BP aims to double LPG imports, sales in China by 2010

BP aims to nearly double imports and sales of liquefied petroleum gas (LPG) in China by 2010, as it plans to widen its distribution network to overcome rising competition, a senior executive said on Wednesday.
The energy major seeks to raise its LPG import volume to 1 million tonnes per year (tpy) by 2010 from 600,000-650,000 tonnes, with the start-up of its new storage facility in southern China, Ray Taylor, president of BP China LPG told Reuters.
BP plans to boost LPG sales to 500,000 tonnes during the period to more cities, up from 260,000-270,000 tonnes currently done via its direct-distribution networks in nine cities in eastern and southern China, along with the higher imports, he said.
To achieve the direct sales target, the major will focus on setting up new networks in big cities in southern and eastern China by acquiring LPG bottling companies, Taylor said, without elaborating on the details.
"BP wants to stay as a leader in China by becoming fully integrated LPG player," he said in an interview. BP's plan to penetrate further into the LPG wholesale and retail business in China is consistent with its strategy of expanding into the country's downstream energy sector. It is already operating hundreds of petrol stations in the country, the focus of its Asian downstream business.
The company has completed its import terminal expansion by commissioning 400,000 cubic metres (cu m) of storages in the southern port city of Zhuhai in December 2006, which was delayed from its original plan of August 2006.
BP, which entered the Chinese LPG market in 1995, also has 550,000 cu m of storage capacities in Ningbo, and 66,000 cu m of storages in Taishan, which was operated by Amoco, the US company it acquired in 1998.
But Taylor said the outlook for BP's import business was being tested by mounting competition from domestic refineries, expansions of terminals operated by other importers, as well as the increasing use of natural gas.
"China is one of the major markets for LPG, but growth in demand is slowing down and competition is getting high. However, it is still an attractive market because of its size," said Taylor.
Overall LPG imports into Guangdong, the biggest import region, fell 14.7 percent in 2006, its first setback since 1990 because of the rise of domestic supply and use of alternatives.
Total imports into China, the world's second-biggest energy user, accounted for 25 percent of the country's demand last year, which was the lowest in five years due to rising domestic production and competition from liquefied natural gas (LNG). China's natural gas consumption is forecast to jump to 60 billion cubic metres (bcm) a year in 2010, up 28 percent from 47 bcm in 2004, the International Energy Agency (IEA) said.
In contrast, demand for LPG, used for cooking and heating, is expected to rise to 26 million tpy by 2010, up about 23 percent from 21 million tpy last year. The competition in Guangdong is expected to intensify as most of the newly built LPG import terminals in China are located in that southern region.
China's total LPG storage capacity is expected to grow 58 percent to 2.26 million cu m by next year compared with end-2005. Guangdong's storage capacity would have more than doubled to 1.17 million cu m over the same period, the Guangdong Oil & Gas Association said.
Taylor said BP would not invest further to expand its terminal as it sees limited growth in the import business. "We already have enough importers here, the industry doesn't want any more," Taylor said.