The term ‘energy transition’ is a hot topic at global climate summits, in the news, and during policy discussions. It typically suggests a shift towards renewable energy sources like solar and wind. Yet, this definition often misses broader challenges, particularly in regions outside the developed areas of Europe and the United States, where many still rely on basic energy sources like firewood.

In developed countries, the narrative focuses on adopting clean, renewable energy technologies, with a push for global adoption. This progressive stance can overshadow the unique challenges of countries not as advanced on this path. For example, Mexico still struggles with transitioning away from harmful energy sources like coal and fuel oil. These polluting sources have significant environmental and health impacts. Notably, between 13.5 and 20 million Mexicans use firewood for cooking, making it more prevalent than natural gas. Globally, over 2 billion people use biomass for cooking—double the population of developed countries in Europe and the U.S.

This disparity in energy transition stages highlights that there is no one-size-fits-all solution. Voltaire aptly said, “Perfection is the enemy of good.” In terms of energy transition, this means that while the ultimate goal may be a complete shift to renewable sources, intermediate steps are both inevitable and necessary. Overemphasis on clean fuels alone can reduce investments in more accessible, albeit less clean, fuels. This could lead to setbacks, like an increased reliance on firewood by those unable to afford alternatives like LPG or natural gas.

Transitioning from firewood to LPG, or from coal and fuel oil to natural gas, are not perfect solutions, but they represent significant steps in reducing environmental impact and improving public health. Waiting for a 100% clean and non-hydrocarbon based energy solution shift forces millions, especially the disadvantaged, to continue enduring precarious energy sources. Furthermore, reliance on firewood disproportionately affects women, who often bear the responsibility of cooking and are exposed to harmful smoke. In some countries, collecting firewood also falls to young girls, preventing them from engaging in productive activities like attending school. This exposure can lead to respiratory diseases in vulnerable groups like older adults and children. India’s embrace of LPG has proven successful in addressing these challenges, showcasing the benefits of a flexible approach to energy transition.

The path to a sustainable energy future involves dismantling an established global system, a process that is inherently disruptive and requires both social and infrastructural changes. While renewable technologies hold promise, they still need to prove their reliability, affordability, and scalability to meet global energy demands.

It would be misleading to consider any single technology, such as hydrogen or electrification, as the ultimate solution. Each region has its unique circumstances—geographic, economic, and social—that shape its energy needs and solutions. A diversified, “buckshot” approach, tailoring a variety of technologies and strategies to specific regional needs, is crucial for advancing towards a sustainable future.

The journey towards energy transition is as varied as the landscapes and challenges of the world itself. While the goal of a sustainable and cleaner energy future is universal, the pathways to achieve it are as diverse as the regions they traverse, highlighting the importance of adaptable strategies. For millions around the globe, a transition without LPG is unimaginable.

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With the implementation of a European Union ban on Russian liquefied petroleum gas (LPG) transitioning over the next 12 months, there will be a growing expectation for more product to arrive from the US to fill the gap. The EU estimates the ban will impact annual imports worth over €1 billion ($1.09 billion) after Russian supply made up around 6% of total LPG imports in the EU in 2023, according to EU Commission data.

Fahima Mathé, editor at OPIS, a Dow Jones company, spoke with Liquid Gas Europe general manager Ewa Abramiuk-Lété to discuss LPG’s role in energy transition and supply security, as well as potential growth opportunities and challenges for the market in Europe.

OPIS: What are the three biggest challenges Liquid Gas Europe is dealing with?

Liquid Gas Europe: The recent changes in the EU regulatory framework and an avalanche of various pieces of legislation in the “Fit for 55 package” have impacted the liquid gas industry. This new legislative framework, which includes a 55% CO2 emission reduction target by 2030 and a climate neutrality target in 2050, has created challenges and opportunities for the industry.

One of the challenges, as well as a potential opportunity, is the impending ban on new internal combustion engine (ICE) sales in 2035. While the ban of the new ICEs is in place for 2035, Liquid Gas Europe with support of other industry groups is still in the process of discussing the possible inclusion of CO2 neutral fuels as transport fuel after 2035. If successful, this would allow the use of biofuels and renewable liquid gases in transport.

Road transport represents almost 20% of Europe’s total greenhouse gas emissions (GHG) and is the main cause of air pollution in cities. To achieve these targets, all lower carbon options should be available. Today, Autogas is the number one alternative fuel in Europe for vehicles to run on renewable liquid gas or LPG, and Liquid Gas Europe believes that it is a viable and cost-effective option for consumers.

