Sinopec in long-term deal to buy LPG from Phillips 66

20-Mar-14

China's largest state refiner, Sinopec Corp, has entered into a long-term deal to buy liquefied petroleum gas (LPG) from Phillips 66, reflecting an impact of the US shale drilling boom on Asian markets, as per Reuters. The US shale boom in recent years has led to a surge in production of LPG, or propane, which is bringing down global prices and challenging established suppliers in the Middle East. LPG can be used for heating, transportation fuel or for making petrochemicals, and has diversified the chemical feedstock supply channels for Sinopec. Last June, the top Asian refiner proposed a US$3.1 bln ethylene plant in East China that would be Sinopec's first to use natural gas and LPG as a feedstock. In October 2013, Phillips 66 plans to develop a US$1 bln LPG export terminal at Freeport, Texas, with a capacity of 4.4 mln barrels per month, with start-up planned for the middle of 2016. U.S. propane exports are estimated to rise to 350,000 bpd in 2015 from 196,000 bpd in 2012. Analysts say the U.S. LPG export boom will be further aided by the expansion of the Panama Canal, allowing the passage of so-called very large gas carriers (VLGC) from 2015 and reducing the cost of freight by cutting the sailing time from the United States to Asia by more than two weeks.