| Title | Petroleum - Royal Commission - 6th Report - Use of liquefied petroleum gas in Australia, I November 1976 |
| Source | Both Chambers |
| Date | 08-12-1976 |
| Parliament No. | 30 |
| Tabled in House of Reps | 09-12-1976 |
| Tabled in Senate | 08-12-1976 |
| Parliamentary Paper Year | 1976 |
| Parliamentary Paper No. | 399 |
| System Id | publications/tabledpapers/HPP032016003015 |
Parliamentary Paper No. 399 /1 9 7 6
The Parliament of the Commonwealth of Australia
THE USE OF LIQUEFIED PETROLEUM GAS IN AUSTRALIA
Royal Commission on Petroleum
Sixth Report
Presented by Command and
ordered to be printed 8 December 1976
The Acting Commonwealth Government Printer
Canberra 1977
© Commonwealth of Australia 1976
Printed by Authority by the Government Printer of Australia
JaUsM Z L â¢Î. A U S T R A L I A , ,/>-
R O Y A L C O M M I S S I O N ON P E T R O L E U M
ummissioner: The Hon. M r Justice YV. H. Collins G.P.O. Box 4377
Sydney, N.S.W. 2001
Telephone 358 3444
rrrretary: Mr J. Kane
1 November 1976.
Your Excellency
In accordance with Letters Patent dated
12 September 1973 , I have the honour to present to you
the Sixth Report of the Commission of Inquiry into the
use of liquefied petroleum gas in Australia.
As this is the final report of this Commission
I have the honour to return the Letters Patent issued to me on 12 September 1973.
His Excellency the Honourable Sir John Kerr, A.C., K.C.M.G., K.St.J., Q.C., Governor-General of Australia, Government House, Yarralumla, CANBERRA, A.C.T. 2600
Yours sincerely
(W. H. COLLINS) Commissioner
SUMMARY OF CHAPTER HEADINGS
JChapter Page
1 LIQUEFIED PETROLEUM GAS AS AN
ENERGY SUBSTITUTE 1
1.1 Australia's Dwindling Crude Oil
Reserves 1
1.2 Crude Oil Substitutes 2
1.3 LPG Availability - Two Sources 3
1.4 Utilisation 3
1.5 What has Australia Done with LPG? 4
1.6 What is Australia Doing with
its LPG? 5
1.7 Terms of Reference 6
1.8 The Policy Issues 7
TABLES
1.1 Planned Bass Strait Production
of LPG 5
1.2 Possible LPG Production from
Other Sources 6
1.3 Consumption Estimates 6
2 CHARACTERISTICS OF LPG 11
2.1 LPG - What is it? 11
2.2 Volumetric Characteristics 14
2.3 Heat of Combustion 14
2.4 Octane Number 15
2.5 Burning Qualities 16
i
2.1 Properties of Light Hydrocarbons 12
2.2 Gross Heat of Combustion 15
2.3 Comparative Research and Motor
Octane Numbers 16
2.4 Flammability Limits 17
2.5 Comparison of Motor Spirit, LPG,
Exhaust Emission 18
3 SOURCES AND PRODUCTION 19
3.1 Sources of Supply 19
3.2 Oil and Gas Fields 20
3.3 Gippsland Basin 23
3.4 Barrow Island/Carnarvon Basin 25
3.5 Cooper Basin 28
3.6 Dampier Sub-Basin, North-West
Shelf 29
3.7 Amadeus Basin, Mereenie and Palm
Valley Fields 32
3.8 Total Production from Australian
Oil and Gas Fields 34
3.9 Historical and Forecast Refinery
Production 34
3.10 Growth Pattern of LPG
Production 39
3.11 Refinery Yields 39
3.12 Production and Use of LPG by
Secondary Process Units 40
3.13 Blending Butane with Motor Spirit 42
3.14 Use Overseas of Butane for
Blending or Conversion to Motor Spirit 45
3.15 Use of Butane in Australian
Refineries 46
3.16 Forecast Refinery Yields 46
TABLES
ii
TABLES
3.1 Oil and Gas Field Production
Stream Components
3.2 Australian Reserves and Cumulative
Production of Liquefied Petroleum Gas
3.3 LPG Average Daily Production
From Bass Strait
3.4 LPG Annual Production - Bass
Strait
3.5 Reserves and Production of LPG
(Ethane Included) - Cooper Basin
3.6 Dampier Sub-Basin - Illustrative
Example of Possible Joint Venture LPG Production
3.7 LPG - Possible Production from
Australian Oil and Gas Fields
3.8 Propane - Possible Production
From Australian Oil and Gas Fields
3.9 Butane - Possible Production
From Australian Oil and Gas Fields
3.10 LPG's Place in Australian
Refinery Production
3.11 LPG Production From Typical
Hydroskimming Refinery
3.12 Production of LPG from Australian
Refineries - Comparison of Production and Yields
3.13 An Example of Amounts of Butane
Blended with Motor Spirit
3-14 Alkylation Units in Australian
Refineries
3.15 LPG Production from Refineries
and Petrochemical Plants
21
24
26
27
30
33
35
36
37
38
41
43
44
45
47
iii
4 LPG DEMAND IN AUSTRALIA 48
4.1 Australian Demand Historically 48
4.2 State Marketing Areas 48
4.3 Categories of Uses in Australia 50
4.4 Comparison with Use in Other
Countries 50
4.5 Domestic and Commercial -
Examples of Uses 55
4.6 Market Outlets and Usage
(Commercial & Domestic) 56
4.7 Industry - Diverse Uses 56
4.8 Market Distribution and Usage 58
4.9 Main Users 58
4.10 Town Gas Utility - LPG Supersedes
Coal Gas 59
4.11 The Reasons for Most Country UnderÂ
takings Changing from Coal to LPG 61
4.12 Market Outlets and Usage (Gas
Utility) 63
4.13 Automotive - LPG is an Alternative
to Motor Spirit 63
4.14 Tax on LPG 64
4.15 Main Users 64
4.16 Market Outlets and Usage
(Automotive) 65
4.17 Agriculture - A Number of
Applications 65
4.18 Market Outlets and Usage
(Agriculture) 66
4.19 Chemical Feedstock - Manufacturing
Applications 66
4.20 Market Outlets and Usage
(Petrochemical) 67
4.21 Altona Petrochemical Complex,
Victoria 68
4.22 Sydney Petrochemical Production 71
4.23 Ethylene and Polypropylene -
Shell, Clyde 74
4.24 Fertiliser Manufacture - New South
Wales and Queensland Consolidated Fertilisers Limited 74
4.25 Fertiliser Manufacture - Western
Australia 76
iv
TABLES
49 4.1 4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
LPG Consumption in Australia
Propane Consumption by State Marketing Areas 51
Butane Consumption by State Marketing Areas 52
LPG Consumption by State Market ing Areas 53
Comparative Uses of LPG in Various Countries 54
Timing of Changeover by Municipal Gas Works to LPG 62
Summary of Intake and Production Capacity of Altona Petrochemical Company 70
Use of I.C.I. Australia Propylene 73
Shell Chemicals, Clyde - Ethylene and Polypropylene Plants - LPG Utilisation 75
Kwinana Nitrogen Company - Feed stock Production and Fuel 77
FIGURES
4.1 Petrochemical Plants at Altona 69
5 THE FUTURE 78
5.1 Demand Forecasts 78
5.2 Future Australian Demand 78
5.3 Future Demand in State
Marketing Areas 80
5.4 Substantial Surplus of Supply
over Demand 80
TABLES
5.1 LPG Demand - Australia 79
5.2 B.P. Estimate of LPG Demand in
State Marketing Areas 81
v
FIGURES
5.1 LPG Forecast Demand and Estimated
Production 82
6 THE EXPORT MARKET - AUSTRALIA 86
6.1 Sources of LPG for Export 86
6.2 Bass Strait 86
6.3 Cooper Basin 89
6.4 North-West Shelf 89
6.5 World Markets and Potential
Exports 91
6.6 Shipping Transport - World 98
TABLES
6.1 A. Exports of LPG from Bass
Strait 90
B. Exports of LPG - Small Pressurised Vessels 90
6.2 World Production, Trade and
Apparent Consumption of Liquefied Petroleum Gases 92
6.3 Forecast World LPG Supply/Demand
Balance 94
6.4 Supply of LPG 95
6.5 OPEC LPG Export Capacity 97
6.6 Major LPG Trade Routes and Ships
Required 100
FIGURES
6.1 LPG Carriers : Supply and Demand 101
vi
7
7.1
7.1
8
PRICE 103
7.1 Price Instability 103
7.2 Comparative Costs 106
7.3 Reasons for Price Instability 107
i â1 CO
Category 1A 1 Product in the Allocation Formula for Indigenous Crude 107
7.3.2 Immobility 111
7.3.3 Export Prices 114
7.3.4 Levy of $2.00 per Barrel 115
7.4 Flexibility of Production 115
i â1 ⢠t r Production from Natural Gas 115
Production from Crude Oil 116
7.5 The Future 116
TABLES
Comparative Costs of LPG and Other Fuels 106
FIGURES
Price Trends of Australian LPG Propane 105
STANDARDS 119
8.1 Variation in Standards 119
8.2 Legislation 119
8.3 Standards Association of
Australia 120
8.4 Need for National Uniformity 121
8.1
TABLES
State Acts and Regulations 119
vii
TRANSPORTATION AND DISTRIBUTION 122 9.1 General Comparison 122
9.2 Methods of Transportation 122
9.3 Large Bulk 123
9.3.1 Pipeline 123
9.3.2 Sea Carriage 125
9.3.3 The Bulk Transport Problems 125
9.3.4 Potential Freight Savings 127
9.3.5 Fully-pressurised Ships 127
9.3.6 Semi-pressurised Carriers 128
9.3.7 Fully-refrigerated at Atmospheric Pressure 129
9.3.8 New Insulation Tank System 129
9.3.9 Bulk Shipping Costs 130
9.4 Medium Bulk 133
9.4.1 General 133
9.4.2 Costs of Rail and Road
Carriage 134
9.5 Small Bulk 136
9.5.1 General 136
9.5.2 Terminal Handling 137
9.5.3 Road Delivery 139
9.5.4 Customer Storage 139
9.6 Package Distribution 140
9.6.1 General 140
9.6.2 Costs 140
TABLES
Short and Long Term Charter Shipping Costs for LPG 131
Comparison of Transportation Costs 136
Terminal Costs : 1974 and 1979 138 Cost of Supply in a Cylinder 142
viii
10 ADDITIONAL USES 143
10.1 Overseas Comparisons 143
10.2 LPG Conversion to Motor Spirit 148
10.2.1 Advantage and Disadvantages 148
10.2.2 Submissions on Conversion 149
10.2.3 Conversion Impractical and Undesirable 155
10.3 Direct Use as a Motor Fuel 155
10.3.1 Can the Market be Expanded? 155
10.3.2 LPG as an Automotive Fuel 15 6
10.3.3 Conversion of Spark Ignition Engines to LPG 160
10.3.4 Advantages of LPG as an
Automotive Engine Fuel 161
10.3.5 Disadvantages of LPG as an
Automotive Fuel 163
10.3.6 Octane Rating 164
10.3.7 Comparison of Fuel Costs -
LPG and Motor Spirit 166
10.3.8 Exhaust Emissions 169
10.4 Greater Use in Australia of
LPG as a Motor Fuel 172
10.5 Increased Absorption 173
10.5.1 Current Offtake 173
10.5.2 Estimates of Future Offtakes 174
10.6 Price and Cost 179
10.6.1 Current Prices 179
10.6.2 Future Price Movements 179
10.7 Quality 181
10.8 The Environmental Impact of
Greater Use of LPG 183
10.9 LPG for Petrochemical Manufacture 184
10.10 Refinery Feedstock 187
10.11 The Australian LPG Market can be
Expanded 190
TABLES
10.1 United States LPG Consumption by
End Use 144
ix
145
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
Japanese LPG Consumption by End Use
Western Europe LPG Consumption by End Use 146
LPG Conversion Proposals 150
Comparative Retail Prices 166
National Roads and Motorists Association - Passenger Car Tests 167
Number of Motor Vehicles Garaged Within 15 Miles of Registration Address in Capital City Urban Areas, 30 September 1971 177
Estimated Potential Automotive Offtake of LPG 178
Cost Comparison Between Motor Spirit and Propane 179
Potential Butane Offtake To Replace Naphtha as Petrochemical Feedstock 186
Estimated Future Butane Supplies From Field Production 187
Butane Production and Demand in United States Refineries 188
10.1
10.2
FIGURES
LPG Conversion Unit for Petrol Engine 158
Schematic Diagram for LP-Gas Operation 159
10.1
APPENDIX
Preferred Automotive Vehicles for Conversion to LPG Propane Fuel 191
x
11 EXPANDING TRANSPORT AND
DISTRIBUTION FACILITIES 199
11.1 The Importance of Supply
Logistics 199
11.2 Logistics of Supply 201
11.2.1 Melbourne/Victoria 201
11.2.2 Adelaide/South Australia 201
11.2.3 Sydney/New South Wales 202
11.3 The Growth of the Australian LPG
Market should be Encouraged 212
TABLES
11.1 Estimate of Cost of Storage
Facility 205
11.2 Road/Rail Equipment Requirements 209
11.3 Estimated Road/Rail Transport
Cost - Melbourne to Sydney 211
11.4 LPG Propane - Sydney - Cost to
Deliver to Customer (Non Profit) 214
FIGURES
11.1 LPG Forecast Demand and Estimated
Production 200
11.2 LPG Transportation Costs in 1979 208
12 EFFECT OF WORLD PARITY COSTS 215
TABLES
12.1 Value - Light Arabian Crude 215
12.2 Value - Australian Crude (Bass
Strait) 216
12.3 Value - Australian Refineries'
Crude Intake Pool 216
12.4 Value - LPG - Westernport F.O.B. 217
xi
13 EXCISE 220
13.1 Excise on LPG used for Automotive
Purposes
13.2 Excise on LPG Produced from
Naturally Occurring Sources
14 ESSENTIAL SUPPLIES
15.1
15.2
15.3 15.4
16
POLICY CONSIDERATIONS
Natural Resource
Foreign Exchange
Environmental Crude Oil Pricing
SUMMARY TO REPORT
234
220
222
224
228
228
230
231
233
- 251
xii
ROYAL COMMISSION ON PETROLEUM
SIXTH REPORT
THE USE OF LIQUEFIED PETROLEUM GAS IN AUSTRALIA
1.0 LIQUEFIED PETROLEUM GAS AS AN ENERGY SUBSTITUTE
1.1 Australia's Dwindling Crude Oil Reserves
Currently Bass Strait provides most of Australia's crude
oil requirements. From this crude oil Australia's refineries
annually have manufactured up to 70% of petroleum products
sold in Australia. The Commission has in its Reports to date
emphasised that this high grade source of energy will not be
available indefinitely (see Fourth Report, p . 215 et seq).
