Sinopec Buys LPG From Phillips 66 As Chinese Tap U.S. Shale Boom


China's largest state refiner, Sinopec Corp, said it had entered a long-term deal to buy liquefied petroleum gas (LPG) from Phillips 66, showing the U.S. shale drilling boom is having an impact on Asian markets.

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The U.S. shale boom in recent years has led to a surge in production of LPG, or propane, which is bringing down global prices and challenging established suppliers in the Middle East. LPG can be used for heating, transportation fuel or for making petrochemicals.

"It has further diversified the chemical feedstock supply channels for Sinopec," Dai Houliang, Sinopec's senior vice president, said in a statement on Friday.

Sinopec, which plans to use the LPG as a petrochemical feedstock, didn't give any details of the contract, the amounts or when the supply starts.

Last June, the top Asian refiner proposed a $3.1 billion ethylene plant in east China that would be Sinopec's first to use natural gas and LPG as a feedstock.

Phillips 66 said last October it would develop a $1 billion LPG export terminal at Freeport, Texas, with a capacity of 4.4 million barrels per month, with start-up planned for the middle of 2016.

U.S. propane exports are estimated to rise to 350,000 barrels per day in 2015 from 196,000 bpd in 2012.

Analysts say the U.S. LPG export boom will be further aided by the expansion of the Panama Canal, allowing the passage of so-called very large gas carriers (VLGC) from 2015 and reducing the cost of freight by cutting the sailing time from the United States to Asia by more than two weeks.