Cheap natural gas flowing from the U.S. shale boom has created new opportunities for U.S. energy companies to market fuels to China.
China Petroleum & Chemical Corp., the country's largest oil refiner, said Friday that it signed a long-term contract to buy liquefied petroleum gas, or propane, from Phillips 66, a U.S. refiner that spun off from ConocoPhillips. China's state oil giant, known as Sinopec, didn't disclose the length, volume or value of the deal.
中国最大的炼油企业中国石油化工股份有限公司周五表示，已与美国Phillips 66签署了液化石油气长期购销合同。Phillips 66是从康菲石油公司分拆出来的炼油公司。中国石化并未披露合同期限、购买量和金额。
'There has been a substantial increase in propane supply due to the rapid development of shale gas in the U.S.,' Sinopec said, adding that the deal will help diversify its sources of propane, a cheap byproduct of oil refining and natural-gas extraction.
Sinopec's latest deal comes as more Chinese petrochemical companies begin sourcing propane from the U.S. to feed a wave of new chemical plants that can turn propane into more valuable propene, a building block for chemicals used in consumer products like paint, carpets and detergents.
Although Chinese companies can make their own propane, the process is more expensive because of the tighter supplies of crude oil and natural gas in China. U.S. propane prices have traditionally been too high to justify shipments to China, analysts say. However, the boom in U.S. natural-gas production resulting from shale-rock drilling technology has sent U.S. natural-gas prices tumbling to their lowest levels in years. Sinopec said the price of propane in the U.S. is 'more competitive' than in other markets because of rising supplies of U.S. shale gas and as propane produced from natural gas is of higher purity than propane produced from refining.
China imported U.S. propane for the first time in May, and shipped in a total of 111,000 metric tons from the U.S. last year, according to Chinese customs data. China imported another 74,000 tons of propane from the U.S. in January, the data shows.
China's first propane-to-propene plant came online in October, according to Li Li, director of industry research at consultancy ICIS C1 Energy. Five more plants are expected to be completed in 2014 with the combined capacity to process 3.45 million tons of propane a year, she said.