The global liquefied petroleum gas (LPG) market is highly competitive, featuring a large number of equally balanced competitors. The top five companies accounted for 17.2% of the global market in 2013. These companies are: Exxon Mobil, Royal Dutch Shell, Sinopec, Valero Energy, and BP PLC. New entrants have a higher chance of venturing into the market through distribution and retailing businesses, states Transparency Market Research (TMR). From the perspective of large market players, the industry is relatively consolidated.
Key players have branched out into LPG storage, distribution, and retailing businesses. In essence, these players are their own suppliers, thus resulting in negligible supplier power. Large companies are adopting the strategy of gradually diversifying their LPG marketing business across many other countries. Case in point. Royal Dutch Shell, divested its LPG business in India. It aims to sell off major stakes in its LPG business in Pakistan. Similarly, BP PLC has strategically invested in exploration and production projects for oil and gas in various regions around the globe.
The access to shale reserves can give a competitive edge to a company, states a TMR analyst. This is because competition in the LPG industry highly depends on price and having access to shale reserves will enable a company to provide LPG in much cheaper rates.
Government Initiatives to Distribute LPG to Rural Areas Fuel Demand
Owing to their higher energy content and ability to burn easily as compared to other fuels, LPG, also known as autogas, is used as fuel in automobiles. The numerous environmental benefits of using autogas is another factor driving its demand. This is because autogas is considered to be greener as compared to other fuels such as gasoline and diesel. Autogas also enjoys legislative policy support and is cost-effective, thus driving its adoption.
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LPG is widely used as cooking fuel in residential sectors. The ease in transportation through pipelines, tankers, and cylinders results in the low cost distribution of LPG cylinders. Moreover, the low CO2 emission from LPG makes it one of the best fuels in the cooking sector. LPG is extensively used in the rural sector. The Indonesian government launched a conversion program and distributed LPG cylinders and gas stoves to the rural population. Similarly, the Indian government has also come up with initiatives, supporting the low cost distribution of LPG cylinders to rural sectors. All these factors contribute to the heightened demand for LPG.
Increasing Procurement of Non-associated Gas Weakens Impact of Volatile Crude Oil Prices on LPG Market
The price of crude oil is susceptible to fluctuation. This, in turn, affects the price of LPG. With the economy regaining stability after 2010, the price of crude oil, which had declined in 2009, has once again risen. This has a direct impact on the price of LPG. However, the prices of oil and natural gas is expected to decline, thus relieving the price of LPG acquired from non-associated gas from the volatility of crude oil prices. However, the growth in the production of LPG obtained from non-associated gas is expected to weaken the influence of the restraint.
Expansion of Panama Canal to Facilitate Increasing Trade Opportunities
The Panama Canal is a major waterway facilitating the trade between North America and the Rest of the World. The expansion project of this waterway is expected to benefit trade between many regions, especially North America and Asia Pacific, in late 2016, when the project is expected to be completed. With the slashed transit cost, export routes between Asia Pacific and North America will open. This will reduce the cost of LPG and the surplus production from North America will be exported to Asia Pacific, thus satisfying the latter’s growing demand for LPG. Similarly, North America is expected to export LPG to Europe owing to the drying up of the North Sea. Thus, trade opportunities are increasing with the expansion of the Panama Canal.
By end use, the residential and commercial segment led in 2013, accounting for a 63.25% of the global LPG market. The segment is expected to continue its lead in the market in the coming years. By geography, the Middle East and Africa is expected to lead in the global LPG market, followed by Asia Pacific. By source, the non-associated gas segment is expected to witness the highest growth rate in the coming years.
According to the report, the global market opportunity in liquefied petroleum gas will rise from US$233.83 bn in 2013 to US$299.05 bn by 2020, expanding at a 3.4% CAGR between 2014 and 2020.
The global liquefied petroleum gas market is segmented as follows:
Source
- Refinery
- Associated Gas
- Non-Associated Gas
End User
- Residential/Commercial
- Petrochemical and Refinery
- Industrial
- Transportation
- Others
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