Several market factors could support additional growth in liquefied petroleum gas (LPG) exports despite tightness at Gulf Coast docks.
East Daley Analytics recently highlighted how the lifting of a nighttime transport ban has increased operating capacity at some LPG docks on the Houston Ship Channel (HSC). 24x7 piloting raises potential exports by an estimated 5-10% for operators like Targa Resources (TRGP) and Enterprise Products (EPD) at a time when spare capacity is scarce, according to the NGL Network Model.
Another factor that could provide a relief valve is Mexico. About 10% of total LPG exports are destined to our neighbors to the south (see light blue area of Figure 1). From 2021 to 2023, exports to China, Japan, and South Korea grew at a CAGR of 17%, 15% and 10%. By contrast, Mexico’s demand for US propane and normal butane has been stable at ~155-160 Mb/d.
Based on industry discussions, we understand LPGs transported to northern Mexico are sent via rail while exports to southern Mexico are loaded onto LPG vessels. According to Union Pacific, two major railroads operate in Mexico: Ferromex (FXE) and Canadian Pacific Kansas City (CPKS). FXE has two cross-border locations in Texas, one in El Paso and one at Eagle Pass. CPKC has cross-border locations in Laredo and Brownsville, TX.
In Figure 2, East Daley assumes LPG exports at El Paso and Laredo (as captured in US Customs data) are moved by truck or rail, while LPG exports at Houston and Port Arthur are loaded onto vessels. If our assumptions are correct, volumes of propane and butane railed to northern Mexico total about 30 Mb/d.
If we are correct, then overland transport doesn’t appear to offer much upside in working around the LPG dock bottleneck. Between 24x7 HSC piloting and a small slice of exports traveling overland, EDA could only uncover at total of 130 Mb/d of additional “effective” LPG dock capacity in PADD 3 for consideration in the NGL Network Model. – Rob Wilson Tickers: EPD, TRGP.
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