West Coast prices both fell one cent to $2.72 per gallon and $3.30 per gallon, respectively. The Midwest price was unchanged from last week at $2.74 per gallon.
The U.S. average price of diesel fuel decreased one cent from last week to $2.83 per gallon, $1.08 per gallon lower than the same time last year. The Rocky Mountain price increased one cent to $2.79 per gallon, while the West Coast price remained virtually unchanged at $3.07 per gallon. The Gulf Coast and East Coast prices were each down two cents to $2.71 per gallon and $2.94 per gallon, respectively, while the Midwest price fell one cent to $2.72 per gallon.
Propane inventories gain
U.S. propane stocks increased by 2.2 million barrels last week to 85.7 million barrels as of July 3, 2015, 25.7 million barrels (42.7%) higher than a year ago. Midwest inventories increased by 1.4 million barrels and Gulf Coast inventories increased by 0.8 million barrels. East Coast inventories increased by 0.1 million barrels while Rocky Mountain/West Coast inventories decreased by 0.1 million barrels. Propylene non-fuel-use inventories represented 6.2% of total propane inventories.