Another challenge/opportunity is related to heating. In the recently-agreed Energy Performance of Buildings Directive, the EU is aiming to cut subsidies for standalone oil and gas boilers from 2025 with a view to phasing out fossil fuel boilers by 2040, but nevertheless, keeping the door open for renewable ready boilers. Transitioning away from fossil fuel boilers in the EU will not be without its challenges.

In Europe, nearly 137 million people live in rural areas and face unique challenges in relation to transport and energy use when compared to urban dwellers. A just energy transition will require deploying suitable and cost-effective heating solutions for these communities.

Liquid gas boilers can offer a solution to these communities. And in the future, this technology might allow consumers to simply switch to a renewable fuel without requiring a full rebuild of their current heating infrastructure.

Renewable gases can be ‘dropped-in’ to existing supply chains and used by consumers in their heating appliances. It can be used in vehicles, stored in existing bulk tanks and cylinders, and transported using today’s infrastructure.

Supported by a regulatory framework promoting research and development, renewable gases can offer a long-term, cost-effective pathway to reduce carbon emissions and air pollutants from hard-to-decarbonize sectors such as transport and rural heating.

The benefits of renewable liquid gases are being gradually recognized by EU Member States. In recent months, we have seen bioLPG or renewable and recycled carbon dimethylether (DME) included in the Italian, Czech and Spanish National Integrated Energy Plan.

OPIS: Considering the current geopolitical challenges affecting energy supplies, could you elaborate on how and why LPG has been a reliable and secure energy source for Europe? How significant are US LPG imports in ensuring the availability and affordability of LPG in Europe?

Liquid Gas Europe: Energy security has become a critical issue for the EU since the Russian invasion of Ukraine, which sent energy markets reeling in 2022. Crude oil futures reached multi-year highs at above $130/bbl, according to data from the Intercontinental Exchange (ICE). Meanwhile, the European inland natural gas price benchmark Dutch Title Transfer Facility (TTF) futures price peaked at just shy of €250($270)/metric ton in August 2022, according to data from ICE.

Although throughout this high-volatility environment LPG prices spiked briefly with propane prices reaching $989/mt on a Cost, insurance and freight (CIF) Amsterdam-Rotterdam-Antwerp (ARA) basis at the beginning of the Russia-Ukraine war, according to OPIS data, since then prices have gradually fallen to as low as $401/mt CIF ARA last year.

Thus LPG has remained affordable due to its diversified supply chain. This is also one of the key reasons why LPG remains a safe and stable energy source for the EU.

In terms of supply security, data from freight analytics provider Vortexa shows LPG has a diversified global and regional supply chain. For example, more than 40% of propane and butane seaborne imports in 2023 into the EU came from the US, its regular supplier. Around 15% came from North Africa, 16% from Norway.

Only 3% of seaborne propane and butane was imported from Russia. We can see the sudden, recent drop in LPG imports coming from Russia was compensated by readily available imports from the US. The USis the largest provider of LPG to Europe and has been for some time. The figures for 2022 were similar to those from 2023. This diversified supply chain has been one of the core strengths of the European LPG industry and will remain so in the future.

OPIS: How do you see LPG contributing to the ongoing energy transition in Europe?

Liquid Gas Europe: To reach carbon neutrality by 2050, the EU has set ambitious targets in terms of energy and emissions. To achieve such objectives, we need to have access to a wide range of energy solutions available that can help citizens be part of the energy transition. This includes liquid gases, which can play a key role in the path towards decarbonization, especially in off-grid rural areas, in the transport and industrial sectors.

For instance, LPG is an immediately available, low carbon alternative that emits 35% less CO2 than coal and 12% less than oil. Renewable liquid gases, such as bioLPG and renewable and recycled carbon DME bring even greater climate benefits as their carbon footprint is up to 80% lower than that of conventional LPG.

OPIS: With the phasing out of diesel cars and increasing concerns about air quality and environment, do you see new market growth opportunities for LPG, particularly in the autogas sector?

Liquid Gas Europe: Passenger cars represent 12% of the total EU emissions of CO2 and are the largest source of air pollution in cities. The EU’s objective is to address the air quality challenge and achieve climate neutrality by 2050.

