A new propane study, underwritten by the Propane Education and Research Council (PERC) and directed by the Gas Processors Association (GPA) NGL Market Information Committee, takes a close look at the propane supply/demand picture in North America over the next five years.

PERC sent its request for the study to GPA Executive Director Mark Sutton, who then brought PERC's request to GPA’s NGL Market Information Committee. An ad hoc committee task force was charged with writing the request for proposal (RFP), sending the RFP to consulting firms, and awarding the contract to prepare the study. After evaluating the proposals, the task force selected Petral Worldwide Inc. (PWI) to prepare the study.

The study's geographic focus included the US and Canada, with emphasis on regional markets and supply/demand trends in the US. PWI evaluated historic supply/demand trends and developed supply/demand forecasts for the following US regions: East Coast, Mid Continent, Gulf Coast, Rocky Mountain, and West Coast markets.

PWI also evaluated historic trends and developed forecasts for propane consumption in all major consuming end uses for all regional markets, including residential, commercial and resellers, agriculture, motor fuel, industrial, and petrochemical.

Lastly, PWI evaluated historic trends and developed forecasts for propane supply by region for all major supply sources, including gas processing, refining and imports/exports.

According to PWI founder Daniel Lippe, the results of the study can be summarized with the following points:

1. North America has substantial natural gas resources. The technological advancements in horizontal drilling and hydraulic fracturing will enable gas exploration companies to significantly increase natural gas production. Growth in natural gas production generally results in increasing throughput rates in gas processing plants in North America.

2. Some new sources of natural gas are NGL rich; some are dry. The value of NGLs has encouraged gas exploration companies to emphasize development of NGL rich gas plays. As NGL rich gas production increases, recovery of NGLs including propane will continue increase.

3. Demand for propane in traditional retail markets (residential/commercial, agriculture, and motor fuel) declined about 18% during 2003-2010. Based on detailed evaluation of the various factors in each market segment, the study concluded that demand in traditional retail markets will continue to decline during 2012-2016.

4. Demand for propane in the ethylene feedstock market also declined during recent years due to displacement by ethane. Since ethane has only one market and since ethane supply will also increase during 2012-2016, the study concluded demand for propane in the ethylene feedstock market will be stagnant at best.

5. As propane supply will increase but demand within North America will continue to decline, NGL marketers will export increasing volumes of propane into international markets via export terminals in the Gulf Coast. Chemical companies will also construct special plants to convert propane to propylene.

"This study is significant because it confirms what most of the industry experts believe: that there will be strong supplies of domestic propane around to fuel any additional demand that the propane industry is successful at creating,” Sutton said. “It also highlights the excellent working relationship between GPA and the Propane Council.”

This study is available to GPA and Gas Processors Suppliers Association members. Call Judy London, GPA, to request a copy: (918) 493-3872.