LONDON, Nov 4 (Reuters) – A U.S. energy drilling boom is revolutionizing the niche market for liquefied petroleum gas (LPG), bringing down global prices and challenging established exporters in the Middle East.
The changes are the latest sign of the global impact of a drilling renaissance in the United States that has already hit oil and natural gas. And like oil and gas, it is U.S. producers of LPG who are set to gain most while established exporters may struggle with new competition in a suddenly altered landscape.
Unconventional oil and gas drilling, including shale gas extraction from fracking, is controversial because it requires large amounts of water and chemicals to be pumped at high pressure into the earth, and some countries such as France and Bulgaria have banned the technology.
In the United States, however, shale oil and gas has resulted in a sharp increase in production, turning the country from a large energy importer into an oil and gas exporter.
In the LPG market, which is mostly known for use of butane and propane in household devices but increasingly also in transport, analysts say that North America will vie with the Middle East as the world's top LPG supply region this year and in 2014 at average daily production rates of around two million barrels per day (b/d).
U.S. shipments are expected to bring down global LPG prices as top Middle Eastern suppliers like Saudi Arabia and Qatar have to adjust to their new low-priced competitors.
"The stars are aligned for increased U.S. LPG exports to Asia," U.S. energy researchers ESAI Energy said in a research note in October.
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