Autogas, the name for vehicles running on liquid gas, is one of the most available, reliable and immediate solutions to help tackle CO2 and air pollutant emissions. Compared to gasoline, liquid gas emits up to 21% less CO2, 62% less nitrogen oxides (NOx) and 90% less particulate matter (PM) on a well-to-wheel basis. Compared to diesel, LPG emits 96% less NOx and 92% less PM. The environmental and economic advantages of Autogas were recognized by consumers in 2022, where many countries saw strong year-to-year sales growth. For instance, sales grew by almost 70% in France, by 45% in the Czech Republic, by around 25% in Spain and Latvia and by 20% in Norway and Portugal. Autogas, therefore, is a strong alternative to other fuels and can improve air quality today.

OPIS: What are the primary challenges currently facing the LPG industry in Europe, especially considering its status as a by-product of fossil fuels?

Liquid Gas Europe: LPG is a by-product of the extraction of natural gas and refining of crude oil. At the same time, renewable liquid gas (renewable propane) is also a co-product of hydrotreated vegetable oils (HVO) or sustainable aviation fuel (SAF) production processes, which makes the production dependent on these pathways. Conventional LPG is still an important fuel used in transport, heating and industrial applications in Europe, as it offers a cost-effective alternative to other conventional fuels. As to bio and renewable propane (liquid gas), it is a co-product of Sustainable Aviation Fuel (SAF) or Hydrotreated Vegetable Oil (HVO), and it can be produced directly from biogas. With the current EU regulatory framework focused on these fuels, we see a lot of potential for bioLPG coming from these (and more) pathways. At the same time, the industry is also looking into developing and commercializing other bioLPG and rDME production pathways.

OPIS: Presently, bio/renewable LPG volumes are relatively small. Do you see the potential for an increase in production, as even the projects underway are not yet big enough to make a difference?

Liquid Gas Europe: There is a great potential for increased production of renewable liquid gases. We have identified eight pathways to produce renewable liquid gas that, with the right support, could provide significant volumes by 2030 and beyond.

The production of renewable liquid gases has been increasing steadily. Global renewable LPG capacity currently is estimated at 200-250,000 metric tons/year. If all current planned projects come to market, the production capacity of bioLPG could be as high as 630,000mt by 2025, according to data from Chemical Market Analytics by OPIS, a Dow Jones company. Current global bioLPG production is around 500,000 mt, CMA data showed.

Short-term growth in bioLPG yields will mainly be from HVO to produce biodiesel, SAF and other biofuels. This currently accounts for around 98% of bioLPG output.

Broad political support for biofuels will mean more investment in HVO and SAF production, much of it in Europe, where refinery conversions and greenfield biofuel projects are encouraged by government mandates. But strong growth will also occur in Asia-Pacific, with several major projects in the pipeline, specifically in China and Australia. In the U.S., incentives provided by the Inflation Reduction Act will encourage supply growth.

OPIS: What initiatives or developments are underway to promote the adoption of sustainable LPG within the industry?

Liquid Gas Europe: Alternative production pathways that directly convert feedstocks to bioLPG are under development. Non-HVO/SAF bioLPG capacity should more than triple to 77,000 mt/year by 2025.

For instance, Polish firm Ekobenz and UGI International led the way in 2021 with their bioLPG from ethanol technology. In 2022, several European LPG companies teamed up with U.S. energy research non-profit organization GTI Energy to develop, bring to production and deploy technology to convert biogas into bioLPG and other renewable fuels.

Green LG Energy, a new joint venture of five leading Italian companies, aims to reach 10,000-20,000 mt of output from a pilot plant within two years using GTI’s technology. In Germany, retailer Friedrich Scharr has also signed an agreement to access the GTI technology, as has a consortium in the U.S., rLPG North America.

SHV Energy is also collaborating with GTI Energy and Drochaid Research Services to develop their designs for bioLPG plants using bioethanol. SHV Energy also has a strategic partnership with Lanzatech to use its carbon capture and transformation technology to bring renewable propane to the market.

Renewable and recycled carbon DME is also gaining increasing attention. U.S. firm Suburban Propane has sold the first-ever propane and rDME blend in California using rDME from Oberon Fuels’ Maverick Innovation Centre. Oberon has plans to raise rDME production to 500,000 mt/year by 2027. Netherlands-based joint venture Dimeta launched its 50,000 mt/year rDME project in Teesside, in Northern England, in May 2022, for completion in 2025.

