February 19, 2015 [OPIS] – Lipigas, Chile’s largest LPG distributor with 38% of the market (Abastible has 36%, and Gasco 26%), is putting the finishing touches on a new LPG import terminal on Quintero Bay, right next to Gasmar S.A., Chile’s long-time destination for LPG imports.
The new terminal is being built in partnership with Oxiquim S.A., Chile’s principal chemical producer. Oxiquim Terminals division actually owns the marine dock that offloads all the propane that goes into the tanks at Gasmar, and the dock will serve the same function for Lipigas. But Lipigas is the project mainspring, on the strength of a 25-year contract they signed to offtake supplies through the terminal.
The surprise is that Lipigas-Oxiquim got to this point so fast, just in time to provide direct supply to the company during the busy season leading up to the southern winter, June-August.
Company executives insist that they’re bringing the project to completion right on schedule. But skeptics on the outside informed OPIS two years ago (April 10, 2013) that Lipigas-Oxiquim could never build a marine terminal from scratch on a two-year schedule. The skeptics insisted that they would encounter difficulties on the way to completing, not just a 50,000 cubic meter (50K cbm) tank, but all the ancillary facilities, like a truck-rack, that would have to accompany the tank.
By contrast, the big 60K cbm tank that became fully operational at Gasmar’s terminal in November was built into an existing major facility. The only component Lipigas did not need to build were the waterfront facilities, since the Oxiquim dock will serve them as well as Gasmar.
Nevertheless, a member of the Lipigas management team says construction is basically complete and the fully refrigerated tank is in cool-down now, already half-full of propane at -44 degrees C.
Not only that, the first cargo is on the way from Mont Belvieu. Ship arrival is scheduled for the first week of March. Our management source did not provide cargo details, like the ship, or the terminal at Mont Belvieu, or whether they will take half a VLGC cargo, 22,000 metric tons (22 KT) of a 44-KT cargo, or receive a smaller vessel. At 50K cbm, nominal capacity of the new tank is 29 KT, just the right size to take half a cargo, with the other half perhaps going into Gasmar’s expanded facility.
It’s still summer in Chile, so the early arrival of this cargo provides the opportunity to get all parts of the new terminal working smoothly before crunch time comes and they have to be receiving cargoes on a continuous basis. The connection to Sonacol pipeline, the 12-inch outlet pipeline to Santiago, is complete, as is a three-spot truck rack to serve the Valparaiso Region north of the capital.
In light of the Gasmar expansion, which looks to provide adequate LPG import capacity for the entire country, OPIS posed the question of what the primary drivers behind the project were. Our management source suggested three. One, there is economic value in performing the logistics function for yourself. Two, the combined capacity at Gasmar and Lipigas offers optionality to engage in international LPG commerce. Three, the project anticipates potential concerns of regulators.
As for logistics, Gasmar was the perfect solution when the nation’s LPG import requirement totaled 300 KT per year. None of the companies was big enough to do an import terminal on its own, but together they created a successful business. Then in 2012, imports took off, hitting 485 KT. For 2013, Gasmar reported bringing in 19 cargoes for a total of 715 KT. The import business has reached the critical mass where one company can support a terminal for its own supply needs.
However, the import business has also reached the critical mass to attract regulators’ concerns. With 65% of the nation’s LPG supply funneling into Gasmar’s lone import facility, people might start to perceive a monopoly situation. Like most countries, Chile has an anti-trust regulator, the Tribunal de Defensa de la Libre Competencia (Free Competition). It was a highly proactive step on Lipigas‘s part to build a second terminal at Quintero and head off the regulators’ concerns at the pass.
The second new terminal
As the largest LPG distributor, Lipigas will continue to be a Gasmar customer. And as suggested above, it is likely the two terminals will work closely together on split VLGC cargoes where each of them takes 22 KT. But the main location where Gasmar will continue to be a primary supply source for Lipigas is down south in the Bio-Bio Region, 320 miles south of Santiago.
Chile has three metropolitan regions: Santiago, Valparaiso (near Santiago), and Concepcion-Talcahuano, twin cities on the coast of Bio-Bio region. Sandwiched between the two main cities is Hualpen, home of the 116,000-b/d Bio-Bio refinery, which, with the 104,000-b/d Concon refinery near Quintero, makes up Chile’s 220,000 b/d of distillation capacity.
Talcahuano sits at the base of the Tumbes Peninsula that juts out into the Pacific. The Port of Talcahuano is on the east side of the peninsula and the Port of San Vicente is on the west side. This small San Vicente Bay provides a sheltered harbor for the long petroleum dock that serves the crude import and product export transportation needs of the refinery.
In 2006, Abastible built the small San Vicente LPG terminal just back of Bio-Bio refinery and on the same road and pipeline route. They put in two 5,000-cbm semi-refrigerated spheres with capacity for about 5,600 tons of propane between them.
This little facility abruptly gained importance in December 2013 when Gasmar signed up with Abastible for a 50% interest in a greatly expanded San Vicente terminal. The partners changed the name of the terminal to Hualpen Gas and completed work on a 30,000-cbm tank. Now, the formerly little San Vicente terminal has 40,000 cbm for about 23,000 tons of propane.
It’s not quite big enough to offload a half-VLGC cargo of 22 KT, but it can easily unload a full Handysize vessel. With the expansion, Hualpen Gas is certain to become an essential LPG supply hub for Chile’s whole southern region south of Concepcion. And with this diversity of supply sources, Lipigas can alleviate potential concerns of the competition regulators.
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