News

Owners Predict Continued Growth in Liquefied Petroleum Gas Exports

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4.9

Andrew R. Michaud

• November 15, 2023

According to recent quarterly reports from BW LPG and Navigator Holdings Ltd, owners of very large gas carriers anticipate a continued rise in liquefied petroleum gas (LPG) exports in 2024 and 2025, although the rate of growth is expected to slow down.

North America LPG Exports

BW LPG stated that North America LPG exports by very large gas carriers (VLGCs) are projected to grow by 12.3% in 2024 and 8.7% in 2025. This is in comparison to a forecasted growth rate of 16.2% for this year.

Middle East LPG Exports

In the Middle East, LPG exports carried by VLGCs will increase by 4.9% next year and 3.4% in 2025, as per the forecast given by BW LPG. This growth rate is slightly lower compared to the 5.3% projected for 2023.

Strong Spot Rates and Freight Agreements

The shipper also noted that forward freight agreements for the rest of this year continue to reflect high spot rates. During the third quarter of 2023, spot rates were exceptionally strong due to the growth in North American LPG exports and higher demand in the Far East.

Effects of Transit Restrictions

Transit restrictions at the Panama Canal have led to more ships taking longer routes through the Suez or Cape of Good Hope to reach the United States. This shift resulted in a potential 50% increase in voyage duration compared to a year ago. Consequently, logistical disruptions and inefficiencies have arisen, leading to longer voyages and higher costs for available transits.

Positive Outlook and Key Drivers

Despite the challenges, BW remains positive about 2023 and 2024. They attribute this optimism to high volatility and key underlying drivers such as a high oil price, which encourages increased oil and gas exploration. These factors contribute to the sustained export growth from the United States and steady growth from the Middle East. Additionally, the introduction of new propane dehydrogenation plants in China is expected to support this positive outlook.

All-Time Highs in North American Natural-Gas Liquids Production

Navigator reports that North American natural-gas liquids production has reached all-time highs, with August production exceeding 200 million barrels per day. Handysize ethane and ethylene cargos from the United States continue to rise, and ethylene export volumes are expected to remain near nameplate capacity during this quarter.

U.S. Ethylene and Ethane Exports on the Rise for 2023

A surge in U.S. ethylene and ethane exports is anticipated for 2023, surpassing previous years' volumes. According to Navigator, Handysize exports of ethylene and ethane reached 339,000 metric tons in September 2023, falling just short of the record set in April 2023 by a mere 1,000 mt.

Ethylene Export Terminal on the U.S. Gulf Coast

The ethylene export terminal located at Houston on the U.S. Gulf Coast witnessed a significant increase in throughput during the third quarter of 2023. The total throughput for the quarter reached 249,857 mt, compared to 189,140 MT in the same period last year, indicating a notable growth.

Navigator Holdings Ltd., along with joint venture partner Enterprise Product Partners L.P., has embarked on the Terminal Expansion Project. This project aims to enhance the export capacity to a minimum of 1.55 million MT/year from the current level of 1 million MT/year. Key components for this expansion have already been ordered, and construction commenced with an estimated completion date during the fourth quarter of 2024.

Deliveries and Charter Agreement

BW LPG is set to acquire the BW Kyoto by the end of 2023, following an attractive purchase option declared in the first quarter of the same year. Subsequently, the vessel will be under a six-year time charter from the first quarter of 2024. This acquisition is expected to yield a return on capital employed of approximately 18%.

Additionally, BW LPG has entered into an agreement to sell the BW Princess, a vessel built in 2008, with delivery scheduled for the first quarter of 2024. This transaction will generate liquidity of around $64 million and result in a net book gain of $20 million. Moreover, the BW LPG pool will be enriched by the inclusion of the Sinogas, along with the addition of the dual-fuel VLGC, the Gas Venus, in the fourth quarter of 2023.

Financial Performance

In terms of financial performance, BW reported a net profit after tax of $122.3 million for the third quarter of 2023, while earnings before interest, taxes, depreciation, and amortization stood at an impressive $183.9 million.

Navigator, on the other hand, disclosed adjusted EBITDA of $72.2 million for the third quarter of 2023, with a net income attributable to stockholders totaling $19.1 million.