It is important to observe that this indigenous crude
oil is eminently suited to Australia's petroleum products demand
pattern. As the Commission pointed out in its Second Report
(para. 38.5), with the use of quite conventional technology,
approximately 90% of each barrel can be refined into white
end products: motor spirits, avtur, distillate and diesel fuel.
1
Indigenous crude produces ideal cracking unit feedstock and with some process units can convert to 93% gasoline range materials.
With the inevitable increased importation of less suitable
crude oil from the Middle East, this percentage conversion
will decrease. Indeed, the maintenance of high levels of
conversion to white end products will require very considerable
investment in secondary capacity (see Fifth Report, p .414 et
seq). .
The peak of crude oil production from known reserves,
particularly Bass Strait, has been achieved, the demand for
petroleum products continues to grow and a number of present
programs concerning lead, sulphur and noxious emissions all
tend to increase consumption. Australia must look carefully
at means of exploiting any alternative hydrocarbons which are
available and capable of replacing any part of the demand for
light end products.
1.2 Crude Oil Substitutes
Many of the petroleum products obtained from the refining
of crude oil can be replaced by other forms of energy available
in Australia. For example industry can substitute coal or
natural gas for fuel oil. But motor vehicle transportation in
Australia is almost entirely dependent upon motor spirit and to
a much lesser extent distillate produced from crude oil. In the
short or medium term, substitute fuels such as electricity or
liquid fuels manufactured from coal or extracted from shale are
not economically practicable alternatives. But liquefied petroÂ
leum gas (LPG), as overseas experience demonstrates, can be an
economically practical alternative to motor spirit for a sigÂ
nificant proportion of motor vehicles.
2
1.3 LPG Availability - Two Sources
LPG is produced as part of the ordinary refining process
and is sold in Australia for a number of purposes notably town
gas. The Bass Strait oil and gas fields produce far greater
quantities of LPG most of which is now exported. As the Cooper
Basin and particularly the North-West Shelf are developed more
LPG will become available.
Currently the Bass Strait oil fields produce over 400,000
barrels of crude oil every day. In accordance with Government
policy this crude oil is almost entirely refined in Australia
for domestic consumption. Each day out of Bass Strait comes
3, 6 0 0 tonnes, the equivalent of approximately 40,000 barrels,
of liquefied petroleum gas.
In total Australia has reserves of 80 million tonnes of
LPG mainly in Bass Strait and the North-West Shelf. The energy
equivalent of the value of LPG represents 50% of the remaining
recoverable crude oil in Bass Strait. Its production is an
inevitable part of the extraction of crude oil or natural gas.
It must accordingly be disposed of. It cannot simply be left
in the ground while crude oil or natural gas alone is produced.
1.4 Utilisation
LPG is used domestically, in industry, in agriculture
and as a petrochemical feedstock. In terms of clean burning
qualities and emission levels of pollutants it is to be
preferred to motor spirit as a fuel for motor vehicles but is
not as easily transported or stored. It has a boiling point
below normal atmospheric temperatures and accordingly requires
refrigerated storage or storage at pressures greater than
atmospheric pressure. Techniques have been developed to make the
transportation and storage of LPG quite practicable and it is
used to a minor extent in Australia but quite considerably in
other countries as an automotive fuel.
3
1.5 What has Australia Done with LPG?
After the Bass Strait fields came on stream in 19 69,
large volumes of LPG came off with both crude and gas. Australia
as an energy consuming nation had no major experience in
utilising LPG, no obvious market and no potential large customer
to assure a base load. Although the market had increased at a
very high growth rate during the 19 60's the size of the market
was small. The production from Bass Strait was several times the
market demand which was generally supplied by the refineries.
Prices of LPG from Bass Strait ranged from $11 to $15 per tonne on the export market and although considerably less than the ex-refinery p rice s of $25 to $35 per tonne, there was the additional cost of transportation from Long Island Point to the main market areas. No such cost penalty
applied to the refinery produced LPG.
Only one of the operators, B.H.P., seems to have made
any significant survey of the market and its expansion possibiÂ
lities. The surveys were concentrated in New South Wales, the
major market area other than Victoria. LPG supply problems were
found to exist in New South Wales in 1973 and it was expected
that Bass Strait producers would make up any shortfall. It was
found that a market could be developed alongside the natural
gas supply from the Cooper Basin. There were however two major
problems:-
(i) storage and transportation facilities;
(ii) the need radically to reconstruct the market.
Without a large domestic market there was literally nothing
to be done with LPG except export at any available price. In the
Middle East in not dissimilar circumstances LPG was flared by
the millions of tonnes.
4
Before October 1973 this may have been barely acceptable.
Since October 1973 it has meant that Australia as a nation
short, and soon to be desperately short, of transportation
hydrocarbons has been exporting its second most convenient
source of the commodity.
The off-takers, Esso and B.H.P., now faced with a domestic
price of $66.88 a tonne, an ex-refinery price which could
be $4 2 . 0 0 to $55.00 a tonne and an export price of over
$95.00 a tonne f.o.b. obviously cannot be expected to develop
a domestic market . So exports continue.
1.6 What is Australia Doing with its LPG?
Today all Australian refiners produce LPG as a refinery
product. The refinery itself uses part of this LPG either as
a refinery fuel or as an additive in other products. Some is
marketed. Indeed Australian refinery production substantially
caters for the Australian LPG market. The amount produced in
Australian refineries in 1975 was 336,731 tonnes. Consumption
based on oil industry sales was 40 5} 6 4 2 tonnes.
The amount produced from Bass Strait in 1975 was 1,260,202
tonnes. Exports exceeded 1,180,000 tonnes, of which over
1,113,000 tonnes were shipped to Japan.
Smaller quantities are produced at Barrow Island. As
production of crude oil and natural gas from Bass Strait and
Barrow Island runs down so will the production of LPG. Table 1.1
sets out current estimates of LPG production from Bass Strait
for the years 1 9 8 0 , 1 9 8 5 and 1 9 9 0 .
TABLE 1.1
PLANNED BASS STRAIT PRODUCTION OF LPG
TONNES
1980
1 ,5 2 2 , 0 0 0
1985 1,080,000
1 9 9 0
9 2 3 , 0 0 0
5
But as the Bass Strait and Barrow Island sources of LPG
diminish, other reserves will come on stream with the developÂ
ment of gas fields in the Cooper Basin and on the North-West
Shelf. Table 1.2 sets out the current estimate of the quantities
of LPG which could be produced from these sources in the years
1 9 8 0 , 1985 and 1990. The Commission emphasises that these
sources will be coming on stream at the same time as local
reserves of crude oil are falling away.
TABLE 1.2
POSSIBLE LPG PRODUCTION FROM OTHER SOURCES
TONNES
1980
Cooper Basin 225,000
North-West Shelf -
Amadeus Basin
and others 8,000
TOTAL 233,000
1985 2 7 0 . 0 0 0
7 0 6 . 0 0 0
2 2 9 . 0 0 0
1,2 0 5 , 0 0 0
1 9 9 0
2 4 0 . 0 0 0
6 9 6 . 0 0 0
2 2 9 . 0 0 0
1,1 6 5 , 0 0 0
Refinery production could reach 330,000 tonnes per year
by 1980 rising to approximately 4 0 0 , 0 0 0 tonnes by 1990 under
present planning and marketing scenarios.
Consumption estimates, assuming the continuation of current
market patterns, are:-
TABLE 1.3
CONSUMPTION ESTIMATES
TONNES
1980
408,500
1985
4 8 4 , 0 0 0
1 9 9 0
5 4 6 , 0 0 0
1.7 Terms of Reference
The Commission considers that a thorough investigation
into the development and use of LPG in Australia is an important
6
part of the subject matter upon which it is required to inquire
and report. The Commission has since 1974 been collecting
material and submissions from parties interested in the producÂ
tion, distribution and marketing of LPG while working on other
Reports. Time and financial constraints imposed upon the CommisÂ
sion pursuant to the Federal Government's economies and the
premature loss of the technical assistance provided by the
Commission's consultants and technical staff has meant that this
Report is less analytical than the Commission would have
preferred. Nevertheless the Commission is able to describe the
policy options as to the future use of this energy resource and
suggest what appear to be the advantages or disadvantages of one
direction against another.
1.8 The Policy Issues
Australia has LPG in quantities far exceeding current or
reasonable projections as to future local demand. The key issue
in terms of public policy is how this surplus production of
1 to 2 million tonnes per year in the 1980's may be best
disposed of in the interest of the nation as a whole. Past
policies or lack of policies have led to a situation where
almost all LPG produced from Australian oil and gas fields is
exported at prices which as a result of the 1 9 7 3 crude oil price
rises, give the producers windfall profits. These prices which
are higher than local prices fixed by the Prices Justification
Tribunal remove all incentive to create a local market. Why turn
LPG into a local market at $ 6 7 a tonne when Japan will pay more
than $90 a tonne f.o.b.? Indeed the local controlled price for
LPG has on occasions resulted in situations where Australian
users such as rural gas utilities have been left in short
supply.
The two broad areas in which public policies have to be
developed are:-
7
(i) increasing the use of LPG within Australia to replace
crude oil based products;
(ii) maximising the benefits to be derived from LPG
exports.
Increased use in Australia ought to be in high form value
applications such as the replacement of the light end fractions
produced from crude oil. Fuel oil replacement by LPG merely
substitutes a surplus in one product for another. As the
Commission has indicated in its earlier Reports because of the
increase of imported crude oil as refinery feedstock, it is the
light end products which are going to be expensive and in short
supply (see Fifth Report, p .410).
The use of substantially increased quantities of LPG will require the creation of new markets and this in turn will take
time. Even if the Australian Government felt disposed to turn
a large part of the Bass Strait production of LPG into the
domestic market there is at the moment no demand for greatly
increased supply. Such demand will take time to generate and
need positive policies for its creation. Indeed it may be too
late to divert large parts of the Bass Strait reserves away from
the export market. But as already indicated new reserves of LPG
will be coming on stream in the short and medium term. Now is
the time when policies must be formulated for the most beneÂ
ficial exploitation of these resources.
The Commission suggests with respect to both LPG and
natural gas that a major objective of policy should aim to
ensure the maximum usable consumption of the resource for the
benefit of Australian industry, using exports as an initial base
load and gradually trading off exports against domestic consumpÂ
tion as internal demand builds up .
8
With respect to indigenous crude oil Australia has pursued
a strong and definite if sometimes inappropriate policy. At the
centre of this policy lies the implicit dedication of crude
oil hydrocarbons to the national hydrocarbon needs. AustraÂ
lian crude is refined in Australia and its products are consumed
by the Australian public.
An essential rationale behind such a policy recognises
that Australian transportation must have security of supply
of petroleum products. Few nations are so overwhelmingly depenÂ
dent upon long and short distance transportation; our major
centres are separated by hundreds if not thousands of miles; our
domestic shipping is notably expensive; even our cities are
sprawling aggregations; all placing a high premium on transÂ
portation hydrocarbons.
Only LPG is a feasible substitute for motor spirit between
now and 1990. Yet granting all the dedication that successive
governments have applied to the national retention of indigenous
crude oil, no part of any similar dedication seems to have
been applied to LPG. Not merely a similar, but in transÂ
portation terms directly substitutional national resource to the nation's crude oil resource has thus year after year been export
ted as if it was self-renewing.
The lack of a recognisable energy policy has resulted
in the Bass Strait fields being administered as to natural
gas and LPG, substantially as a local or Victorian resource.
For natural gas it has meant that the Victorian-Sydney pipeline
has not been built and at a greatly increased cost very much
more expensive natural gas has been brought to New South
Wales from the Cooper Basin where reserves may well not sustain
adequate supply beyond 19 8 4 / 8 5·
9
For LPG this has meant that in the absence of absorption
in a Victorian market, it has been exported.
