Energy Ministry proposes developing exchange trading of LPG
MOSCOW. Nov 19 (Interfax) - Russia's Energy Ministry is in favor of organizing exchange trading of liquefied petroleum gas (LPG) as well as natural gas, Deputy Energy Minister Kirill Molodtsov said at the international Russian Gas forum.
"One of the priorities is organizing exchange trading of not only natural gas, but also, possibly, C3-C4 fractions (propane-butane), so that this would also be an exchange commodity for households and its pricing would be transparent," Molodtsov said.
He said the ministry still has plans to launch electronic trading of natural gas next year.
Molodtsov said that the Energy Ministry is looking next year to use market mechanisms to meet all demand for LPG based on 'balanced fuel objectives.' "The balanced objectives for supplying households were formed back in the 1990s, and are in essence a holdover. The amount of supply can be regulated on market terms. We think that next year we can carry out the task of the balanced supply of gas, which today is not more than one million tonnes a year, being satisfied on market terms," he said.
Earlier, the Energy Ministry worked up a draft governmental resolution abolishing state regulation of the price of LPG for household needs. The ministry explains that the production of LPG in Russia is totally sufficient to meet domestic needs and companies producing it are prepared to do so at fair market prices. In 2013, overall LPG production in Russia will amount to about 12 million tonnes versus domestic market consumption of 8-9 million tonnes. In 2012, as per the 'balanced fuel objectives' there was sold 700,000 tonnes of LPG, or about 6% of total output.
Exchange trading of liquefied gases was launched on the Moscow International Commodities & Energy Exchange (MICEX) and St. Petersburg International Mercantile Exchange (SPIMEX) back in 2010. Sibur, Novatek and Lukoil offer their products for trading, but very small amounts of gas are sold on the exchange. Market players attribute this primarily to the fact that producers do not have substantial amounts available, as most LPG is either used for internal processing into petrochemicals or exported. Another potential use for LPG, as a motor fuel, is not currently common.
