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China Gas Report

LPG Report

September 2008

Report on Liquefied Petroleum Gas Market September 2008

Sales still weak despite price reductions

Despite lower prices, domestic LPG market is still weak. e market is waiting for the arrival of boom season when northern China turns cold. Refineries’ gas supply reduction decreased China’s LPG apparent demand (production plus net imports) to 1.75 million tons in July from 1.79 million tons in June this year. For the first seven months of this year, the demand fell to 12.23 million tons, down 8 percent year on year. As the peak period has not come yet,, only petrochemical raw materials was bullish in the European LPG market. Cargoes from West Africa and the Middle East are flooded with the market to arbitrage, making European manufacturers fell into marketing predicaments. In the United States, the demand for propane in August reduced by 4.4 percent year on year. Weekly statistics from the US Energy Information Administration (EIA) indicated that, propane inventories in August increased for consecutive 5 months, however, the current stock is 3 percent less than that of the last year. Price reductions have not stimulated the purchase interests of major Asian importers like Japan, South Korea and the Chinese mainland, only a small amount of import demands from China’s Taiwan province and ailand are brisk in the market.

Million tons

Processing Volume (thousand ton/day)

China LPG Apparent Consumption Volume on Months

Net Imports

Domestic Production

July 2003

July 2004

July 2005

July 2006

July 2007

July 2008

Comparison between Refineries Crude Oil Processing Volume and LPG Production

Crude Oil Processing Volume

LPG Production

LGP Production (thousand ton/day)

July 2003

July 2004

July 2005

July 2006

July 2007

July 2008

Output tends to rise after Olympics

Domestic crude oil processing volume has surged in the past two months. Figures from the National Bureau of Statistics show that, crude oil processing volume exceeded 30 million tons up to 30.31 million tons in July for the first time. To relieve tight fuel supply this summer, CNPC and Sinopec refineries increased production of diesel and gasoline as far as possible at the cost of reducing liquefied gas refinery, naphtha and aromatic hydrocarbon

products and chemical materials. Refineries’ maintenance peak ended in June, improving operating ratio. As a result, the liquefied gas production still went down to 1.55 million tons in July while the processing volume was apparently up.

So far this year, China's accumulated liquefied gas production is even lower than 2007.

  • e total production for the first

seven months was 11.07 million

tons, down 1.1 percent year on year from 11.19 million tons. Tight supply in the refined oil market will be significantly eased after n e w r e fi n e r i e s , i n c l u d i n g S i n o p e c ' Qingdao plant were put into operation. Refineries will no longer need to cut production of liquefied gas and chemical raw materials to ensure the supply of diesel and gasoline, so the liquefied gas production went up. But marketing is also a problem for gas refineries amid reducing demand. s

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