A national energy policy would have developed both natural
gas and LPG as an eastern seaboard resource. A pipeline for
natural gas may yet have to be built from Victoria to New
South Wales. An opportunity for the economic transportation
of LPG could present itself at that time. Until then high
cost transportation is the true limiting factor on the increased
distribution and use of Bass Strait LPG.
When in the second half of the 1900's LPG came ashore
in large volumes as an unavoidable part of both oil and gas
streams, Australia lacked, as it still lacks, an energy policy.
Little or nothing was done to plan the incorporation of LPG
into domestic energy consumption and it was exported on a
faut de mieux basis at low prices. It is still being exported
though the price rose as a result of the dramatic lift in
crude oil prices after the historic discontinuity of October
1973. As in so many other sectors of the petroleum economy,
Australia has continued to act as if nothing ever changed.
10
2.0 CHARACTERISTICS OF LPG
2.1 LPG - What is it?
Liquefied petroleum gas, LPG, is a generic term used to
describe propane and butane gases. These gases have two and
three carbon atoms respectively. While gaseous at atmospheric
temperatures and pressures, they can be stored as liquids under
moderate pressures or reduced temperatures.
Generally, hydrocarbon compounds with the greatest number
of carbon atoms have the higher boiling points. Table 2.1 shows
the properties of the common hydrocarbons with up to five carbon
atoms.
Where the carbon atom in a hydrocarbon molecule has its
full complement of hydrogen atoms the hydrocarbon is termed
a "saturate". The saturated LPG components, are propane and
butane. "Unsaturates", with less than the full complement of
hydrogen atoms, include propylene and butylene, which are
sometimes referred to as propene and butene . If the molecular
structure of butane is a straight chain of carbon atoms, it is
termed "normal butane", as opposed to "iso butane", which has a
branched chain.
11
TABLE 2.1
PROPERTIES OF LIGHT HYDROCARBONS
Boiling Point
°C
Vapour Pressure
10 5 N/m2 (1)
Liquid Density
Kg/m3 (2)
Gross Heat
Mj/kg (3)
Methane c h 4 - 161.5 - 300 55.6
Ethane
C2H 6 - 88.6
â
377 51.9
Ethylene
C2H4 - 10 3.7 - 50.3
Propane
C3H 8 - 42.1 13.1 506 50.4
Propylene C3h6 - 47.7 1 5 . 6 520 49 .0
Butanes
Normal Butane C4H 10 - 0.5 3.6 583 49.5
Iso Butane C4H 10 - 11.7 5.0 561 49.4
Normal
Butylene (-1) C4H8 - 6.5 4.3 6 0 0 48.5
Iso Butylene C4H 8 - 6.9 4.4 599 48.2
Trans
Butylene (-2) C4H 8 + 0.9 3.4 6 0 8 48.3
Cis
Butylene (-2) C4H8 + 3.7 3.1 625 48.4
Pentanes
Normal Pentane C5H12 36.1 1.1 6 2 9 49.1
Iso Pentane C5H12 27.9 1.4 623 48.9
12
TABLE 2.1
(continued)
NOTES:
(1) Vapour pressure at 3 7.8°C (100°F) 5 2 10J Newtons per square metre (Nm ) is approximately one atmosphere.
(2) Liquid density at 15.6°C (60°F) - kilograms per cubic metre
(kg/m3).
(3) Gross heat of combustion at 15.6°C (00°F) to form water
(liquid) and carbon dioxide (gas) - megajoules per kilogram
(Mj/kg).
13
The propanes (C^) and butanes (C .) must be treated sepaÂ
rately. As shown in Table 2.1 their physical and chemical
properties are sufficiently different to require different
handling and make for different end uses. For example, at
atmospheric pressure, commercial propane liquefies at -42°C and
commercial butane at 0°C. Lower temperatures may be required
depending on the presence of impurities or associated comÂ
ponents . To maintain them in a liquefied state, they must be
kept below these temperatures by refrigeration. Alternatively,
they can be kept under pressure without refrigeration. The
vapour pressures shown in Table 2.1 are indicative of the
pressure required. The design pressures for storage tanks
specified by the Australian Standards are, depending on size,
from 1.55 to 1.9 mega pascals (MPa) for commercial propane and
0.525 to 0.825 MPa for commercial butane.
2.2 Volumetric Characteristics
Commercial propane and butane are normally measured on
a liquid weight basis, that is pounds/tons, kilograms/tonnes,
or less usually barrels, and priced at a rate per tonne. However
they are lighter than other petroleum products and accordingly
the volume of LPG equivalent to a given unit of mass is greater
than the volume of, say, motor spirit equivalent to the same
unit of mass. Thus one tonne of LPG is equivalent to approxiÂ
mately 1 , 9 1 8 kilolitres, whereas one tonne of motor spirit is
equivalent to approximately 1,359 kilolitres. Consequently LPG requires greater fuel storage space.
2.3 Heat of Combustion
Although the heat of combustion of a kilogram of LPG is
higher than that of a kilogram of motor spirit (49.5 - 50
megajoules per kilo as compared with 4 6 . 8 - 47.5)> the heat of
14
combustion value per kilolitre is less. The heat of combustion
value of propane is 2 5 , 4 0 0 megajoules per kilolitre and of
butane 2 8,000 mega joules per kilolitre as compared with 3 4, 380
to 34, 8 93 mega joules per kilolitre for motor spirit.
Table 2.2 compares the heat of combustion of natural gas,
commercial propane , commercial butane and motor spirit.
TABLE 2.2
GROSS HEAT OF COMBUSTION
Mj /kg Mj/kl Mj/kl
(mass (volumetric volume tric
equivalent) equiva lent equi va lent as liquid) as gas)
Natural gas 46.9 N.A. 38.8
Commercial propane 50 .0 2 5,400 93.3
Commercial butane 49.5 2 8 , 6 0 0 1 2 4 . 0
Motor spirit 47.2 34, 6 0 0 N.A.
2.4 Octane Number
Propane has a research octane number (RON) substantially
higher than premium motor spirit (100+). This characteristic
tends to favour the use of propane as a vehicle fuel, particuÂ
larly in vehicles where demand is less severe. Forklift trucks,
city delivery vans, vehicles used indoors, are particularly well
suited.
15
TABLE 2.3
COMPARATIVE RESEARCH AND MOTOR OCTANE NUMBERS
RON MON
Premium motor spirit 98 88
Regular motor spirit 89 79
Propane 111.5 100
Normal butane 95 92
Iso butane 1 0 0 . 4 99
Propylene 100.2 85
2.5 Burning Qualities
In its simplest form the burning of LPG gases in air will
produce carbon dioxide, water, heat and nitrogen, which is
the residue of the air involved. In the case of propane the
following volumetric balance will result
1 cubic metre of propane
plus
2 3 . 8 cubic metres of air
produces 3 cubic metres of carbon
dioxide
4 cubic metres of water vapour
I8 . 8 cubic metres of nitrogen
99 .2 megajoules of heat.
It is however difficult to ensure complete combustion
with the exact equivalent of oxygen in air. If an excess of
oxygen is not available, the fuel will not burn to carbon
dioxide and therefore partial oxidation products are formed.
16
These include principally carbon monoxide and hydrogen but
frequently unsaturated hydrocarbons, formaldehyde and sometimes
elemental carbon are also found.
A further aspect of the combustion of LPG is the limits
of composition with air beyond which it is impossible to
propagate a flame. Propane and butane only burn over a relaÂ
tively narrow range of concentrations. Table 2.4 compares with
other gases the upper and lower limits of the volumetric
proportions of propane and butane with mixtures with air beyond
which the mixture is not flammable.
TABLE 2.4
FLAMMABILITY LIMITS - VOLUME % IN AIR
Lower Limit Upper Limit
Hydrogen 4. 1% 74.0%
Methane 5 . 3 14.0
Acetylene 2.5 8 0 . 0
Propane 2 . 4 9. 5
Butane 1.8 8.4
As will be further discussed in this Report, the use of
LPG in motor vehicles greatly reduces exhaust emissions of
unburnt hydrocarbons, carbon dioxide and oxides of nitrogen.
The use of LPG itself will not necessarily result in emissions
reduction sufficient to meet 1976 United States of America
Environmental Protection Agency Regulations. It would in most cases however satisfy the Australian Design Rule (ADR) No.
27A which came into effect in July 1976. Table 2.5 compares
1972 Californian tests reported by Bureau of Transport EcoÂ
nomics, Liquefied Petroleum Gas as a Motor Vehicle Fuel, April
1974, together with ADR 27A and the U.S.A. 1976 regulations.
17
24717/76â2
TABLE 2.5
COMPARISON OF MOTOR SPIRIT, LPG, EXHAUST EMISSION
(grams per vehicular kilometre)
Motor Spirit Range of Regulations
Engine Conversion Emission Motor Propane LPG Engines ADR 2 7A USA
Spirit (1) (2) 1976
Hydrocarbons 2.97 0.36 .5 - 1.1 2.1 0.25
Carbon Monoxide 34.19 4.28 .8 - 12.7 2 4 . 2 2.11
Oxide/Nitrogen 2 . 6 1 0.71 .7 - 2.4 1.9 0.25
(1) State Government Administration, Pollution Solution, January
- February, 1972.
(2) California Institute of Technology, Transport Report, 1972.
18
3.0 SOURCES AND PRODUCTION
3.1 Sources of Supply
The major sources of marketable LPG are oil refineries and
crude oil and natural gas production fields. In refineries, LPG
is produced during the crude oil distillation, cracking and
reforming processes. It is used within the refinery:-
(i) for refinery fuel;
(ii) as a feedstock for processes such as isomerisation and alkylation;
(iii) as a blendstook for products, mainly motor spirit.
Quantities not consumed within the refinery are available
for sale or in some cases may be burnt as waste, that is flared.
Production from oil and gas fields is generally divided
into four or five streams:-
(i) Natural gas - mainly methane;
(ii) Ethane - which is used as a petrochemical feedstock;
19
(iii) LPG - mainly propane, normal butane and iso butane;
(iv) Condensate - liquids from gas fields, mainly pentane
and heavier compounds; this is often mixed with
the stabilised crude stream;
(v) Stabilised crude oil - crude oil with most of the
gaseous compounds extracted.
Table 3.1 shows the components of each of these streams .
Natural gas, consisting mainly of methane can be transÂ
ported by pipelines or in liquid form when it bears the
description of "liquefied natural gas" (LNG). When prepared for
distribution through pipelines, it is necessary to remove the
LPG and condensate. However, in some cases where pipeline
distribution is not planned, the LPG may be left. Similarly, LPG
is recovered from crude oil during the process of stabilising
the crude for transportation to oil refineries.
To provide a basis for policies bearing on increased utiliÂ
sation, the Commission turns to examine:-
(i) LPG reserves in Australia, both in fields currently
being produced and in fields which will come on stream
in the short or medium term, and
(ii) likely production from refineries and other manufacÂ
turing sources.
3.2 Oil and Gas Fields
The reserves of LPG in Australia are associated with both oil and gas deposits. The production of the LPG depends on the
production rate of the field. Recoverable, proved and probable
20
TABLE 3.1
OIL AND GAS FIELD PRODUCTION STREAM COMPONENTS
STREAM Natural Ethane LPG LPG Con- Stabilised
Propane Butane de ns at e
FIELD Rankin Rankin Rankin Rankin Rankin Kingfish
Components % % % % % %
Methane 97.62 2. 62 trace
Ethane 1.38 94.74 2. 38 0.02 0.01
Propane 0 . 0 6 2 . 6 2 95.24 1.73 1. 10 0. 32
Isobutane 2. 38 16.51 1. 57 0.70
N-butane 34.51 4. 60 1 . 6 0
Isopentane 11.34 4.40 1.77
N-pentane 1 0 . 8 2 5.61 2. 15
Heavier
hydrocarbons 25.09 82 . 7 0 93 +
Nitrogen and
carbon
dioxide 0.94 0.01 trace
21
reserves of propane and butane as at today are about 80 million
tonnes. Nearly half of these reserves are situated in the
Gippsland Basin off the Victorian coast. Approximately 3 8
million tonnes of propane and butane remain in this Basin. Five
million tonnes have so far been produced. The Barrow Island
field in the Carnarvon Basin contains the only other reserves
from which LPG production has already commenced. The recoverable
reserves there amount to only 0.12 million tonnes.
The Cooper Basin is located in the north-east corner of
South Australia and south-west of Queensland. Although natural
gas production has already commenced, the LPG from this gas has
only been used as plant fuel. The Bureau of Mineral Resources estimates the recoverable reserves of LPG in the area to be
18.45 million tonnes including ethane. Other information availÂ
able to the Commission put the reserves at the beginning of 1975
at 7.78 million tonnes of propane and butane and 7.93 million
tonnes of ethane. Production of LPG for sale was originally exÂ
pected to commence about 1978 but without an associated liquids
project involving a liquids pipeline, the LPG reserves could be difficult to market. The reserves are contained in both the
crude oil and the gas of these fields.
The other major reserves of LPG are contained in the Carnarvon and Bonaparte Gulf Basins of the North-West Shelf
off Western Australia. These reserves are estimated to be
32.4 million tonnes. Production will depend on arrangements
between the Federal Government and the owners of these reserves.
