The demand for propane is expected to be, on average, 100,000 b/d lower in 2014 compared to 2013 due to reduced demand from petrochemical plants, according to the U.S. Energy Information Administration (EIA).
In a "Today in Energy" brief released Thursday, EIA said that although propane use will increase during the winter season as a heating fuel and during the harvest season to dry crops, petrochemical consumption of propane is not affected by seasonal change.
"Beginning in mid-2013, higher propane prices reduced demand from petrochemical users," EIA said. "This decline is evident after accounting for the seasonal variation in annual consumption: even though temperatures, as measured by heating degree days, were 9% colder in 1Q2014 compared to the previous year, propane consumption was 7% lower."
According to EIA, the primary use of propane by the chemical industry is as a feedstock for the production of ethylene and propylene, both of which are integral for the production of plastics.
"Ethylene producers are sensitive to feedstock prices," EIA said. "During 2013, when propane prices increased relative to ethane prices, ethylene crackers began substituting ethane for propane. This trend continued into 2014, as the price spread between propane and ethane widened."
EIA said it does not expect ethylene plants to switch back to using propane feedstock in 2015, as a growing supply of ethane is expected to continue driving ethane prices lower compared to propane. "However, several new propane dehydrogenation plants, which use propane to produce propylene for chemical and plastic manufacturing, are expected to come online in 2015-16, which should contribute to some growth in propane use in the chemical industry," the agency said.