LPG Deal A Sign Of Greater Landscape Change

BMI View: Sinopec's long-term supply contract with US' Phillips 66 for liquefied petroleum gas (LPG) is set to further alter the composition of countries making up China's LPG imports as the US rises in prominence as a LPG exporter. This is on the back of the US' oil and gas renaissance led by its unconventional production boom. The Middle East, -the traditional suppliers of LPG to China- is set to see higher competition in the long-term Chinese LPG market should further contract deals with the US are signed.

A long-term supply and purchase agreement (SPA) was signed between China's Unipec and US downstream major Phillips 66 that will see the latter deliver supplies of liquefied petroleum gas (LPG) to the Chinese firm. While neither the length nor size of this contract is stated in their official press releases, it will nonetheless see the US establish a stronger foothold in China's growing LPG market.

Unipec is the subsidiary of state-owned China Petroleum and Chemical Corporation (Sinopec), which is also China's largest downstream player. The subsidiary mainly deals with the trading and logistics of oil, oil products and liquefied natural gas (LNG). The LPG supplies - specifically noted to be propane in Sinopec's press release - procured from Phillips 66 will likely be sold to its parent company. Senior vice president of Sinopec Dai Houliang stated that the contract will 'further diversif[y]' the firm's feedstock supply channels and 'will be critical to adjust our chemical feedstock structure', hinting that the propane will most likely be used in petrochemical production.

A Gas Bonanza
US LPG Production By Type ('000b/d)

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This article is tagged to:
Sector: Oil & Gas, Petrochemicals, Shipping
Geography: China, United Arab Emirates, Iran, Kuwait, Saudi Arabia, United States

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