Production is not expected to begin before 1983/84. The producÂ
tion rate depends on the rate of offtake of natural gas with
which the LPG is associated. There are no firm production plans,
although various schemes have been suggested. One scheme, curÂ
rently under consideration, does not necessarily involve the exÂ
traction of the LPG from the natural gas produced.
22
Another small reserve, 2.02 million tonnes, exists in
the Amadeus Basin in Central Australia. There are no plans
for the production of the gas and oil with which the LPG
reserves are associated, although there is a proposal for
the utilisation of the crude oil in an Alice Springs refinery
(see Fifth Report, Chapter 8). These reserves are contained
in a difficult geological structure.
Details of the reserves and cumulative production are
given in Table 3.2.
Estimated production rates for the Cooper Basin and NorthÂ
West Shelf are speculative and depend upon policies for exploiÂ
ting natural gas not yet fully formulated or determined.
However the Commission sets out some of the proposals and
possibilities of which it has notice.
3.3 Gippsland Basin
The oil and gas fields in the Gippsland Basin in Bass
Strait came into production in 1969 . Production of LPG began
in 1970 and had in 1975 reached 1.26 million tonnes. The
operators of the field, Hematite Petroleum Pty. Limited, and
Esso Exploration and Production Australia Incorporated, plan to
increase production to 1, 65 2,000 tonnes in 19 78 .
Thereafter production was expected to decline to 1,080,0 00
tonnes per year in 198 5. By this time more than 18 million
tonnes or almost one-half of the initial recoverable reserves
will have been produced.
23
38.38
30.68 (80.02) Excluding ethane
A gas processing and crude oil stabilisation plant at
Longford divides the oil and natural gas from offshore into
three streams:-
(i) natural gas for sale;
(ii) gas liquids;
(iii) stabilised crude oil.
Gas liquids are taken by pipe to the Long Island Point
fractionation plant where the ethane gas is extracted and
piped to the Altona Petrochemical Company. The residue is
LPG.
Table 3.3 shows the historic and planned average daily
production of propane and butane from the Gippsland fields,
in thousands of tonnes per day. Table 3.4 shows actual annual
and estimated future production to 1 9 9 0 .
A particular feature of these reserves is that they
are not only close to major markets in the south-eastern
part of Australia particularly Melbourne, but also Sydney and
Adelaide and the area bounded by the triangle formed by these
three cities. Other Australian reserves are comparatively remote
from this major Australian market.
3.4 Barrow Island/Carnarvon Basin
West Australian Petroleum Pty. Limited (WAPET), a company
owned by California Asiatic Oil Company, Texaco Overseas PetroÂ
leum Company, Ampol Exploration Limited and Shell Development
(Australia) Pty. Limited operates this field. Each participant
markets its share of the LPG produced.
25
TABLE 3.3
LPG AVERAGE DAILY PRODUCTION FROM BASS STRAIT
Year ending
December 31,
(forecast)
PROPANE BUTANE-"-m t /d m t /d
1 9 7 0 0. 1 10 0.137
1971 0 . 6 5 8 0.90 4
1 9 7 2 0 . 8 9 0 1.233
1 9 7 3 1 . 1 9 2 1.633
1 9 7 4 1 2 8 8 1 . 6 0 5
1 9 7 5 1 . 4 6 8 1.882
1976 1 . 6 3 3 2.011
19 77 1 . 8 5 3 2 . 2 4 2
1978 3 944 2.581
1979 1.920 2.498
1980 1 . 8 4 8 2.323
19 8 1 1 . 7 4 6 2.073
1982 1 . 6 4 2 1.871
1983 1. 5 2 4 I. 6 5 8
1984 1.445 1.52 3
1985 1.456 1.504
1986 1.443 1.463
1987 1.432 1 . 4 2 2
1 9 8 8 1. 381
NO CO r - H 1989 1. 335 1.273
1990 1.30 7 1.22 3
m t /d
= thousands
of tonnes
per day
* The ratio of normal butane to iso butane in the butane product
depends on the proportions coming from natural gas or from
crude oil and can vary frcm day to day. Overall, as natural gas production increases and crude oil declines the normal
butane content will decline from about 6 5% as at present
to 5 5% in 19 90.
26
TABLE 3.4
LPG ANNUAL PRODUCTION - BASS STRAIT
YEAR PROPANE BUTANE TOTAL
ACTUAL
1970 62,059 86,753 1 4 8 , 8 1 2
1971 235,248 325, 6 4 4 5 6 0 , 8 9 2
1972 323,988 438,205 76 2, 19 3
1973 445,609 611,022 1,056, 631
1974 486,489 591, 170 1,077, 659
1975 540,029 720,173 1,2 6 0 , 202
FORECAST
1976 596,000 734,000 1,330,000
1977 676,000 8 1 8 , 000 1,494,000
1978 7 1 0 , 0 0 0 942,000 1,6 5 2 , 0 0 0
1979 701,000 9 1 2 , 0 0 0 1,613,000
1980 6 7 5 , 0 0 0 8 4 8 , 0 0 0 1,522,000
1981 637,000 757, 000 1,394,000
1 9 8 2 599,000 6 8 3 , 0 0 0 1,282,000
1983 556,000 6 0 5 , 0 0 0 1 ,1 6 1 , 0 0 0
1984 5 2 7 , 0 0 0 5 5 6 , 0 0 0 1,083,000
1985 531,000 549,000 1,0 8 0 , 0 0 0
1 9 8 6 527,000 534,000 1,0 6 1 , 0 0 0
1987 527,000 519,000 1,042,000
1988 504,000 4 9 1 , 0 0 0 995,000
1989 4 8 7 , 0 0 0 4 6 5 , 0 0 0 952,000
1990 477,000 4 4 6 , 0 0 0 9 2 3 , 0 0 0
REFERENCE Ministry of Fuel and Power (Victoria) Publications Forecasts: B.H.P., 19th September and 5th October
27
LPG is produced from the natural gas and not from crude
oil by means of low temperature separation (LTS) facilities
on Barrow Island. This plant commenced production in January
1973. Production for 1973 was 2,554 tonnes. It is expected
to reach 8,300 tonnes per year in 1976 and to continue at
this level through to 19 82 . The capacity of plant is a little
over 9 » 500 tonnes per year. Up to 10% of the LTS plant output
of LPG is used by company ligjit vehicles on Barrow Island.
3.5 Cooper Basin
All gas liquids produced so far in the Cooper Basin at
the Moomba plant have been used as boiler feed. Plans which
were dependent on the establishment of a liquids pipeline to
the Port Augusta area and the establishment of a petrochemical
complex to utilise the liquids of the Cooper Basin area were
the basis of a production scheme, to comnence in 19 7 8 , involving
the ethane, propane and butane gases. Although such plans are
now in abeyance the field operators state that such a scheme
is still feasible. The commencement date would, of course,
be delayed.
The Commission recognises that plans for LPG production
from the Cooper Basin are speculative but has included them
as possible production. With the supply of natural gas to New
South Wales from this area to commence in the near future,
these associated IPG gases will necessarily be extracted from
the gas stream before piping to the Sydney area. Based on this
scheme production of propane and butane could have been about
55» 000 tonnes in 1978, rising to 290,000 tonnes in 19 81 .
Thereafter production was expected to oscillate as different
fields were brought into the collection system. The production
of butane and propane would have continued at more than 250,000
tonnes per year until 19 87 when a decrease was indicated.
28
Details of the reserves and the future production are
given in Table 3.5.
3.6 Dampier Sub-Basin, North-West Shelf
There has been no production of natural gas as yet from
this field. In 1975 B.O.C. of Australia Limited indicated to
the Commission that a series of production studies had been
done as follows:-
Market Scheme No._1
This follows the forecast of Western Australian demand
made by the Fuels and Energy Commission of Western AustÂ
ralia in April 19 74.
Market Scheme No. 2
This takes account of additional demand, such as might
be created by the supply of gas to a petrochemical
industrial complex or a liquid natural gas (LNG) plant.
Field Capacity Study
This assumes an unlimited gas market and is designed to
show the capacity of the fields to deliver gas, being
limited only by good engineering practice.
The company had assumed that these schemes could eventuate
in 1982 based on a date of approval for the gas production
from the whole field being given at the beginning of 19 76.
A further alternative scheme which is being studied at
present involves a major export program of liquefied natural gas which could or could not contain LPG.
29
TABLE 3.5
RESERVES AND PRODUCTION OF LPG (ETHANE INCLUDED) - COOPER 3ASIN
Ethane Propane iso Butane (1) n Butane
7.913.200 4,985,400 873,700 1.671.200
12,900 100,100 62,700 187,300
7,926,100 4.985.500 936,400 1.858.500
Propane Butane Only
4.985.500 936,400 1.858.500
15,705,500 7,780,400
PRODUCTION (Tonnes per year) (2)
From Natural Gas From Crude Oil TOTAL Propane and Butane Only (3)
1978 101,200 - 101,200
1979 164,100 76,100 240,200
1980 294,600 65,200 259,800
1981 444,100 47,800 491,800
1982 445,100 28,700 473,000
1983 464,700 24,500 489,200
1984 482,800 26,400 509,200
1985 449,000 24,300 473,300
1936 455,300 23,800 479,000
1987 424,000 24,000 448,000
55,424 163,897 224,768 289,732 271,658
278,346 290,099 269,545 272,509
255,560
1978 1979 1980
1981 1982 1983 1984 1985
19 86 1987
NOTE: (1) Proportions of iso-Butane and normal Butane based on previous submissions. (2) Production includes ethane, propane and butane. Production schedule is as proposed by Delhi/Santos submission 31 October, 1974 and assumes a liquids project with primary recovery only of presently known crude oil reserves. Although a number of schemes
were under study at the end of 1975, no firm plans had arisen from these studies by 20 January, 1976. The Commission has accepted the above as a possible production schedule although the suggested date of commencement will probably be later than shown particularly for LPG from crude oil. (3) As given in Table continuation.
COOPER BASIN - PRODUCTION OF PROPANE AND BUTANE (Tonnes per Year) (1)
From. Natural Gas From Crude Oil TOTAL From Gas and Oil
Propane Butane Propane Butane
1973 35,796 19,628 - -
1979 58,045 31,828 20,398 53,626
1980 104,206 57,140 17,477 45,945
19 81 157,089 86,136 12,813 33,684
1982 157,441 86,330 7,693 20,224
1983 164,373 90,132 6,567 17,265
1934 170,776 93,643 7,076 18,604
1985 158,820 87,087 6,514 17,124
1936 161,049 88,309 6,380 16,771
1937 149,977 82,238 6,433 16,912
Propane
35,796
78,443 121,683
169,902
165,134
170,949
177,852
165,334
167,429
156,410
+ Butane
19,628
85,454 103,085
119,320
106,554
107,397
112,247
104,211
105,080
99,150
= . LPG
55,424
163,397 224,768
289,722
271,588
278,346
290,099
269,545
272,509
255,560
Note: (1) Production of propane and butane based on LPG production proposed in Delhi/Santos submission 31 October 1974 assuming this includes ethane. Submission also states recovery is expected to be of the order of 75% ethane, 95% propane and 100% Butane at Moomba Plant processing the raw gas stream. Production of each fraction
is calculated by the Commission in proportion to total recoverable reserves of each with the above recovery rate applying.
(2) Based on reserves, one third of butane produced would be iso-butane and the remainder normal butane.
Market Scheme No. 1 would lead to a production starting
in 198 2 of approximately 100,000 tonnes of LPG per year,
increasing almost lineally to 6 0 0 , 0 0 0 tonnes at the end of the
century. Market Scheme No. 2 would have a greater rate of
increase in production. In 1990 production of LPG would reach
6 5 0 , 0 0 0 tonnes and remain at that level until the end of the
century. Both schemes would utilise only production from the
North Rankin field.
The capacity of the field to produce LPG as shown in the
Field Capacity Study could however involve the additional fields
of Angel and Goodwyn. In this case the full capacity commencing
at 1 9 3 > 00 0 tonnes in 1 9 8 3 could increase rapidly to over 7 0 0 , 0 0 0
tonnes in 198 4. Thereafter production could be maintained at
this level until 1998 when the Angel field is brought into
production, and in the following year the Goodwyn field;
production could then reach more than one million tonnes per
year at the end of the century.
Details of the production per year are given in Table
3 . 6 for each of the schemes.
3.7 Amadeus Basin, Mereenie and Palm Valley Fields
Production from the Mereenie field, discovered in 1974,
is not expected to exceed 50 barrels per day, that is 1 , 5 0 0
tonnes per year and even then depends on the utilisation of
the crude from this field.
