ANALYSIS-Poland and Ukraine eye more LPG from outside CIS

Понедельник, 28 ноября 2016 16:54 MSK
 

MOSCOW, 28 Nov (Reuters) - By Damir Khalmetov  
Poland, the biggest importer of liquefied petroleum gas (LPG) from
Russia, faced cut-throat competition from Ukraine this year on the
back of a supply shortage and record-high prices. 
    Ukraine has more than doubled imports of Russian LPG, while
Poland has ramped up LPG imports from Scandinavia and Western Europe,
via its offshore terminals, in a move designed to meet growing
domestic demand, statistics and market data showed.  
    LPG from the Commonwealth of Independent States (CIS), primarily
from Russia and Belarus, is increasingly being supplied to the
Ukrainian high-end market. 
    "Why not? If the margin from LPG supplies to Ukraine is four-five
times higher then to Poland, of course, I will deliver gas to a place
where I can sell it at a higher price," a Belarusian trader said. 
    LPG supplies from Russia to the Ukrainian market saw a higher
premium of $100-$110 per tonne on average in the first ten months of
the year compared to the Polish market. It was more profitable than
supplies through the Black Sea ports or to the Russian market by
$60-$70 per tonne and $25-$35 per tonne respectively, Reuters netback
calculations showed.   
    
    POLITICS AND ECONOMY 
    Despite strained political relations between Ukraine and Russia,
Kiev more than doubled LPG imports to 690,000 tonnes from 330,000
tonnes in January-October, making Ukraine the second-largest consumer
of Russian LPG. Poland remains the top importer with more than one
million tonnes, customs data showed. 
    Hit by an increase in prices for Russian propane-butane mix and
dwindling supplies from Belarus, Ukraine started rail shipments in
July of LPG from Lithuania, Poland and Romania. In September, an LPG
shortage and constantly rising prices for Russian fuel prompted Kiev
to follow Warsaw’s example and start sea imports from the
Mediterranean and Scandinavia. 
    Political tension between Moscow and Kiev has played its role.
Traders say that Ukraine lives under the constant threat of a sharp
decline or complete termination of LPG supplies from Russia as
happened with natural gas.  
    At the end of October, Ukraine’s state-run railway company
Ukrzaliznytsia imposed a conventional ban on cargo shipments on a
handful of Russian railway freight operators, including SG-Trans,
which accounted for 40-50 percent of Russian LPG supplies to Ukraine
and to Poland and other Eastern European countries through Ukrainian
territory.
    Russian suppliers then cut LPG exports to Ukraine and
significantly reduced transit to Poland, which pushed prices to a
record-high this year. 
    
    PRICES
    Average wholesale prices on FCA basis for propane-butane mix with
loading from LPG gas filling stations in Poland jumped by 17-23
percent to $545 per tonne (excluding taxes and excise duties) from
the start of November, Reuters data showed. Prices for propane
fraction surged by 12-18 percent to $540 per tonne. 
    Prices for propane-butane technical and propane fraction on DAP
Brest basis (Belarus-Poland border) also rose from the start of this
month by 21 percent and 18 percent respectively to a record-high this
year of $450-$470 per tonne (propane-butane technical) PRBT-D-BST
and $455-$475 per tonne (propane) PRO-D-BST. 
    LPG imports to the Polish market, from routes outside the CIS and
Baltic states, increased by 10-11 percent in January-October this
year compared to 4-5 percent in the first half of the year, according
to Reuters calculations based on data compiled by the Polish LPG
Association and data from market participants.  
    Russia still remains the biggest LPG supplier to Poland, market
players said.
    "Russia was, is and will be our strategic supplier. This is
because of geographical proximity, well-established logistics
communication and the mutual business interest of the key players in
this market," said a major LPG importer in Poland. 
    "If oil prices surge back to $60-$70 per barrel, LPG purchases at
the Amsterdam-Rotterdam-Antwerp (ARA) hub and Scandinavia could again
become unprofitable as LPG in Western Europe is likely to be more
expensive than Russian propane-butane mix," said an international
trader.
    
