Published February 2017
The global propane business is operated by oil and natural gas companies from the public and private sectors. Major global end uses for propane include consumption for residential/commercial heating and cooking, chemical (ethylene and propylene) production, industrial fuel, engine fuel, and other smaller fuel uses (farm, town gas, and refinery).
Natural gas accounts for about 70% of the global production of propane, with refineries accounting for the remaining 30%. Historically, propane from natural gas has grown the fastest and is forecast to continue to do so during 2016–21, since refineries are limited on production capacity while natural gas/propane/butane is being sourced in greater quantities from shale oil/gas and oil sands, and horizontal drilling.
The following pie chart shows world consumption of propane:
Northeast Asia and the United States are the leading consumers of propane, accounting for about 24% and 21.5%, respectively. Northeast Asia is forecast to have the highest growth at just over 5% annually during 2016–21.
The two leading applications are residential/commercial heating and chemical production. In 2016, residential/commercial heating accounted for about 47% and chemical production for about 34%. Industrial and engine fuel accounted for approximately 8.0% each. All other applications accounted for about 3%.
Chemical consumption is primarily in the production of ethylene and propylene. Much of the chemical growth is related to the growing use of propane dehydrogenation in the production of ethylene, which has been made possible through the low-cost availability of natural gas/propane/butane as a result of shale oil/gas, oil sands, and horizontal drilling. Propane dehydrogenation has been growing rapidly since 2011.
Globally, average growth in the use of propane dehydrogenation was about 20% per year during 2011–16, and is forecast to be 12.5% per year during 2016–21, and 9.5% per year during 2016–26. Northeast Asia, led by China, is the leading consumer of propane in propane dehydrogenation, with consumption having grown at a rate of about 58% per year during 2011–16, and forecast to grow at almost 14% per year during 2016–21. The United States is the second-leading consumer, with consumption having grown at a rate of about 25% per year during 2011–16 and forecast to grow at about 24% per year during 2016–21. As a result of more shale-based ethane being consumed as a feedstock in US steam crackers, production of propylene from ethane has declined while production from propane has increased. Ethane yields very little propylene, while heavier feedstocks like propane produce more.
Polypropylene is the second-largest-volume plastic consumed globally and is benefiting from the supply of competitive natural gas feedstock in North America as a result of the growth of on-purpose production of propylene, the chemical building block of polypropylene. Investment in on-purpose production of propylene, primarily via propane dehydrogenation, will serve to replace declining supplies from the traditional sources, olefin crackers and refineries.
Global demand for propane is forecast to grow at 2.7% annually during 2016–21. Production of propylene by propane dehydrogenation is in part leading this growth.