Production of LPG from the Palm Valley field will depend
on the rate of production of gas. Two schemes have been
suggested by the Magellan Petroleum Australia Limited company,
32
DAMPIER SUB BASIN VENTURE LPG PRODUCTION
Year (3)
1
2 3 4 5 6 7 8
9
10 11 12 13
14 15 16 17 18 19
20
TOTAL
1982 83 84 85 86 87 88 89 9 0 91 92 93 94 95 96
97 98 99
2000 2001
Market Scheme No. 1 (1 )
Propane Butane Total
60,000 42,000 102,000 138,000 98,000 236,000 160,000 114,000 274,000 169,000 120,000 289,000 180,000 128,000 308,000 189,000 135,000 324,000 197,000 141,000 338,000 223,000 160,000 383,000 229,000 164,000 393,000 238,000 171,000 409,000 259,000 187,000 446,000 264,000 189,000 453,000 271,000 194,000 465,000 291,000 209,000 500,000
304,000 219,000 523,000 309,000 222,000 531,000 319,000 230,000 549,000 324,000 232,000 556,000 341,000 244,000 585,000 349,000 250,000 599,000
4,814,000 3,449,000 8,263,000
ref: B.O.C. AUSTRALIA LTD. SUBMISSION OF 1 NOVEMBER, 1974 12) Field Capacity Study
ILLUSTRATIVE EXAMPLE OF POSSIBLE JOINT
Market Scheme No. 2
Propane Butane
(1 )
75,000 219.000 241.000 262.000 281,000 296.000
324.000 349.000 373.000 381.000
384.000 384.000 382.000 381.000 381.000 380.000 382.000 381.000 380.000 332.000
53,000 158.000 172.000 186.000 201,000 212,000 233.000 246.000 267.000 273.000 276.000 276.000 272.000 272.000 272.000 272.000
272.000 272.000 269.000 234.000
Total
128,000 377.000 413.000 418.000 482.000 508.000 557.000 595.000 640.000 654.000 660.000 660,000 654.000 653.000 653.000 652.000 654.000 653.000 649.000 566.000
Propane
6,568,000 4,688,000 11,256,000
113 318 410 410 409
407 406 404 404 403 401
400 400 400
400 400
(4) 409
(5) 502
569 637
,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 , 000
,000 ,000 ,000 ,000 ,000 ,000
Butane
80,000 228,000 233.000 296.000 296.000 292.000 292.000 292.000 292.000 292.000 288.000 288,000 288,000 288,000 283.000
285.000 296.000 371.000 426.000 479.000
Total
193.000 546.000 703.000 706.000 705.000 699.000 698.000 696.000 696.000 695.000 689.000
6 8 8 . 0 0 0
6 8 8 , 0 0 0
6 8 8 , 0 0 0
6 8 8 , 0 0 0 685.000 705.000 873.000 995.000 1,116,000
NOTE: 1) Production from North Rankin only 2) Production from North Rankin only till year 17 3) Year 1 Estimated to be 1982 4) Angel Field on Production
5) Goodwyn Field on Production
Scheme 1
Scheme 2
8,203,000 5,950,000 14,153,000 Demand at W.A. Fuel & Energy Commission, April 1974 estimates Scheme 1 plus Petrochemical Industry Complex
or LNG project
Field Capacity Study Limited only by good engineering.
one involving 100 million cubic feet of gas per day and the
other, less likely scheme of 6 5 0 million cubic feet of gas per
day. Propane and butane produced from these schemes would be
3 5 * 0 00 tonnes per year for the first and 22 7, 00 0 tonnes per year
for the second.
Production therefore from the Amadeus Basin could be 36,500
tonnes per year. However production from these areas currently
seems remote and the Commission has ignored them in its
estimates of future production.
3.8 Total Production from Australian Oil and Gas Fields
Assuming that the Cooper Basin fields come into production
in 1978 Australia's total production could reach 1,800,000
tonnes per year of propane and butane in 1 9 8 0 . If then in 19 82
the Dampier Sub-Basin on the North-West Shelf produced at its
capacity, this could lead to production, in Australia, by 1 9 8 5 ,
of over 2,000,000 tonnes of propane and butane per year.
Tables 3.7, 3.8 and 3.9 show estimated possible production
in Australia of LPG and its components, propane, and butane, for
the years 1976 to 1990.
3.9 Historical and Forecast Refinery Production
The ten Australian oil refineries have a total primary
crude distillation capacity of between 740,000 and 778,000
barrels per stream day. Table 3.10 shows the LPG as a proportion
of all marketable products from refineries, including those from
petrochemical plants, and the yields of LPG as a percentage of
the input of crude oil feedstock for the years 1965 to 1975)
both inclusive.
34
TABLE 3.7
LPG - POSSIBLE PRODUCTION FROM AUSTRALIAN
OIL AND GAS FIELDS
(Tonnes per year)
YEAR GIPPSLAND
BASIN
BARROW
ISLAND
COOPER
BASIN
DAMPIER
SUB-BASIN
TOTAL
POSSIBLE
PRODUCTION
1976 1,330,000 8,300 1,338,300
1977 1,495,000 8,300 1,503, 300
1978 1,6 5 2 , 0 0 0 8,300 55,424 1,715,724
1979 1,6 1 3 , 0 0 0 8 , 3 0 0 163,897 1,785, 197
1980 1,5 2 2 , 0 0 0 8,300 224,768 1,755,068
1981 1,394,000 8 , 3 0 0 289, 7 2 2 1,6 9 2 , 0 2 2
1982 1,2 8 2 , 0 0 0 8,300 2 7 1 , 6 8 8 193,000 1,754,988
1983 1 , 1 6 1 , 0 0 0 278,346 546,000 1,98 5, 346
1984 1 ,0 8 3 , 0 0 0 290,099 7 0 3 , 0 0 0 2,076,099
1985 1,0 8 0 , 0 0 0 269,545 7 0 6 , 0 0 0 2,055, 545
1986 1,0 6 1 , 0 0 0 272,509 705,000 2 ,0 3 8 , 50 9
1987 1 ,0 4 2 , 0 0 0 255, 5 6 0 6 9 9 , 0 0 0 1,996, 560
1988 995,000 2 5 4 , 0 0 0- â - 6 9 8 , 0 0 0 1,9 4 6 , 0 0 0
1989 952,000 2 4 8 ,0 0 0 - » - 6 9 6 , 0 0 0 1,896,000
1990 923,000 2 4 2 , 000-::- 6 9 6 , 0 0 0 1,8 6 1 , 0 0 0
* Extrapolated values.
35
TABLE 3.8
PROPANE - POSSIBLE PRODUCTION FROM AUSTRALIAN
OIL AND GAS FIELDS
(Tonnes per year)
YEAR GIPPSLAND
BASIN
BARROW
ISLAND
COOPER
BASIN
DAMP IE R
SUB-BASIN
TOTAL
POSSIBLE
PRODUCTION
1976 596,000 5 , 0 0 0 6 0 1 , 0 0 0
1977 6 9 6 , 0 0 0 5 , 0 0 0 6 8 1 , 0 0 0
1978 7 1 0 , 0 0 0 5,000 35,796 750, 79 6
1979 7 0 1 , 0 0 0 5,000 78,443 78 4, 443
1980 675,000 5,000 121,683 801,683
1981 637,000 5,000 169,902 8 1 1 , 9 0 2
1982 599,000 5,000 165,134 113,000 882,134
1983 556,000 170,949 318,000 1,044,949
1984 5 2 7 , 0 0 0 177,852 4 1 0 , 0 0 0 1,114, 852
1985 531,000 165,334 4 1 0 , 0 0 0 1 ,1 0 6 , 334
1 9 8 6 527,000 167, 429 409,000 1,103, 429
1987 5 2 3 , 0 0 0 156,410 407,000 1,0 8 6 , 4 1 0
1988 504,000 156,000* 4 0 6 , 0 0 0 1,066, 000
1989 4 8 7 , 0 0 0 5 1 2 ,0 0 0 * 4 0 4 , 0 0 0 1 ,0 4 3 , 0 0 0
1990 477,000 1 4 8 , 00 0* 4 0 4 , 0 0 0 1,0 2 9 , 0 0 0
* Extrapolated values.
36
TABLE 3.9
BUTANE - POSSIBLE PRODUCTION FROM AUSTRALIAN
OIL AND GAS FIELDS
(Tonnes per year)
YEAR GIPPSLAND
BASIN
BARROW
ISLAND
COOPER
BASIN
DAMPIER
SUB-BASIN
TOTAL
POSSIBLE
PRODUCTION
1976 734, 000 3,300 737, 300
1977 8 1 8 , 0 0 0 3,300 8 2 1 , 3 0 0
1978 9 4 2 , 0 0 0 3,300 19,628 964,928
1979 9 1 2 , 000 3,300 85,454 1,000, 754
1980 8 4 8 , 0 0 0 3,300 103,085 954,385
1981 757,000 3,300 1 1 9 , 8 2 0 8 8 0 , 1 2 0
1982 683,000 3,300 1 0 6 ,554 8 0 , 0 0 0 872,854
1983 605,000 1 0 6 , 397 2 2 8 , 000 940,397
1984 556,000 1 1 2 , 2 4 7 293,000 961,247
1985 549,000 104,211 2 9 6 , 0 0 0 949,211
1986 554, 000 1 0 5 , 0 8 0 2 9 6 , 0 0 0 955, 080
1987 519,000 99,150 2 9 2 , 0 0 0 910,150
1988 4 9 1 , 0 0 0 99 ,000* 2 9 2 , 0 0 0 8 8 2 , 0 0 0
1989 4 6 5 , 0 0 0 9 6 ,0 0 0 * 2 9 2 , 0 0 0 8 5 3 , 0 0 0
1990 4 4 6 , 0 0 0 94,000* 2 9 2 , 0 0 0 8 3 2 , 0 0 0
* Extrapolated values.
37
TABLE 3.10
LEG'S PLACE IN AUSTRALIAN REFINERY PRODUCTION
Year· LPG Total Input of LPG LPG
Production Marketable Crude Oil/ % of % of
Products Feedstock Marketable Refiner; Tonne s Tonne s Tonne s Products Input
(1) (1) (1)
1965 125,664 14,664,407 16,626,342 0.86 0.75
1966 147,185 16,057,386 18,183,860 0.92 0. 81
1967 183,169 17,885,968 20,319.286 1.02 0.90
1 9 6 8 244,184 19,615,165 21, 975, 56 3 I. 2 4 1. 11
1969 279,774 19,714,176 2 2 , 1 9 2 , 5 8 4 1 . 4 2 1 . 2 6
1970 280,333 21,096,196 23,845,535 1. 33 1.18
1971 307,654 21,759,216 24,335,878 1.41 1 . 2 6
1972 330,697 21,357,255 23, 6 6 9 , 66 8 1.55 1 . 4 0
1973 343,735 24,368,976 2 6 ,9 2 1 , 4 8 6 1.41 1 . 2 8
1974 324,833 24,291,939 26,905,381 1.34 1.21
1975 336,731 24,621,859 27,180,834 1. 37 1 . 24
(1) Reference: Petroleum Statistics, Department of National
Resources.
38
3.10 Growth Pattern of LPG Production
In the five years 1965 to 1969 leading up to the first
production of LPG from the Bass Strait oil and gas fields,
refinery LPG production grew at an average rate of 17.4% a year.
Thereafter the growth rate dropped significantly. In the five
years 1971 to 1975 growth has averaged only 3.7% per year.
Corresponding growth rates for all marketable products for the
same periods were 7 · 5% and 3.1% per annum respectively. As will
be shown later, refinery production prior to 1970 met the
Australian demand. In the following years it was supplemented by
the oil and gas field production.
3.11 Refinery Yields
The yields of LPG from refinery production showed a steady
increase in the latter half of the I960's to meet the demand
for LPG. Since 19 70 yields have remained almost constant .
LPG is a product of a number of refinery processes inÂ
cluding distillation. The amount produced at this point of the
refining process is almost entirely dependent on the characÂ
teristics of the crude being used. The refinery production as
shown in Table 3.10 is determined by additional factors such as: -
(i) the output of and input to secondary refining process
units;
(ii) the amount of butane used for direct blending with
motor spirit;
(iii) the amount of LPG used as a refinery fuel.
39
3.12 Production and Use of LPG by Secondary Process Units
(i) Catalytic reformers, in the course of upgrading
straight run naphtha, produce LPG, predominately the
hydrocarbon saturates propane, normal butane and iso
butane .
(ii) Catalytic cracking units which convert the heavier
fractions from the crude distillation unit into lighÂ
ter fractions, produce LPG, mostly in the form of
unsaturates such as propylene, normal butylene and iso
butylene .
(iii) Hydrocrackers, of which there is none in Australia,
are also used to break down the heavier fractions
and in the course of this process produce LPG although
in this case mostly saturates.
(iv) Alkylation units, which are used to produce alkylates
- a direct blends to ck for motor spirit - combine iso
butane with olefins, including the unsaturates proÂ
pylene and butylene .
(v) Isomerisation units, of which none is currently operaÂ
ting in Australia, convert normal butane into iso
butane to be used as an alkylation feedstock, thereby
increasing output which would otherwise be limited by
the iso butane occurring in the refining streams.
According to the submission received on 19th June 1974 from B.H.P., (Exhibit 66d ) a typical hydroskimming refinery with an
input of 6 5 , 0 0 0 barrels per stream day of crude would produce each day propane (and associated gases) and butane (and associaÂ
ted gases) in the quantities set out in Table 3.11.
