LPG Consumption In S. Korea Rises As Substitute For Naphtha As Petrochemical Feedstock

LPG consumption in S. Korea rises as substitute for naphtha as petrochemical feedstock

20-Feb-17

A shift in the use of liquefied petroleum gas (LPG) as feedstock for petrochemicals is propping up demand for the fuel to new records in South Korea, as per Reuters. Commercial vehicles in the automotive sector - the major consumer of LPG in S Korea, have switched to other fuels such as diesel or gasoline since 2010. The change mostly benefits US suppliers as South Korea’s major LPG distributors, SK Gas and E1 Corp scouted for other sectors to offset revenue loss.
Last year strong demand for consumer plastics began to strengthen Asian petrochemical margins and at the same time SK Gas started up a plant using LPG as a feedstock.
As petrochemical consumption in South Korea began jumping and with LPG prices dropping to around 30% less than naphtha, demand recovered, shooting to its highest ever.
Analysts are expecting to see much the same this year. In 2016, LPG imports rose by almost a third compared to the previous year, to a record 7 mln tons, according to data from the Korea National Oil Corp. (KNOC), while total consumption rose to a record 9.4 mln tons.
Between 2015 and 2016, South Korea’s US LPG imports more than doubled to about 3.4 mln tons, according to KNOC, making up almost half its total LPG imports. Last year around 4.3 mln tons of South Korea’s total LPG consumption was used in the petrochemical and industrial sectors, a jump of more than 70% from the previous year, according to KNOC data. South Korea’s record LPG use accompanied a near doubling of its petrochemical production to 3.3 million tons last year, up 87.8% from 2015.
Analysts expect South Korea’s petrochemical production to hold near that level this decade, although JBC Energy’s David Wech warned that use of LPG in the system likely “maxed last year.”