These developments clearly showcase the interest within the industry in finding new pathways to develop renewable liquid gases in the years ahead.

For much of 2023, the US propane industry dealt with high inventories, strong production and weak demand, and NGL market sources believe it will continue to face those headwinds in 2024.

US propane inventories remained well above their five-year average highs at the end of 2023 based on Energy Information Administration data.

In addition, Permian Basin production is projected to continue to increase, adding still more to storage. In September, the EIA said that ethane output from the Permian Basin in the first half of 2023 was 10% above 2022 production.

Forecasts for the 2023-2024 winter were unremarkable, providing little opportunity to whittle down stocks. The National Oceanic and Atmospheric Administration is predicting above-normal winter temperatures across much of the US and, if that pans out, it will bode poorly for domestic propane demand.

Increased exports are viewed as the most available way of managing the bearish influences in 2024.

But a key caveat is that much of Asia, an important buyer of US propane, remains in recession, with many ethylene and propane dehydrogenation plants there operating below capacity.

The ability of the US to export more NGLs hinges on the expansion of export facilities. To that end, Enterprise Products Partners and Energy Transfer each plan to expand their facilities from 2024 through 2026, with the bulk of the work scheduled for 2025 and 2026.

Enterprise is planning to add a flex ethane/ethylene capacity project at Morgan’s Point terminal in Texas, where it will convert a 120,000 b/d ethane train to a flex ethane/ethylene expected to come online in the second half of 2024. That will include a 900,000-bbl refrigerated ethane tank that beginning in the second half of 2025, will enable loading rates of up to 45,000 bbl per hour onto a vessel.

Enterprise also plans to build a facility in two phases at its Neches River NGL terminal in Texas. The first phase, set to begin operations in the second half of 2025, will consist of an ethane-only refrigeration train with a capacity of 120,000 b/d, a loading dock, and a 900,000- bbl refrigerated ethane tank. The second phase, which is expected to enter service in the first half of 2026, will include a flex ethane/propane refrigeration train with a capacity of 180,000 bbl of ethane or 360,000 bbl of propane, or a combination of the two.

Energy Transfer, at its Nederland terminal in Texas, is working on an expansion that will add up to 250,000 bbl of NGL export capacity by mid-2025. It also is an optimization project at its marine terminal in Marcus Hook, Pa., that would add incremental ethane refrigeration and storage capacity.

“The most important thing is the end of the chemical industry recession in China, Japan & Korea,” Dan Lippe, principal of Petral Consulting, said of the export market, noting that China has postponed six-seven PDH plants given its weaker economy.

Lippe, however, said there are two factors that point to potentially significant increases in Asian propane demand in the new year. First, as demand for ethylene-based chemicals (polyethylene, etc.) recovers, operating rates in Asia (China especially) will increase and total demand for propane as feedstock will rise.

Second, he said crude oil production from the US and Iran will continue to increase in 2024. Saudi Arabia has made its first major production cut (1 million b/d in July-September with this voluntary rollback extending into February or March).

According to Lippe, as Iranian and US exports to Asia continue to rise, Saudi Arabia will face the same tough choices – make another major production cut or step aside and watch prices fall. “Before the end of 2024, someone in the Middle East will make significant cuts in oil production and gas plant propane supply will also drop again,” Lippe said. The US, he continued, “is the only alternative supply source with sufficient depth to offset these supply losses.”

Canadian exports also move to Asia and as the petrochemical market recovers, any additional resources not being supplied by Canada would have to come from the US Gulf Coast, Lippe added.

Henry Hub natural gas prices were down by more than 25% in the fourth quarter of 2023, suffering from the same pressures as propane – high stocks and little in the way of sustained cold weather. EIA reported US natural gas stocks in the week ended Dec. 8 total 3,664 Bcf. That’s 245 Bcf above where they were in the comparable week of 2022 and 260 Bcf above the five-year average of 3,404 Bcf.

In addition, natural gas prices at the Waha Hub in West Texas, near the Permian Basin, have fallen sharply.

Oil and NGL prices tend to slide at the end of the year, and West Texas Intermediate crude prices were ranging between the high $60s/bbl to low $70s/bbl in mid-December.

“If crude changes direction, you could see some strength in propane,” David Thompson, executive VP of consultant Powerhouse told OPIS. “I’m not calling for it yet.”