40
TABLE 3.11
LPG PRODUCTION FROM TYPICAL HYDROSKIMMING REFINERY
Barrels per stream day
Propane
Propane from crude
distillation unit 1 30
Propane from
reformer unit 1,430
Total propane 1,5 60
Propane used as
refinery fuel 140
NET PROPANE PRODUCTION 1,420
Butane
Butane from crude
distillation unit 9 10 Butane from
reformer unit 1,470
Total butane 2,380
Butane blended with
motor spirit 1,940
NET BUTANE PRODUCTION 440
A catalytic cracking unit could increase LPG production
by 6 0 5 BPSD of propanes and 1,040 BPSD of butanes. Both propanes
and butanes so produced contain unsaturated molecules. Some
of this additional butane produced is blended directly with
motor spirit. After allowing for increased refinery fuel conÂ
sumption the net refinery production becomes: -
NET PROPANE PRODUCTION 1,975 NET BUTANE PRODUCTION 1,380
If a hydrocracking unit is installed rather than a cataÂ
lytic cracking unit, net LPG production could be slightly less and on the basis of the above example be come:-
NET PROPANE PRODUCTION 1,760 NET BUTANE PRODUCTION 1,110
41
The production of LPG from each of the Australian refineÂ
ries can vary significantly and in a way not related to crude
intake. Table 3.12 shows the production for each refinery
as a percentage yield of the crude/feedstock input and also
as a percentage of total Australian LPG refinery production
for the years 1974/75 and 1975·
3.13 Blending Butane with Motor Spirit
All refineries use butanes for blending directly with
motor spirit. In their 1975 forward planning only Amoco,
A. O.R., B.P. (at Kwinana) and Esso (at Adelaide) proposed
to sell significant amounts of butane on the local market .
Vapour pressure specifications limit the amount of butane
that can be blended into motor spirit. In summer the amount
must not be so high as to cause vapour lock in the fuel system,
but in winter the amount of butane can be raised to increase
vaporisation so as to give easier starting in cold weather
conditions. Table 3.13 is an example of percentages of butane
blended with motor spirit, submitted to the Commission by
B. H.P.
42
TABLE 3.12
PRODUCTION OF LPG FROM AUSTRALIAN REFINERIES
COMPARISON OF PRODUCTION AND YIELDS
Refinery LPG Production as % of total* Australian refinery
production
Refinery LPG Yield
Crude/Feedstock % of Crude/ as % of total* Feedstock Australian refinery crude/feedstock
Amoco 1974/75 0.09 3.87 2.45
Ampol 1974/75 5.93 7.93 0.88
B.P., Westernport 1975 6.83 8 . 7 6 0.97
B.P., Kwinana 1975 6.53 13.37 0 . 6 1
A.O.R. 1974/75 16.37 17.48 1.10
P.R.A., Altona 1974/75 8.61 14.56 Î. 6 9
P.R.A., Adelaide 1974/75 5.32 7.07 0.88
Shell, Clyde 1975 7.72 10.76 0.89
Shell, Geelong 1975 1 5 . 8 8 15.05 1.31
REFERENCE Company Submissions.
* Petroleum Statistics, Department of National Resources.
43
TABLE 3.13
AN EXAMPLE OF AMOUNTS OF BUTANE BLENDED WITH MOTOR SPIRIT
PERIOD OF YEAR BLENDED BUTANE
% of MOTOR SPIRIT
November 1 - February 1 6.20
February 2 - March 31 7.05
April 1 - May 15 8.75
May 16 - July 31 9 . 6 0
August 1 - September 15 8.75
September 16 - October 31 7.05
Average 7.90
As stated above refineries convert normal and iso butane
and some propane gases to motor spirit by the use of isomerisaÂ
tion and alkylation units. There are alkylation units at all
Australian refineries except P.R.A. Adelaide, B.P. Westernport
and B.P. Kwinana. B.P. Kwinana may install a unit in 1979/80.
Table 3.14 shows the capacity of the various alkylation units.
44
TABLE 3.14
ALKYLATION UNITS IN AUSTRALIAN REFINERIES
(Barrels per stream day capacity)
Shell, Clyde 2, 700
Shell, Geelong 3, 80 0
P,R.A., Altona 2, 200
P.R.A., Adelaide -
B.P., Westernport -
B .P ., Kwinana (3 , 8 0 0 in
year 1979/80)
Ampol, Lytton 5,000
A.O.R., Kurnell 3, 400
Amoco, Buiwer Island 1,500
TOTAL 18,600
3.14 Use Overseas of Butane for Blending or Conversion
to Motor Spirit
The Canadian refiners have increased the severity of
reforming and cracking operations in order to produce a greater
proportion of motor spirit from available crude oil. This
trend is taking place and will continue to a greater extent
in Australia. It results in a greater production of olefins,
as feedstock for alkylation units. In consequence more iso
butane is needed as an alkylation feedstock and more normal
butane is needed as a motor spirit blendstock.
In Canada this has resulted in less butane being available
for sale from refineries and butane being transported to
refineries in Ontario from as far as the Alberta oil and gas fields.
A similar trend is occurring in the United States of
America.
45
3.15 Use of Butane in Australian Refineries
The use of butanes in refineries for the production of
motor spirit is a premium use. Overseas experience suggests
that as Australian refineries need to employ more severe
refining methods to counter reduced lead levels in motor spirit
production, and to offset the effect of increased import crude
feedstocks, so they will need to increase inputs of normal and
iso butane.
3.16 Forecast Refinery Yields
Table 3.15 sets out total LPG production for the years
1970 to 1990, both inclusive, furnished to the Commission
by various companies.
46
TABLE 3.15
LPG PRODUCTION FROM REFINERIES AND PETROCHEMICAL PLANTS
REFINERIES PETROCHEMICAL TOTAL
' 0 0 0 tonnes
PLANTS
â 0 0 0 tonnes ' 0 0 0 tonnes
ACTUAL
1970 2 4 6 82 3 2 8
1971 265 91 356
1972 277 94 371
1973 287 10 8 395
1974 270 1 0 6 376
ESTIMATE
1975 2 7 0 10 6 376
1976 265 1 1 6 381
1977 2 77 118 39 5
1978 2 8 0 1 1 6 396
1979 2 9 2 115 40 7
1980 30 2 1 1 8 4 2 0
1985 333* 1 18 451
1990 3 6 8* 1 1 8 4 8 6
* Commissionâs estimate, extrapolated from years 1975 to 1980.
REFERENCE
Companies submissions 19 75 .
47
4.0 LPG DEMAND IN AUSTRALIA
4.1 Australian Demand Historically
In this Chapter the Commission examines what has historiÂ
cally been the demand for LPG in Australia and how demand has
grown. The Commission also describes in detail the various uses
to which LPG has been put. Later in the Report the Commission
assesses future demand and demand patterns and in particular
which of the conventional areas of use have the greatest
potential for expansion.
In I9 6 0 /6 I, the annual LPG demand in Australia was 35*000
tonnes. Today it exceeds 360,000 tonnes. But the rate of growth
has slowed down. In the 19 60' s the rate of growth was dramatic.
Consumption in 196 7/ 68 exceeded that for the previous year
by over 36/. Thereafter growth slowed and by 1974 had
fallen to 1.1%. Table 4 ·1 shows the LPG consumed in Australia
during the years 1 9 7 0 to 1 9 7 5 ·
4.2 State Marketing Areas
New South Wales has been a major consumer of LPG taking
approximately 40/ of the total consumed in Australia. ConsumpÂ
tion in New South Wales has been increasing significantly over
the last few years. In contrast consumption in Victoria has
48
TABLE 4.1
LPG CONSUMPTION IN AUSTRALIA
YEAR TONNES
1970 277,834
1971 319,965
1972 344, 327
1973 3 6 0 , 8 0 8
1974 364, 605
1975 405,642
REFERENCE Petroleum Statistics, Department of National Resources
49
24717/76â 3
been decreasing. New South Wales and Victoria together consume
more than 7 ζ% of all LPG in Australia. Tables 4.2, 4.3 and
4.4 show the consumption of propane, butane and total LPG
for each of the Australian States by quarters over the years
1971 to 1974.
4.3 Categories of Uses in Australia
In Australia the use of LPG can be broken up into the
following categories:-
Domestic and commercial
Industrial
Automotive
Town gas utility
Agriculture Petrochemical.
The Commission describes the method and extent of usage
in each of these categories and market outlets in 19 74, the
only year in which sufficient data is available to the CommisÂ
sion to split the market in any meaningful way into categories.
The figures are approximate only, and may be marginally distorÂ
ted by duplication. They nevertheless show the pattern and
trend.
4.4 Comparison with Use in Other Countries
Comparison is made with use in other countries in Table
4.5? a suimiary Table, which shows the split of market in these
categories for Australia (1974)} North America, Europe and
Japan (1969/1972) . The Table indicates much heavier use of
LPG in Australia in town gas utilities,· this use will be
progressively and probably rapidly reduced with the availability
50
PROPANE CONSUMPTION BY STATE MARKETING AREAS
TONNES
Quarter of year ending
NSW VIC. QID. S.A. W.A.
September, '71 32,285 20,450 8,647 4,860 3,911
December, '71 23,161 19,340 7,203 4,319 3,474
March, '72 20,537 19,418 7,715 3,078 2,997
June, '72 22,877 18,331 7,935 1,925 3,365
September, '72 30,078 34,955 7,554 4,740 4,022
December, '72 26,406 27,157 5,548 2,827 3,256
March, '73 17,5.12 17,607 6,755 2,711 3,436
June, '73 27,871 22,747 11,013 3,406 4,218
Feotcmber, '73 36,763 27,792 9,481 4,646 4,682
December, '73 28,495 27,121 9,779 3,382 4,244
March, '74 24,499 3.8,787 7,181 2,975 3,480
June, '74 30,773 21,482 10,300 3,955 4,450
TAS.
322 333 325 336 296 657 228
673 240 807 234
1,456
TOTAL AUSTRALIA
70,474 75,830 54,070 54,770 81,649 65,851 48,248 69,927 83,603 73,829 57,156 72,417
Financial /ear 1971/72 98,860 77,539 31,499 14,182 13,747
1972/73 101,867 102,470 30,870 13,683 14,932
1973/74 120,530 95,182 36,741 14,959 16,856
1,317 1,853 2,736
237,144 265,675 287,005
Calendar year 1572 99,898 99,864 28,752 12,570 13,640 1,614 256,340
1973 110,640 95,268 37,028 14,145 16,580 1,947 275,608
Note: converted from tons resulting in sene round off errors
BUTANE CONSUMPTION BY STATE MARKETING AREAS
TONNES
Quarter of year ending
NSW VIC. QLD. S.A. W.A.
September, '71 6,794 7,754 1,616 1,387
December, '71 4,376 6,416 1,211 - 1,415
March, '72 6,226 4,547 974 4 1,197
June, '72 7,791 9,962 2,661 1,166 1,296
September, '72 6,026 5,150 2,573 (172) 1,511
December, '72 9,505 8,040 1,556 528 1,092
March, '73 7,134 5,589 1,964 446 925
June, '73 9,114 4,812 2,601 643 1,134
September, '73 11,195 3,203 2,552 772 1,228
December, '73 11,471 3,011 4,088 1,504 1,179
March, '74 11,231 2,920 763 612 911
June, '74 11,215 3,230 2,172 692 893
TOTAL AUSTRALIA
17,551 13,419 12.949 22,877
15,083 20,721 16,058 18,304
18.950 21,252 16,438 18,202
Financial year 1971/72 25,188 28,680 6,462 1,170 5,296
1972/73 31,779 23,592 8,693 1,446 4,662
1973/74 45,112 12,363 9,575 3,580 4,212
66,796 70,171 74,842
Calendar year 1972 29,549 27,699 7,764 1,527 5,096 71,635
1973 38,914 16,614 11,205 3,365 4,466 74,564
Note: converted frcm tons resulting in sane round off errors
LPG CONSUMPTION BY STATE MARKETING AREAS
TONNES
TAS. TOTAL AUSTRALIA
September, '71 39,079 28,204 10,263 4,860 5,298
December, '71 27,537 25,756 8,414 4,319 4,899
March, '72 26,763 23,965 8,689 3,082 4,194
June, '72 30,668 28,293 10,596 3,091 4,661
September, '72 36,104 40,105 10,127 4,568 5,533
December, '72 35,911 35,197 7,104 3,355 4,348
March, '73 24,646 23,196 8,719 3,157 4,361
June, '73 36,985 27,559 13,614 4,409 5,352
September, '73 47,958 30,995 12,033 5,418 5,910
December, '73 39,966 30,132 13,867 4,886 5,423
March, '74 35,730 21,707 7,944 3,587 4,391
June, '74 41,988 24,712 12,472 4,647 5,343
322 333 325 336 295 657 228 673 240 807 234
1,456
88,025 89,249 67,109 77,647 96,733 86,572 64,307 88,232 102,554
95,081 73,594 90,619
Financial year 1971/72 124,048 106,219 37,961 15,352 19,043
1972/73 133,646 126,062 39,563 15,129 19,594
1973/74 165,642 107,545 46,316 18,539 21,068
1,317 1,853 2,736
303,940 335.846 361.847
Calendar year 1972 1973
129,447 127,563 36,516 14,097 18,736
149,554 111,882 48,233 17,510 21,046
1,614 327,975
1,947 350,172
Note: Surination of data fran Tables 4.2 and 4.3.
TABLE 4.5
COMPARATIVE USES OF LPG IN VARIOUS COUNTRIES
JAP All NORTH
AMERICA
EUROPE AUSTRALIA!
