The combination of significant U.S. propane production increases over the past seven years and relatively slow domestic demand growth has reversed historical trade positions. The United States has gone from being a net propane importer to a net exporter, facilitated by rapid expansion in export capacity of domestic supply. Propane exports from the United States are changing traditional propane market patterns across the globe.
The initial growth in U.S. propane production, between 2008 and 2010, caused a reduction in dependence on propane imports, with net imports falling from an average of 109,000 barrels per day (b/d) in 2008 to a near-balance of 16,000 b/d in net exports in 2010. By 2011, only Canada remained as a major supplier of imported propane into the United States, with overseas imports relegated to occasional seasonal shipments into the Northeast and delivery to Hawaii. As propane production and export capacity continued to grow, so did the reach of U.S. propane exports.
Demand for U.S. propane exports is driven by favorable pricing for U.S. propane compared with the international market, where prices are typically set by the Saudi Aramco monthly contract price (ACP). Saudi Aramco generally bases its propane price on naphtha, a light petroleum product created through the processing of crude oil in a refinery and the competing petrochemical feedstock to propane. In 2005, when the United States was still a net importer of propane, the U.S. price of propane at Mont Belvieu, Texas, averaged a 3-cent per gallon (gal) premium to ACP (Figure 1). As growing U.S. propane exports reached terminal capacity limits, Mont Belvieu prices became discounted compared with the international market, averaging an 89-cent/gal discount in 2012. The wide price differential prompted new export capacity terminal construction, providing an outlet for stranded U.S. propane into the international market. With the expansion of export capacity in the United States, the spread between international and U.S. propane prices has gradually narrowed. The discount for Mont Belvieu propane prices compared with ACP declined from an average of 77 cents/gal in 2013 and 59 cents/gal in 2014 to 40 cents/gal for January through September 2015.