Increasing demand for liquid petroleum gas (LPG) on account of its growing adoption as a domestic fuel in Asia Pacific and Africa is expected to remain a key driving factor for the global butane market. Governments across these regions have been promoting the use of LPG as domestic fuel to replace coal and reduce its carbon footprints. The government offers LPG cylinder at subsidized rates to consumers which have been gaining acceptance and further driving the global butane market. Butane is used in fuel manufacturing processes due to its properties such as high flammability and easily liquefiable. Technological advancements in extraction and processing of natural gas liquids (NGLs) have given impetus for market expansion. Capacity expansion coupled with increased spending on development of refineries and petrochemical complexes particularly in the Middle East is expected to have a positive influence on butane market growth over the forecast period.
Volatility in spot prices of crude oil and NGL is projected to remain a key challenge for companies operating in the global butane market. Increasing groundwater contamination due to leakage of MTBE along with growing demand for alternatives such as ethanol for gasoline blending is also expected to impact market growth negatively. The U.S. EPA has laid stringent standards for fuel & additives, complying to which the regulatory body had decided to ban MTBE to be used for gasoline blending in the nation. However, MTBE is still used for gasoline blending across Asia and Middle East.
Global butane market volume by application, 2012-2014 (Million Tons)
LPG emerged as the leading application segment in global butane market owing to its increasing demand as a fuel for cooking and heating purposes across household, commercial as well as industrial segments. Butane and its isomer are used for gasoline blending in refineries as oxygenate as well as to improve its octane rating. It is also used as feedstock for manufacturing several petrochemical intermediates, such as butadiene and ethylene, for the production of synthetic rubber and compounds used in aerosol propellants, deodorants, and cigarette lighters. The gas also finds application in refineries to improve the flammable properties of the fuel. Iso-butane is expected to replace the conventional hazardous chlorofluorocarbons (CFC) which were previously used as propellants, refrigerants, and deodorants. Autogas is expected to be the fastest growing application segment for LPG (butane) on account of consumer shift towards adoption of natural gas vehicles. Increasing adoption of autogas based vehicles particularly in Europe and Asia Pacific is expected to drive the global butane market over the forecast period.
Asia Pacific emerged as the leading regional butane market at approximately 30% of total demand in 2013. The surge in demand for gas in refineries and chemical processing plants in China and India is expected to drive the regional butane market. Asia Pacific butane market is characterized by high demand from LPG for cooking and heating purposes among the populations of rural and suburban regions of India and China. Government support in terms of subsidies and multiple connections for LPG were the major factors which contributed to the surge in demand for LPG and further butane in the region. The Middle East is the major regional producer of butane owing to the abundant availability of natural resources. Europe is expected to emerge as another major regional consumer in the global butane market. According to the forecasts by EIA, which estimated the overall energy consumption in Europe is expected to grow at an average rate of 8% over the next six years. North America is also anticipated to have a positive outlook towards the growth of butane market through its auto fuel and petrochemicals markets. The rapid development of shale gas in U.S. is expected to support the sustainable supply for natural gas liquids and will eventually benefit the butane market over the next several years.
The global butane market is highly concentrated exhibiting oligopolistic characteristics. Key market participants compete against each other on the basis of services and overall profitability. Since the market is comprised of several market players and is highly capital intensive the barriers to entry for new entrants are quite high. For a new market player to enter into this industry and sustain the existing competition, the company has to bring some innovation in terms of product development or substitute products with added applications. Some of the market participants have been involved in R&D for developing a bio-based alternative in order to create niche applications in butane market. Major players operating in this market include British Petroleum (BP), ConocoPhillips Inc., Chevron Corporation and Exxon Mobil Corporation. Other companies having significant operations in butane market include Royal Dutch Shell PLC., China Petroleum and Chemical Corporation (SINOPEC), Total S.A., China National Petroleum Corporation (CNPC), Praxair, Linde and Air Liquide.
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