1969 1972 1969 1972 1969
1972 1974
(1) (1) (2) (2)
Per
(3)
;ent
(4) (5)
Domestic and
2 4 . 8
Commercial 56.9 47.9 40.9 37-8
5 8 . 2 32
Industrial 15.2 17.3 5.1 5.1 16.5
21 27.5
Town Gas
36.3
Utility 2.7 4.8 1.0 1.4
1 4 . 6 9
Automotive 23.0 17.7 7.8 6.8 3.7
6 5.2
Chemical
Industry 6.7 12.0 44.0 28.4
5.6 12 5.0
Agricultural N N 1 .1-* 1.4* 1.4
N 1.2
Motor Spirit N N N 1 8 .6* N
N N
Other 0.5 0.3 0.1* 0.4
N 20 N
REFERENCE (1) The LP Gas Industry in Japan.
(2) America Gas Association, 1973 Gas Facts.
(3) Modern Petroleum Technology.
(4) Commission's consultants.
(5) Oil industry submissions.
Estimates by consultants.
N - not given or estimated.
54
of natural gas in New South Wales and its greater use in other
States. Industrial usage also is high in Australia. This again
will be replaced progressively and rapidly by natural gas.
The automotive figure is low compared with North America
in 1969/19 72 , and would probably show a far greater discrepancy
if compared with current figures. The discrepancy is even
greater and more dramatic when Australian automotive use is
compared with Japanese, which has continued to increase in
absolute terms. The proportion of total LPG had declined due to
a 50% increase in total LPG usage between 1969 and 19 72 .
Automotive use of LPG in Australia is a prime target for market
development.
The low usage in the chemical industry compared with
North America indicates a potential for development of LPG
as a displacement for naphtha feedstock. The latter may be
more easily converted to gasoline type products.
4.5 Domestic and Commercial - Examples of Uses
Where fixed domestic offtakes are beyond the reach of
reticulated main gas or electricity LPG is used domestically
for water and space heating, refrigeration, lighting, air
conditioning and as a fuel for cooking. Domestic cookers ranging
from small single burners to complete cooking stoves can be
fired by LPG. It is also used for camping, caravaning and
boating. It is supplied either in cylinders varying in size
from small (1 to 10 kg.) for campers to large ( 5 0 to 100 kg.)
for dome stic/commercial use, or in bulk to a fixed tank
installation for blocks of flats, offices and commercial
customers.
Where a clean immediately available source of fuel for
heating or cutting is required commercially or domestically
LPG has a premium use .
55
4.6 Market Outlets and Usage (Commercial and Domestic)
The traditional marketers of petroleum, major gas utility
companies, and some specialised marketers of commercial gases
all serve the market . The mode of distribution can be in bulk
to a filling centre where it is refilled into small cylinders,
or delivered in bulk or cylinders direct to the consumer.
Some refilling centres are small such as service stations
or country stores, others are large industrial installations set
up for the purpose. The product is a standard one with no
quality variations but the supply and distribution pattern is
very complex.
In 1974 the offtake for domestic and commercial purposes
was over 100,000 tonnes.
4.7 Industry - Diverse Uses
Industry uses LPG in a large number of diverse ways, which can be grouped as: -
(i) heating in processes which require careful control,
such as glass and ceramics, electronics and fine
mechanics;
(ii) heating directly where the quality of the combustion
gases are important, such as milk drying, biscuit
manufacture and baking;
(iii) producing in the metallurgical industry of protective
atmospheres, for metal cutting and heating.
Some typical uses of LPG for industrial purposes are set out in the following summary, which is extracted from
the Shell Petroleum Handbook, 1966.
56
(i) Controlled Atmospheres
Controlled atmospheres are used extensively in the
heat treatment of steel and other metals in order
to prevent surface damage, to obtain a desired surface
finish or to modify the surface properties. Oxygen,
carbon dioxide, carbon monoxide, hydrogen, sulphur
compounds and water vapour can all be re active to
metals during heat treatment. The requisite in a
controlled atmosphere is to keep these constituents
constant within the limits required by the operation
in question. Such atmospheres can be readily achieved
by burning LPG either partially or completely, under
controlled conditions of combustion.
(ii) Lighting
Petroleum fuels are little used for general industrial
lighting in the way they are still used for domestic
lighting. There are, however, a number of special
applications deserving mention. LPG is used to an
increasing extent in place of acetylene for the
illumination of buoys. It is also used in lighthouse
lamps employing a blue -flame burner with an incandesÂ
cent mant le .
(iii) Miscellaneous Industrial Uses
Metal Cutting, Welding, etc.
LPG is used extensively in oxy/LPG burners for metal cutting and the welding of non-ferrous metals. The
welding of steel has not so far been practicable
because the necessary reducing flame is not hot
enough for satisfactory welding.
For most of these uses LPG can be replaced by natural
gas where this is available through a system of reticulation.
57
4.8 Market Distribution and Usage
The traditional marketers of petroleum products, major
gas utility companies, marketers of industrial gases, and
a chemical manufacturer all market LPG. Market distribution
is either direct bulk or by delivery in cylinders. Producers
often supply a number of different marketers, as well as
marketing themselves. Marketers normally have several sources of
supply. Sometimes they enjoy an exclusive franchise from a
producer in one area. The supply and marketing picture is complicated.
The industrial market offtake of LPG in 1974 was approxiÂ
mately 120,000 tonnes, of which:-
50% was used in New South Wales
33.1/3% was used in Victoria
16.2/3% was spread over other States.
The impact of natural gas on LPG offtake for industrial
purposes is already being felt, particularly in Victoria.
There is no doubt that the same depressive effect will apply
as natural gas becomes available in Sydney and New South Wales.
4.9 Main Users
Usage of LPG for industrial purposes in 1974 was very widely spread amongst different industries, particularly if
the full range of bulk and cylinder distribution is included.
The Commission does not have sufficient information to split
the offtake amongst industries and types of industries in
any meaningful way. The following minimum offtakes occurred
in 19 74:-
58
Milk drying - 10,000 tonnes in Victoria
Metal refining/treating - 10,000 tonnes in Victoria and
Western Australia
Automotive, including parts - 4,000 tonnes in Victoria
and New South Wales
Refractories/Ceramics - 3,000 tonnes in New South Wales.
4.10 Town Gas Utility - LPG Supersedes Coal Gas
Traditionally reticulated town gas in Australia was made
from coal, but this now has been largely superseded by petroleum
feedstocks, particularly LPG, or by direct reticulation of
natural gas. LPG can be processed by two basic types of plant
to produce a town gas suitable for normal use in a town gas
reticulation system.
(i) LPG propane can be mixed with air under controlled
conditions to produce Tempered LPG (TLP). The producÂ
tion equipment is fairly simple, consisting of an air-
gas mixer which produces a dry gas directly for
use in appliances. Appliances must however be converÂ
ted to use the gas.
(ii) LPG can be used as feedstock for a re forming plant
and processed in conjunction with steam to produce
a town gas suitable for distribution through a normal
reticulation system. The endothermic nature of the
steam-hydrocarbon reactions makes it necessary to
supply extraneous heat. The reaction is therefore
59
often carried out in a tubular externally fired
reactor. In order to promote the reaction between
feed and steam, catalysts are used rather than thermal
cracking of the hydrocarbon. The common catalyst
is nickel on an inert support.
One type of gasification plant which invariably operÂ
ates at atmospheric pressure is the cyclic gasifier
a piece of equipment widely used in the gas industry
for the reforming of light hydrocarbons. Here the
heat of reaction is supplied by burning part of
the feed on a refractory regenerator, which sometimes
also provides the catalyst support; steam/ reformer
feed and fuel/combustion air are charged in alterÂ
nating cycles, and a set of interconnecting valves
ensure that only fuel gases are collected. Combustion
gases are exhausted through a stack. Subsequently
direct injection of LPG may be made into gases made
from reforming units as an enrichment to more closely
approximate the quality of gases produced from coal
carbonisation.
In this way an existing gas utility company can continue
to supply to its customers through their normal reticulation
system a town gas for domestic conmercial and industrial use of a quality comparable to that which had previously
been supplied from coal. This method has been used particularly
in urban and rural areas not yet served by natural gas, although
some rural gas utility companies have completely closed down their gas manufacturing facilities and are marketing LPG direct
to consumers in bulk or cylinder.
The New South Wales Government made the following submisÂ
sion dated 16th April, 1975, to the Commission:-
60
4.11 â âThe Reasons for Most Country Undertakings Changing from Coal to LPG
"LPG was initially imported in bottled form from California in the mid-thirties. Transport and landing costs, however, raised its price to the Australian consumer to an uneconomical level, despite its utilitarian value.
"The development of oil refining in Australia led to a local supply source of LPG and large scale distribu tion of it, both in bulk and in bottles throughout the Commonwealth in 19 58 .
"Since then, the Gas Industry, initially in Victoria, has, where it was economically feasible, adopted LPG as a complete or partial feedstock.
"Increasing costs for labour, repair of coal plant and the difficulties of disposing of coke and tar, assisted LPG to find a place on the market .
"The main differences between the conventional produc tion of town gas by carbonising coal and the production of tempered LPG (air and LPG) are as follows:-Town Gas from Coal
Coal Retorts Condensers Exhauster
Purifiers Holders Labour Coke
Tar Wet gas Appliances
Tempered LPG (TLP) LPG Air-gas mixer No condensers necessary No exhauster necessary No purifiers necessary Holde rs No labour necessary No coke
No ta r Dry gas Converted appliances."
Table 4.6 sets out the timing of changeover by municipal
gasworks to LPG as supplied to the Commission by the New South
Wales Government in its submission.
The country gas undertakings which are privately owned
all using LPG are:-
61
TABLE 4.6
TIMING OF CHANGEOVER BY MUNICIPAL GAS WORKS TO LEG
Name of Council Date of Comment
Changeover
Aberdare County Council 1964 Uses LPG for enrichment and cylinder and bulk sales.
Armidale 1971 LPG replaced oil reformers.
Bathurst Uses LPG for enrichment and
cylinder and bulk sales.
Bega 19 65
Cootamundra 1 96 8
Cowra 19 68 Closed reticulation plant in
19 74· Sells LPG in cylinders.
Dubbo 19 73 Sells LPG in cylinders.
Yass 1963
Glenn Innes 19 66
Grenfe11 19 70 Bottle sales.
Kiama 19 67
Lismore 19 70
Lithgow 19 70
Molong 19 67
Orange 1975 Operates solely on LPG.
Parkes 19 69
Shoalhaven Main gas supply from coal
using vertical retort. Also supplies LPG in bulk and bottles.
Wellington 1971 Uses LPG exclusively.
Invere11 1973
62
Broken Hill Singleton
Goulburn Casino
Grafton
Albury
Camden
Bowral
Mu swelibrook Katoomba
Tamworth
LPG requirements for Sydney (A.G.L. and North Shore),
Newcastle and Wollongong are excluded.
4.12 Market Outlets and Usage (Gas Utility)
Most of the gas utility companies now concerned with
using LPG as feedstock to their gas manufacturing plants are
located in urban/rural areas, and are either private companies
or local government controlled. They are spread over all States
of Australia, but their number, and therefore the LPG used,
is being reduced as natural gas becomes more readily available
and as pipeline distribution systems for natural gas are built
in all mainland States.
The offtake of LPG for this purpose in 1974 was about
100,000 tonnes.
4.13 Automotive - LPG is an Alternative to Motor Spirit
LPG propane is an effective alternative fuel to motor
spirit for spark ignition engines. It is a clean fuel, ith
a research octane number (RON) of 111, compared with premium
motor spirit at 9 8 . It gives smoother running with better
engine performance and lower emissions of noxious exhaust gases/air pollutants since it burns more cleanly and completely
and does not contain lead additives. Engine maintenance costs
are claimed to be lower with double the mileage before mainÂ
tenance and reduced costs for lubrication oil and spark plugs.
63
In terms of energy value the rate of consumption is about
10% higher than motor spirit. The conversion cost of a vehicle
from motor spirit to LPG is about $400 to $600. Modern converÂ
sion systems can retain the power output of the engine while
still improving comparative exhaust gas emission quality. HowÂ
ever, there is a factor of inconvenience due to accommodation of
the gas container on the vehicle and the presently restricted
number of refuelling outlets.
4.14 Tax on LPG
Since 1st November, 1974, the rate of tax on LPG has
been 2 cents per litre (9.09 cents per gallon). This rate
is 4 0 .7% of the rate of excise duty on motor spirit (presently
4.905 cents per litre or 22.3 cents per gallon). The Treasurer
has stated that: -
"for a period of five years the tax will retain
this relativity to duty on motor spirit except that one- half of any increase in motor spirit duty during that time would be added to the tax on LPG".
The LPG tax is not a general excise duty, but a direct
tax on gas used to propel road vehicles. It does not apply
to gas used to propel non-road using vehicles.
4.15 Main Users
LPG propane is particularly suitable for vehicles which
do limited mileage and spend a lot of time at idling speeds.
It is convenient to use where operations are within range
of a central bulk refuelling depot.
64
The main users thus tend to be small truck fleet owners,
such as bakeries and dry cleaners, taxi fleets, and users
of forklift trucks and similar vehicles operating in enclosed
areas. Candidates for its further use include State and Federal
Government cars, P.M.G, vehicles, delivery trucks, light buses
and municipal vehicles.
In 1974 in Victoria there were approximately 800 road
vehicle operators who, between them, operated 3, 300 vehicles
using LPG as a fuel. Users included bakeries, dry
cleaners and meat processors.