Most NGLs have followed typical seasonal patterns so far in the fourth quarter, but for isobutane, which in November developed an especially wide premium to normal butane that was loosely attributed to increased octane demand in Latin America. But by mid-December, the isobutane-normal butane spread returned to more usual levels.

Ethane, which fell to multi-year lows of 17.125cts/gal in mid-December based on OPIS price history, was also an anomaly. The price drop was attributed to either a company-mandated reduction in internally owned inventory before year’s end or a reduction in inventory for year-end tax purposes.

“Ethane supply is so plentiful that all traders, buyers and producers know gas processing plants’ recovery costs are the predominant driver,” Lippe said. “Recovery costs declined during November and December due to falling natural gas prices at Henry Hub as well as at other regional pricing points such as Waha.”

With export capacity from the US expected to further increase in 2024, shipowners are upbeat about the possibility of more LPG trade, continuing the momentum from 2023 where freight rates and profits climbed.

North America LPG exports by VLGCs are set to grow by 12.3% in 2024 and then 8.7% in 2025, according to BW LPG. VLGC shipments from the Middle East are forecast to grow by 4.9% in 2024 and 3.4% in 2025.

Both Avance Gas and BW LPG noted they expect deliveries to China to continue to grow in 2024. Chinese propane dehydrogenation (PDH) demand is expected to remain resilient, despite weak margins, as refiners are forced to run their PDH units to generate cashflow for handling debt, Avance Gas added.

BW LPG reiterated its positive view for 2023 and 2024 amid high volatility, noting key underlying drivers that include high oil prices leading to increased oil and gas exploration conducive to continued strong export growth from the US as well as steady growth from the Middle East and new PDH plants coming on stream in China.

Transit Restrictions at the Panama Canal Cause Ripple Effect

Ongoing transit restrictions at the Panama Canal are expected to amplify inefficiencies in the VLGC fleet, according to shipowners.

Avance Gas expects the continued growth in trade, delayed deliveries and the inefficiencies in the Panama Canal will likely absorb the fleet expansion.

Transit restrictions at the Panama Canal have caused more ships to ballast back to the US the long way round via the Suez Canal or the Cape of Good Hope, in comparison to voyages a year ago, BW LPG said, adding that alternative routes will lead to as much as a 50% increase in voyage duration.

With fewer transits at the Panama Canal, voyage distances ultimately increase, causing more logistical disruptions, which in turn lead to higher freight costs amid a dwindling supply of readily available carriers.

While November is typically a busy month at the canal and fees are often inflated above average, after further restrictions were implemented at the end of October, auction slots costs have skyrocketed.

The average fee paid for a VLGC transit through the Neopanamax Locks at the Panama Canal in November reached $2.157 million. A new record high fee was paid for a transit on Nov. 8, hitting just shy of $4 million, in addition to the regular transit fee of $400,000. Comparatively, the average fee paid for LPG carrier transits was around $982,500 in November 2022.

Continued Momentum for Shipowners

Looking ahead, Avance Gas lists the current global VLGC fleet at 373 carriers, with an orderbook of 69 vessels or 18% of the existing fleet. Twenty carriers are due for delivery in 2024 and a further 13, 18, and 12 due in 2025, 2026 and 2027, respectively.

Following a strong year for VLGC newbuilds, little downward pressure was recorded on freight rates. A continually tight VLGC supply/demand balance, strong arbitrages and logistical constraints have kept freight rates holding above five-year averages, New York-listed shipowner Dorian LPG said.

The cost of freight for a VLGC loading a cargo from Ras Tanura to Chiba averaged $107.81/metric ton in January-November this year, up from $75.27/mt in the same period last year, according to OPIS pricing data. And in the third quarter, the assessment averaged $121.05/mt compared to $66.69/mt in July-September 2022.

The cost of freight for a VLGC loading from Houston to Chiba averaged $168.36/mt in the first 11 months of the year, compared to $119.19/mt in the same period in 2022. The same freight averaged $189.35/mt in July-September, up from $105.77/mt in Q3 2022, OPIS pricing data showed.

VLAC orders will increase

Lastly, one trend to watch in the gas shipping market is the increasing number of orders for Very Large Ammonia Carriers (VLAC). Shipbrokers have noted they expect to see an increasing number of VLGC owners opting to retrofit their carriers to be able to carry ammonia.

At the time of writing there have been 11 VLAC orders placed – not including the six optional VLACs attached to an order from Denmark-based shipper Maersk Tankers. The majority of the VLACs on order will not be delivered until 2026, with two due to arrive in 2027.