    GROWTH MARKET
    After a decline in 2011-2013, the Polish LPG market showed a
small but stable increase, 2 to 3 percent in 2014-2015 and around 4.0
percent in the first half of this year, according to data compiled by
the Polish LPG association. 
    The association calculated that the share of LPG supplies used as
autogas still accounts for more than 75 percent of overall
consumption in the country. This market sector is currently the main
growth driver, buoyed by more attractive retail prices for
propane-butane mix than for gasoline А-95, 40-50 percent less than
gasoline prices, which makes a shift to autogas fuel economically
viable. 
    Production of liquefied gas in Poland stood at 200,000 tonnes in
January-June with imports at 1.055 million tonnes, up by 3.4 percent
compared to the same period last year, with exports at 106,000
tonnes. Overall domestic consumption climbed 3.9 percent year-on-year
to 1.149 million tonnes. 
    In the first half of this year, LPG imports from Russia accounted
for 61.1 percent with 19.7 percent from Kazakhstan, 10.1 percent from
Belarus, 4.6 percent from Lithuania and 4.5 percent from other
countries, the association said. 
    Diversification of supply routes could be seen on the Polish
market from July onwards, primarily through offshore terminals in
Gdansk, Gdynia and Szczecin, where LPG trade was high due to a sharp
decline in spot supplies in the east of the country on DAP Brest
basis (Belarus-Poland border). 
    A sharp decline in LPG supplies to Poland from Belarusian oil
refineries and gas processing plants was caused by dwindling oil
supplies from Russia to Belarusian plants, including to Mozyr oil
refinery in the second half of the year, and a wide spread of light
hydrocarbons at Belarusian gas processing plants.
    "I think that LPG supplies to Poland from Belarus dropped by
60-70 percent in the second half of the year compared to shipments in
January-June. Unfortunately, things are unlikely to change for the
better until the end of the year," said an LPG exporter from Belarus.
    The Ukrainian LPG market is growing faster than the Polish market
and could match it in the coming years, market participants said. 
    Analysts forecast that LPG consumption in Ukraine is set to rise
by around 25 percent year-on-year to 1.4 million tonnes per year in
2016, before surging by another 20 percent to 1.7 million tonnes per
year in 2017. 
    Rising LPG consumption is caused by an increase in the number of
vehicles using LPG fuel, and also because it is cheaper than
traditional types of motor fuel, around 35-45 percent cheaper than
А-95 petrol for most of the year.
    Meanwhile, the ratio of domestic LPG production to imports to
Ukraine in 2016 will be around 30/70 percent of the overall market
volume compared to 40/60 percent in 2015. In the coming years,
analysts forecast, this ratio could be 20/80 percent as imports
increase, which will put pressure on price volatility on the domestic
market, depending on the stability of supplies from Russia and
Belarus, and hryvnia/dollar fluctuations. 
    
    BREAKTHROUGH AT SEA 
    There are three offshore terminals in Poland in the north of the
country, Gdansk (owned by Gaspol), Gdynia (led by Onico ONCP.WA) and
Szczecin (controlled by PKN Orlen PKN.WA) which are capable of
receiving tank-car shipments of propane-butane mix.
    With a relatively stable spread between LPG prices in the eastern
border of Ukraine (DAP Ukraine) PRBT-D-UKR and Poland (DAP Brest)
PRBT-D-BST of between $15 and $25 per tonne in the first half of
the year, in favour of the Polish market, the terminals saw a low
workload with around 50,000 tonnes of fuel shipped to Poland on
average by sea in January-June. 
    In the second half of the year, after a sharp spread rise to
$55-$65 per tonne, this time in favour of the Ukrainian market, and
LPG shipments from Russia and Belarus to Ukraine, an increase in
import supplies of liquefied gas to Poland was seen and an overall
volume of sea shipments to all three terminals of 50,000-60,000
tonnes a month now looks standard, market players said.   
    "We keep building up imports though our terminal. If earlier, we
received one tanker in one to two days, then in the second half of
November there will be days when we will receive two tankers a day,"
a source at the Gdansk terminal said. 
    "Freight rates have dropped significantly this year, by several
times, allowing us to diversify supplies and boost sea shipments," he
added.
    "We forecast that our imports in November will be much the same
as in August-September, probably even higher," a trader with the
company that owns the Gdynia terminal said.
    "Prices in Poland are rising every day, while the east of the
country clearly lacks propane-butane mix, which is why we also
regularly buy sea shipments [of LPG]," said a source with Orlen, the
owner of the Szczecin terminal.
    Poland’s offshore terminals received 22 LPG tankers on November
1-22, which is comparable to the total amount shipped in October,
Reuters shipping data showed. 
    "I think this month we (Poland) will see record-high sea
shipments of LPG," a source at one of the terminals said.
    
    Data on Poland’s LPG imports by supplying countries in
January-October this year, in thousand tonnes (based on Reuters
calculations and traders’ data):
 Supplying     Jan-Nov     Import
 country       2016        share
 Russia        1,050       59.0%
 Kazakhstan    330         18.5%
 Belarus       130         7.3%
 Lithuania     70          3.9%
 Other         200         11.2%
 countries                 
                           
 Total         1,780       -
 Data on Poland’s LPG imports through offshore terminals in
January-November this year, in thousand tonnes (based on Reuters
calculations and traders’ data):
 Destinatio  Owner   Jan-Ju  Jul   Aug   Sept      Oct   Nov    Jan-N
 n                   n 2016  2016  2016   2016      201  2016   ov
 port/termi                                        6            2016
 nal                                                            
 Gdansk      Gaspol  30      4     27    25        27    38     151
 Gdynia      Onico   2       0     17    28        10    15     72
 Szczecin    PKN     21      2     11    10        6     14     64
             Orlen                                              
                                                                
 Total               53      6     55    63        43    67     287
 * - November 1-22, 2016
Data on Poland’s LPG imports through offshore terminals by supplying
countries, in thousand tonnes (based on Reuters calculations and
traders’ data):
 Supplying     Jan-Nov
 country       2016
 Russia        100
 Sweden        80
 UK            57
 Norway        24
 Netherlands   8
 Other         18
 countries     
               
 Total         287
 * - November 1-22, 2016 

 (Editing by Alexander Ershov. Translated by Tatiana Vodyanina)