U.S. Energy Makes Another Crack in Saudi Bastion With LPG Sales

(Bloomberg) -- Less than two months after the first long-term contract for U.S. crude to be sent to India, American supply is making further inroads into the Saudi stronghold in the Asian nation.

India -- where oil demand is growing faster than anywhere else in the world -- is set to get its debut shipment of cooking fuel from the U.S. this week. The liquefied petroleum gas cargo aboard Clipper Sun is expected to arrive at Ennore on the South Asian nation’s east coast on April 11, according to shipping data and intelligence firm Kpler SAS.

At least three more tankers are headed to India from the U.S., the first cases of “direct LPG shipments on this route,” Kpler said in an emailed report on Friday. About 95 percent of the South Asian country’s LPG imports come from the Middle East, mostly Saudi Arabia and Qatar.

The shipments open up a new market for U.S. LPG as America’s trade war with China has almost drained exports to that Asian market. Meanwhile, India is scouting for supplies to meet soaring demand as cargoes from the Middle East shrink as a consequence of the deal between OPEC members and their allies to reduce crude production. The scramble for shipments has boosted premiums for the fuel.

“We see the U.S. taking the incremental market share from Saudi Arabia,” Thomas Olney, a Singapore-based analyst at industry consultant FGE said, adding that the kingdom is able to sell to China at a “very substantial premium.” That’s “forced India to source cargoes from further away,” he said.

Cargo Demand

India’s three state-oil companies issued rare spot tenders seeking more than half a million tons of LPG for delivery in March and April, data compiled by Bloomberg show. The country usually purchases cargoes containing equal quantities of propane and butane gases, byproducts of crude production and refining. The U.S. primarily exports propane.

However, butane export capacity in the U.S. is set to increase in the second half of this year. Enterprise Products Partners LP, one of the biggest operators of American petroleum export terminals, is expanding its Houston facility, which will become operational this year and be able to switch between propane and butane loadings. Another exporter, Targa Resources Corp., also expects higher volumes for overseas shipments.

“This year, all things being equal and if tariffs imposed by China remain in place, India will have to turn to the U.S. to provide the incremental cargoes,” Olney said.

To contact the reporter on this story: Saket Sundria in Singapore at ssundria@bloomberg.net

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Andrew Janes

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