Ammonia is considered a carbon neutral alternative fuel given that it does not emit any carbon dioxide during combustion, making it a promising candidate for decarbonizing the maritime shipping industry.

–Editing by Rob Sheridan, 

Starting in April 2024, the Moroccan government will end all subsidies on liquefied petroleum gas (LPG) that have been in place since the early 1940s. The North African country will gradually increase the price of butane by $1 each year until it reaches the ‘real market price.’ These price hikes aim to control excessive consumption but also ease the financial burden on the state, which spent over $2 billion subsidizing the cost of LPG last year.

Mohammed Rachid Idrissi Kaitouni, president of the Energy Federation in Morocco, spoke to OPIS about ending subsidies and the challenges ahead.

OPIS: How do butane subsidies in Morocco pose a challenge in the context of encouraging LPG consumption?

Idrissi Kaitouni: Recent statistics show a global increase in LPG consumption. However, LPG consumption rates in many sub-Saharan or North African countries, still lag behind certain countries, such as India, which has seen significant consumption growth in the past 10 years. The growth in LPG consumption in India has helped halt deforestation and put an end to the use of charcoal or wood for cooking. Unfortunately, in Africa, the per capita consumption across different African countries does not exceed 10 kilograms/year, which is very low.

Morocco ranks at the top globally with a consumption of 73 kg/year per capita, which is enormous. This is beneficial for the industry, but there’s a downside to this. In Morocco, butane LPG is subsidized, with approximately 50% of its actual price subsidized by the government.

OPIS: And are those subsidies about to end next year?

Idrissi Kaitouni: Yes, the subsidy on LPG has been a reality in Morocco for several decades and has continued to grow each year. Currently, Morocco has a population of 37 million people and consumes around 3 million metric tons of LPG. This has helped to slow down deforestation and replaced the use of firewood for heating. However, this subsidy is a  significant burden on the government, having spent $2.1 billion on the 3 million mt of LPG consumed in 2023.

Other countries, such as Chile, Brazil, or India, have faced similar issues related to subsidies. Morocco plans to gradually reduce subsidies in 2024.

To be more precise: Currently, a 12 kg bottle is sold for $4 in Morocco, whereas its actual cost price is around $10 per bottle. Next year, the price will increase by one dollar to reach $5. This increase will continue gradually until it reaches the real market price. This process will be adjusted based on market fluctuations.

OPIS: Couldn’t this potentially harm consumption since growth was supported by subsidies?

Idrissi Kaitouni: You are right. In many countries, subsidies are used to encourage consumption. However, when the quantity consumed becomes significant and the market matures, it is important to target the subsidy and analyze the
consumption. Currently, in Morocco, someone with a comfortable income, earning for example $5,000 or $10,000 per month can buy a gas bottle at a subsidized price of $4. That’s not normal. This leads to abuse and overconsumption.

To illustrate, at one time in the former Soviet Union, LPG was practically free, leading to considerable waste. People would leave stoves on to avoid using matches because matches were more expensive than gas. That’s an extreme example, but it highlights the abnormality, which should be corrected by targeting and then allocating appropriate aid to the populations who need. It’s essential to look at consumption to avoid a waste of energy and resources.

OPIS: What are the main challenges currently facing the LPG industry in Morocco and the wider African continental region?

Idrissi Kaitouni: Many African countries must encourage the use of LPG to avoid increased deforestation. That’s a big challenge for many of them with a big rate of energy consumption.

In North Africa, the main challenge for Morocco is to analyze and optimize gas subsidies in the country. This transition must be carried out while maintaining a price structure defined by the state. Once liberalization is in place, the market could more effectively adapt to consumer needs. However, this comes with challenges. There might be initial resistance. The experience of other countries which have followed a similar transition path by organizing their subsidies, show that growth stagnates for one to two years, then picks up again and resistance from consumers slows down after one or two years.

OPIS: So, despite the subsidy cuts, do you expect to see a growth in consumption next year?

Idrissi Kaitouni: Moroccan demand for LPG has seen a steady growth of around 3% every year. In 2023, we imported around 3 million mt of butane, and 75% of this amount came from the U.S. The rest came from Europe or West Africa. Next year, we expect a growth rate of approximately 3% again.

OPIS: In the context of sustainability and environmental concerns, how is the Moroccan Energy Association promoting the use of LPG as a cleaner energy alternative?

