Latin America's imports of US NGLs continue to grow

10:33 AM | January 17, 2020 | Francinia Protti-Alvarez

Latin American countries are increasingly dependent on US NGL exports, highlighting the region’s need to invest in infrastructure –import terminals as well as production capabilities. US NGLs exports will continue growing as Latin America’s propane and ethane demand outpaces supply. But as Asia absorbs higher volumes of US NGLs, Latin America’s consumers become more exposed to changes in global trade.

“Latin America’s NGL production is recovering. Despite drastic declines in Mexican and Venezuelan production, NGL production in the region has resumed growth, allowing production to keep up with current levels of imports,” says Adrian Calcaneo, director/ Latin America midstream Oil & NGL, at IHS Markit. “However, other than Mexico and Ecuador, there are no major additions of refinery capacity announced in the region going forward. Meanwhile, propane and ethane demand continue growing.”

Natural gas processing is the main driver for LPG (propane & butane) production in Latin America, except for Brazil. Refinery production has remained steady, but drastic production reductions in Mexico and Venezuela account for much of the apparent drop in the region’s LPG production.

Brazil and Mexico are the largest consumers of LPG in the region, and Brazil is close to overtaking Mexico as the largest consumer, according to IHS Markit data. Argentina and Venezuela complete the picture. Residential and commercial uses have fuelled propane demand.

LPG demand from residential and commercial end-user markets leaves little volume available for petrochemical consumption, while the industrial sector faces growing competition accessing natural gas.

US NGL exports also meet Latin America’s petrochemical industry demands for ethane. Mexico and Venezuela possess the infrastructure but are facing different problems curtailing its use.

“Due to underinvestment in new natural gas exploration and production, Mexico is running out of ethane, and imports help meet demand at Braskem-Idesa as well as at Pemex plants. The recovery of ethane production in Mexico is unlikely, and import infrastructure is likely to expand,” Calcaneo says.

However, with new infrastructure, Brazil and Argentina have the potential to increase NGLs production, he adds.
Meanwhile, US NGL exports have pushed much of the product from other countries out of Latin America. Although Argentina and Trinidad & Tobago provide some natural gas to the region, the vast majority comes from the United States and Canada.

Mont Belvieu has, therefore, become the reference price for Latin America, but the region is only a ‘price taker’. Because other regions set the price, politics –global and local— represent significant risks to Latin America’s NGL prices. 

“Trade tensions raise questions about what will happen with US LPG sales to China and whether the rest of the world could pick up the slack. Regionally, the Brazilian pre-salt deposits have yet fulfilled their promise. Meanwhile, in Mexico, the future of the energy reform and the fate of Pemex remain uncertain. In Argentina meanwhile, it is still too early to assess how the new government will allocate its expenditure in infrastructure –crucial if Vaca Muerta’s production is to reach export markets,” Calcaneo concludes.

Explore the global dynamics influencing feedstock costs in Latin America during the Latin America Petrochemical Summit at the World Petrochemical Conference in New Orleans, Louisiana, March 24-27, 2020.