Oil report

Russia to boost LPG output in east, but bottlenecks curb exports

MOSCOW, Sept 29 (Reuters) - Output of liquefied petroleum gas (LPG) in the east of Russia is expected to increase by 1.0-1.2 million tonnes next year, according to producers’ plans, although exports to energy-hungry Asia could be limited by a lack of infrastructure.

Production of LPG from eastern Russia will account for up to 15% of the country’s total output in the next few years, according to Reuters’ calculations.

LPG, or propane and butane, is mainly used as fuel for cars, heating and to produce other petrochemicals.

LPG production in Russia totalled 16.9 million tonnes in 2019, while exports, mainly via the Baltic Sea port of Ust-Luga to Europe, stood at 5.7 million tonnes, according to Refinitiv Kortes data.

Independent company Irkutsk Oil Company (INK) is one of the producers in eastern Siberia expected to contribute to Russia’s LPG output growth. It plans to launch the Ust-Kut gas processing plant, with annual capacity of 800,000 tonnes, next year.

Gazprom also plans to make its Amur gas processing plant operational in the second quarter of 2021. The plant is set to reach full capacity of 1.5 million tonnes in 2025.

INK made a foray into China’s LPG market last year by shipping 2,300 tonnes of propane and butane mixture by train towards the Far East Gas terminal in northeastern China - the only one in the region.

China is one of the world’s largest importers and users of the fuel. Key suppliers to the country are the United Arab Emirates, Qatar, Kuwait and Saudi Arabia, which jointly account for more than 60% of China’s LPG imports.

Russia has long planned to build infrastructure for shipping LPG via the sea in its far east, but the projects have been kicked into the long grass for various reasons, including lack of funds and uncertainties over production.

Only one terminal - Remstal, with capacity of 1 million tonnes per year in the Pacific port of Sovetskaya Gavan - is expected to become operational in late 2021. (Writing by Vladimir Soldatkin; Editing by Mark Potter)