Idrissi Kaitouni: There is a big debate in America and Europe about increasing bio-LPG, including recycled-Dimethyl Ether (r-DME) production, to make LPG greener. But countries like Morocco and other African nations have other
priorities to deal with.

OPIS: So, how are plans to increase bio-LPG output affect the Moroccan energy association?

Idrissi Kaitouni: It’s more of a conversation between Americans and Europeans. However, for countries like Morocco and others in Africa, it’s a secondary issue. Right now, LPG is already cleaner and more environmentally friendly compared to coal, wood, oil, or diesel.

Our priority is to increase the consumption of regular LPG to ensure that it remains a cleaner alternative compared to other polluting fuels. Of course, Morocco is currently focusing on energy transition, particularly interested in hydrogen and renewable energies, especially wind and solar power. The country is also committed to decarbonizing industries, promoting the use of green energy rather than sources like coal or other polluting fuels.

OPIS: So, you are encouraging increased use of traditional LPG as a clean energy source?

Idrissi Kaitouni: Exactly. Our goal is to promote the use of LPG as a clean alternative to many other energy sources. The first step is to substitute coal, wood, oil, and diesel. Of course, if biofuel production in these countries becomes available on a large scale and more competitive than regular LPG, it would become interesting for Morocco and the wider region as well.

Ahead of the European Union’s ambitious proposal to ban the sale of new gasoline and diesel internal combustion (IC) engine vehicles by 2035, the Italian liquefied petroleum gas (LPG) Association is preparing for a key review in 2026. The association, led by president Andrea Arzà, will challenge the EU proposal, focusing on the limitations and pitfalls a complete ban of IC engine vehicles would bring.

Arzà spoke to us in November during the LPG week in Rome, on the association’s initiatives and expectations for the LPG market.

OPIS: How does the Italian Association plan to persuade the European Union to consider its proposals for using more LPG instead of completely banning combustion engine (ICE) vehicles?

Arzà: The EU’s “Fit for 55” plan aims for a 55% cut in emissions by 2030 and climate neutrality by 2050. A key part is banning IC engines, which will have the greatest direct implications for the LPG sector. We believe the EU’s plan overlooks emissions linked the whole life cycle of technology, for example from sourcing and production to utilization as well as end-of-life waste management.

We conducted a study, presented during the LPG Week conference, which introduced a fuel blend for cars using LPG, including bio-propane, along with renewable dimethyl ether (rDME). This combination—20% rDME and 80% propane—adheres to EN 589 standards and showcases a 10% to 15% reduction in emissions compared to traditional gasoline.

Another study from the Polytechnic University of Milan analyzed the entire life cycle of electric and IC engines. Electric engines emit zero emissions while running, but we need to look at the entire life cycle of the electric engine, from production to consumption.

This study found that no energy source guarantees a complete emission cut, even if fully renewable. So, adding 20% renewable LPG cuts emissions by 10%. Scaling up this blend with more renewable product significantly boosts performance. Imagine the impact of an 80% renewable LPG and 20% gas blend on the industry!

We strongly believe that we need cars with IC engines powered by renewable fuels instead of electric cars only. For us the priorities are to have a variety of energy sources, an option of choice, with no competition between the different sectors, as well as performance and efficiency.

OPIS: So, what’s the problem, why can’t I drive my car with a renewable LPG fuel blend?

Arzà: In Italy, we’ve made significant progress, but it’s unfortunate that only a few European countries embrace LPG usage due to cultural differences.

For instance, the LPG market in Poland and Turkey surpasses Italy’s market size. Interestingly, the markets in France and Germany are relatively smaller, but they use LPG. Economically robust countries like Germany are less affected by price increases, yet they use more LPG.

The other challenge is finding enough feedstock to produce the quantity of LPG needed. But that’s part of the process. Italy’s refiner Eni said during LPG Week that it plans to increase production of feedstock from organic sources to produce more renewable fuels, including bio-LPG. In Italy Eni declared that they want to increase biofuel production to more than 5 million metric tons/year by 2030. As a side product, bio-LPG production is expected to be around 200,000 mt/year.

OPIS: What is your outlook for the bio-LPG market?

Arzà: By 2030 we will have 200,000 of bio-LPG just from Eni, but it’s possible that companies like Total or BP could develop the technology needed to also produce bio-LPG.

