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Phillips 66 selling propane to China, as U.S. shale boom opens opportunities

  • Sinopec (SNP) says it signed a long-term contract to buy propane from Phillips 66 (PSX), in the latest example of how cheap natural gas flowing from the U.S. shale boom is creating new opportunities for U.S. energy companies to sell fuels to China.
  • Although Chinese companies can make their own propane, the process is more expensive because of the tighter oil and gas supplies in China; while U.S. propane prices traditionally have been too high to justify shipments to China, the boom in U.S. natural gas production from shale-rock drilling technology has sent U.S. prices tumbling to their lowest levels in years.
  • SNP didn't disclose the length, volume or value of the deal.
Comments (3)
  • rjj1960
    , contributor
    Comments (1359) | Send Message
     
    Fantastic news, as 3/4 of the east coast watched propane prices double???????? Let the Chinese set up businesses in the US if they want cheaper energy.
    14 Mar, 08:30 AM Reply Like
  • Michael Fitzsimmons
    , contributor
    Comments (8085) | Send Message
     
    My understanding is the high propane prices experienced this winter had more to do with insufficient transport infrastructure than it did a lack of product. PSX can easily ship propane to China via its Gulf Coasts terminals. I for one enjoy seeing PSX selling product to China and reducing our trade deficit with that country. As I have been saying for some time now: PSX could quite possibly be the best long-term investment in Shale USA.
    14 Mar, 08:54 AM Reply Like
  • Jbacle
    , contributor
    Comments (15) | Send Message
     
    There are many factors to take into account when considering these decisions.
    Propane and other combustible gases can be a byproduct of the refining process and can accumulate faster near large refineries such that an oversupply to the local market demand can develop. Transport options may be limited if available pipeline capacity for refined products is nil. The greater population needs methane and this winter some regions began experiencing shortages, mostly because of limited storage and inadequate regional pipeline networks.

     

    Due to the large number of refineries located near the gulf, the accumulated volume of propane is larger and growing daily. While other consumption options may be locally available, the value of product falls compared to shipping it to higher demand markets. Considering the logistics of transportation and market demand,
    sea-going tankers may be the most viable solution. Then ocean-port market demand will then be considered in order to maximize value.
    14 Mar, 10:30 AM Reply Like
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