The size of European bio-LPG supply today is less than 200,000 mt/year. We hope to achieve around 1 million mt/year of bio-LPG supply by 2030. If everyone contributes in a similar manner to Eni, I don’t see any reason why bio-LPG production shouldn’t increase. To achieve this goal, we estimate an investment of around €1.5 billion ($1.7 billion) will be required to establish enough bio-LPG production plants by 2030.

OPIS: With the global push for energy security, could you discuss Italy’s strategic priorities in ensuring a reliable and secure supply chain for LPG, and how the association is involved in these efforts?

Arzà: Our goal is to conserve the size of the industry, create molecules that can be blended into the gasoline stream in a safe manner, with no adverse impact for the end-user, nor for the industry. We want to increase blending fossil fuel products with larger quantities of non-fossil fuel products. This can be challenging but also has advantages, as it conserves existing infrastructure and requires less investment while ensuring safety of users.

OPIS: What is the current state of the LPG market in Italy and Europe in terms of consumption and supply? How are you pushing for more consumption without changing the infrastructure?

Arzà: Presently, the Italian market consumes around 3.5 million mt/year of LPG. 50% is consumed by the automotive sector. The domestic sector consumes 25% and the remainder is used by the industrial and commercial sectors.

We hope to maintain and increase consumption as well as supply. We have different scenarios. On the one hand, there are challenges in increasing consumption due to new technology that decreases demand for fuels like LPG. If I have an engine for production or operation, which needs less product for the same output, it is clear that it will potentially reduce regional or even global consumption. For example, new technology allows us to move less, travel less and need less fuel.

OPIS: What are the advantages for adopting a more widespread use of LPG?

Arzà: The replacement of light and heavy oil derivatives with less polluting alternatives represents a significant advantage for the LPG industry. Eliminating pollutants is imperative in both industrial and domestic applications.

This transition doesn’t necessarily involve an immediate switch to heat pumps or electric cars but could instead include a shift from oil to LPG and subsequently to other equipment. This strategic direction offers us an opportunity to be part of the energy transition and maintain or increase consumption and supply of LPG.

OPIS: Where do you see the LPG market headed?

Arzà: Over the next five years, I anticipate a stable market with consistent consumption at 3.5 million mt/year.

The automotive sector is poised to drive LPG demand, as electric cars remain extremely expensive for many, especially low-income consumers who rely on second-hand cars. In 2023, in Italy the number of cars powered by LPG has grown by 10% compared to 2022. That’s one of the best performances ever. This trend is driven by LPG’s cost advantage—50% cheaper than traditional gasoline—and the cautious attitude of potential buyers that await more affordable electric options.

However, the decision to phase out IC engines has adversely impacted the residual value of older cars for those with limited spending power. But despite these challenges, I anticipate another successful year in 2024, with an estimated 10% growth in demand for LPG.

OPIS: How will you navigate the balance between traditional uses of LPG and emerging trends in the energy sector, such as renewable energy integration, especially as the government wants a “mixed energy resources” approach?

Arzà: Innovation is crucial for survival. Our current focus lies in the automotive sector. The challenge we face is to prepare for the 2026 review, ensuring we’re equipped with solid evidence, consistent supply, and comprehensive studies showcasing the performance of LPG. To achieve this, we need to innovate both in terms of producing new molecules as well as new technology.

A consolidation frenzy in the midstream sector is seeing integrated majors snap up gathering and processing firms active in America’s shale hinterlands, as the majors jostle with one another to source more y-grade (the raw mix of natural gas liquids) to feed into their expanding fractionation and export operations.


Anyone working in the gas liquids market knows the need (and hassle) to convert global NGLs.

NGLs — a.k.a. ethane, propane, pentanes+, normal butane and isobutane  — are shipped all over the world, every day, from export hubs as diverse as Mont Belvieu, Texas, and the Arab Gulf.


NGLs, like other hydrocarbons, have undergone a metamorphosis in recent years, given wild fluctuations in crude and natural gas prices in the wake of Covid-19 and the war in Ukraine.


With all due respect to the Jackson Five, sometimes A-B-C is not easy as 1-2-3.

We’re talking NGL or LPG or LNG – abbreviations for gases that can trip up even a seasoned energy market veteran. Let’s take a moment to straighten out our definitions for these important gas terms and then familiarize ourselves with common uses for this hydrocarbon alphabet soup. There will be a very easy-to-follow graphic that you can print out and ponder at your leisure, too. We’ve got your back!