4.16 Market Outlets and Usage
The main marketing area for automotive LPG is Victoria,
where there are some 30 service station outlets, 50% of which
are in the metropolitan area. There are a limited number of
outlets in the metropolitan and country areas of the other
States, but these have not yet been developed to the same extent
as Victoria. Distribution tends to be directly to the main
user .
Market distribution is partly through some of the tradiÂ
tional oil industry marketers and partly by marketers of domes tic, commercial or industrial gases, sometimes in conjunction
with an oil company.
Total Australian automotive usage in 1974 was over 20,000
tonnes, with some three-quarters of this being used in Victoria.
4.17 Agriculture - A Number of Applications
LPG can be employed to heat greenhouses and supply addiÂ
tional carbon dioxide to the atmosphere, to dry sensitive crops,
to burn weeds, and as a source of fuel for motive power, either
fixed or mobile.
65
The following potential agricultural uses of LPG are exÂ
tracted from the Shell Petroleum Handbook, 1966:â
Grain drying
Grass drying
Quick haymaking
Heating of animal quarters
Flame cultivation
Soil sterilisation Carbon dioxide enrichment in greenhouses
Crop drying and curing.
4.18 Market Outlets and Usage (Agriculture)
The main market outlets are through gas work utilities
in the rural areas, but some distribution is direct by tradiÂ
tional marketers of petroleum products or commercial and indusÂ
trial gases. This latter offtake absorbed some 5,000 tonnes in
1974.
The Commission does not have data on agricultural usage
of LPG from rural gas works utilities.
4.19 Chemical Feedstock - Manufacturing Applications
Hydrocarbon feedstocks including LPG can be used to produce
chemicals falling within the following broad general cateÂ
gories : -
(i) industrial chemicals
(ii) solvents
(iii) plastics and rubber
(iv) fertilisers.
66
The first three categories are mostly manufactured in
the Sydney and Melbourne areas. Fertiliser plants of the ammonia
derivative type are located near Newcastle, Brisbane and Perth.
Primary products within these categories produced in AustÂ
ralia for which LPG can be used as a total or partial feedstock include:-
Perchlorethylene
Carbon tetra chloride
Butanol Acetate ester solvents
Phenol Acetone
Polyethylene
Polypropylene
Ammonia
Ammonia nitrate
In 197 4 however LPG represented only 1 % of petroleum
products sold for use as petrochemical feedstocks.
4.20 Market Outlets and Usage (Petrochemical)
In Australia most of these chemicals are not produced
from LPG but from base feedstocks containing naphtha, ethane,
refinery gas and heavy special petroleums. Less than a third
of the polypropylene produced is made directly from propylene
supplied from refineries and manufacturing during normal reÂ
finery secondary processes.
67
In 19 74 66,000 tonnes of propylene were derived from
naphtha used in the production of industrial chemicals, solvents
and plastics, and only 22,000 tonnes from refinery secondary
processes. The ammonia derivative fertiliser plants with capaÂ
city of 400,000 tonnes a year operated on naphtha and refinery
or · natural gas. Ethane and refinery gas provided a substantial
intake for other chemical manufacture of this type.
The following paragraphs describe Australia's main petroÂ
chemical operations. If greater quantities of IPG can be used in
these operations, it will displace naphtha making it available
for motor spirit production.
4.21 Altona Petrochemical Complex, Victoria
This complex uses feedstock produced from within the P.R.A.
Altona refinery and Altona Petrochemical complex, ethane deÂ
livered by pipeline from Bass Strait sources, and some special
imported feedstock. A general summary of the companies involved
in this complex, the feedstocks used and products manufactured
are shown in Figure 4.1. In addition, Australian Carbon Black
Pty. Limited produces within this complex industrial carbon
black.
The Altona Petrochemical Company steamcracks gas oil and
ethane to produce ethylene, propylene, butadiene and carbon
black feedstocks along with several by-products. A summary
of its intake and production capacity is:-
68
PETROCHEMICAL PLANTS AT ALTON A
S Y N T H E T IC
E th yle n e
B u ta d ie n e A U S T R A L IA N
R U B B E R
CO. LTD.
L-.
ETHANE
Feed B.A .S.F.
A U S T R A L IA
L IM IT E D .
P E T R O L E U M
A L T O N A
x P E T R O C H E M IC A L (A U S T R A L IA ) LTD.LTD. ReturnP ro d u c ts D O W C H E M I C A L B.F. G O O D R IC H E th y le n e k ( A U S T R A L IA ) C H E M I C A !
L I M I T E D . | D ic h lo r id e L I M I T E D .
U N I O N
C A R B ID E
( A U S T R A L I A )
LTD.
E th y le n e
i tZitJuar
PRODUCT
S B R S y n th e tic
lb, R"toer·· }Y v B R S y n th e tic R u b b e r L \ P o ly s ty re n e
γ (F o a m a b le )
DOW C H E M IC A L k
( A U S T R A L IA ) < Φ P o ly s ty re n e
L I M I T E D . r
, 1 ^ P o ly v in y l
C h lo r id e
(High Densiry)
fND USE Cor, C ycle,
T r u c k and T r a c to r Tyres,
Tyre R e tre a d M a te ria l,
M o to r V e h ic le Parts,
B a tte ry Cases,
C onve yor B a itin g ,
R u b b e r F ootw ear.
P a c k a g in g , C ar Fridges,
T h e rm a l In s u la tio n ,
S u rfb o a rd s .
P o ly s ty re n e ,
R e frig e ra to r L in in g ,
R adio a n d T.V. C a b in e ts ,
A ir C o n d it io n in g U n its ,
H o u s e w a re s , Toys.
in s u la t io n â
W ire s a n d C ables.
F ilm , H oses, T u b in g
G ra m o p h o n e R ecords,
P a p e r C o a tin g , F lo or T iles.
P a c k a g in g ,
P ip in g ,
S q u e e z e B o ttle s .
HOECUST , C H E M I C A L S | J X . P o ly e th y le n e
( A U S T R A L I A ) ΠΧ ( H ig h D e n s ity )
I_-q_ | Polypropylene
P ip in g , B o ttle s ,
P la s tic U te n s ils ,
G e n e ra l I n d u s t r i a l U ses.
FIGURE 4
TABLE 4.7
SUMMARY OF INTAKE AND PRODUCTION CAPACITY
OF ALTON A PETROCHEMICAL COMPANY
FEED '000 TONNES
PER YEAR
DISPOSITION
Gas oil 395
Ethane 100
PRODUCTS
Ethylene 140 50% HDPE (high density polyethylene)
40% LDPE (low density polyethylene)
5% Styrene
5% EDC (ethylene dichloride)
Propylene 52 80% Polypropylene
20% Cumene - Phenol/Acetone
Butadiene
Carbon Black
16 80% SBR (synthetic rubber)
20% Styrene -butadiene lattices
Feedstock 48 100% Carbon black
BY-PRODUCTS
Butylenes 25 100% Motor spirit
Naphtha 82 100% Motor spirit
Fuels 132 100% consumed internally
70
LPG propane and butane could be used to replace part
of the gas oil feedstock, but the percentage replacement depends
on the feedstock slate required by the downstream processing
plants. Moreover, since all the plants are in close proximity
with interconnecting pipelines, the Commission would expect
LPG usage to be optimised within the economic and end use
parameters existing from time to time. The Commission will
not, therefore, dwell on details of the operations of this
petrochemical complex or the possibilities of greater use
of LPG within it.
Although no LPG is used as feedstock for the Altona PetroÂ
chemical complex, the Commission notes that Shell Chemicals
(Australia) Pty. Limited has announced plans to invest $50
million in a polypropylene plant at Geelong to use propylene
feedstock available from the Shell refinery at Geelong. The
plant is scheduled to come on stream in 1978. Shell has
indicated that the LPG (propylene) consumed could be 30,000
tonnes per year.
4.22 Sydney Petrochemical Production
I.C.I. Australia Limited produces propylene at its Botany
plant as one of several co-products resulting from the cracking
of naphtha to produce ethylene. The chemical end uses of this
propylene are:-
(i) for the manufacture of polypropylene by Shell ChemiÂ
cals (Australia) Pty. Limited at Clyde;
(ii) for the manufacture of butanol by C.S.R. Chemicals
Limited at Rhodes;
(iii) for the manufacture of perchlorethylene and carbon tetrachloride in the I.C.T. plant.
71
Quantities of propylene produced are estimated for the
years 19 70 to 19 80 on the I.C.I. naphtha cracker and quantities
supplied to these consuming plants are set out in Table 4.8.
The portion of polypropylene production not needed for petroÂ
chemical feedstock is sold as LPG fuel. Petrochlorethylene and
carbon tetrachloride although normally made using propylene, can also be produced in the I.C.I. plant using propane, but
production is technically less efficient with propane.
C.S.R. Chemicals uses, as a base material about 5*000 to
6,000 tonnes per annum of a purified propylene fraction derived
from I.C.I. Botany, to manufacture butanols, which it either
sells directly or uses in the manufacture of a range of
plasticisers and acetate ester solvents. C.S.R. states that
propylene is the only suitable feedstock available for butanol
manufacture in the Oxo process, a process used generally
throughout the world. The C.S.R. Oxo plant came into production
in 1967. Butanol, butyl plasticisers and butyl acetates are used
by C.S.R. to produce for the Australian market:-
Surface coatings
Adhesives
PharmaceuticaIs
Weedicides
Others
8 2% of production
5% of production
4 % of production
1% of production
2% of production
The remaining 6% of production is exported, mainly to New
Zealand and China.
The propylene produced by I.C.I. is derived from the
cracking of naphtha. Such naphtha is generally imported and the propylene not used for chemical feedstock therefore competes
with Australian derived LPG in the Sydney market to the extent
of 20,000 tonnes per year. This is expected to drop to
approximately 16,000 tonnes per year.
72
TABLE 4.8
USE OF I.C.I. AUSTRALIA PROPYLENE
Financial
Year
Total
Propy lene
Production
Chemical End Uses
Tonne s
Shell - CSRC - ICI
Remainder
Sold as
LPG Fuel
ACTUAL
1 9 6 9 - 7 0 21,913
1970-71 32,077
1971-72 35,814
1972-73 37 ,9 87
1973-74 39 ,2 86
ESTIMATES
1974-75 39,700
1975-76 36,400
1976-77 4 1 , 0 0 0
1977-78 4 1 , 0 00
1978-79 36,400
1979-80 4 1 , 0 0 0
4,797 1 7 , 1 1 6
8,699 23,378
16,444 19,3 70
17,154 20, 8 33
2 0 ,1 0 6 1 9 , 1 8 0
2 1 , 0 9 0 1 8 , 6 1 0
21 , 0 0 0 1 5 , 4 0 0
2 4 , 1 0 0 1 6 , 9 0 0
24,400 1 6 , 6 0 0
22,000 14,400
2 5 , 0 0 0 1 6 , 0 0 0
73
4.23 Ethylene and Polypropylene - Shell, Clyde
Shell Clyde produces ethylene which is transferred by
pipeline to I.C.I. Botany, and polypropylene manufactured from
its own propylene and from 13,000 to 1 5 , 0 0 0 tonnes per year of
propylene obtained from I.C.I. Botany.
The quantities of LPG used by Shell at Clyde for the
production of ethylene and polypropylene for 1970 to 1980 are
shown in Table 4-9.
4.24 Fertiliser Manufacture - New South Wales and Queensland
Consolidated Fertilisers Limited
Consolidated Fertilisers has plant located at Newcastle
and Brisbane where it produces principally ammonia and nitroÂ
genous fertilisers. At the Newcastle plant a naphtha feedstock
is processed to produce ammonia at the rate of about 5 4 0 tonnes
per day. This is partly used in the production of solid
fertiliser or explosive intermediate, and partly marketed as
direct fertiliser or for industrial use. 100,000 tonnes of
naphtha feedstock are used per year. With additional capital
expenditure this could be replaced by a similar quantity of
butane.
The Brisbane plant uses an inland gas feedstock at a
maximum rate of 5 5 0 tonnes per day to produce ammonia for
the manufacture of urea or for direct use as fertiliser. The
plant uses oil refinery gas and liquid as fuel . With some
plant modifications LPG, in particular butane, is a suitable
feedstock and fuel for these production processes. Although
Consolidated Fertilisers indicated that an amount of 100,000
tonnes of butane per year could be used at its Brisbane plant,
8 0 , 0 0 0 tonnes of this would be for power and steam generation
and furnace firing.
74
TABLE 4.9
SHELL CHEMICALS, CLYDE - ETHYLENE AND POLYPROPYLENE
PLANTS - LPG UTILISATION
Tonne s
PROPANE AND PRODUCTION TOTAL
PROPYLENE FROM LPG PRODUCTION
CONSUMED
Aetna 1
1970 20,000
1971 11,000 10,000 3 2 , 0 0 0
1972 2 4 , 0 0 0 2 3 , 0 0 0 45,000
1973 2 7 , 0 0 0 26,000 4 8 , 0 0 0
1974 22,000 21,000 38,500
Estimates
1975 30,000 2 4 , 6 0 0 35,000
1976 40,0 00 31,000 4 2 , 0 0 0
1977 40,000 31,000 4 2 , 0 0 0
1978 40,000 31,000 4 2 , 0 0 0
1979 40,000 31,000 4 2 , 0 0 0
1980 40,000 31,000 4 2 , 0 0 0
75
4.25 Fertiliser Manufacture - Western Australia
Kwinana Nitrogen Company Pty. Limited has since 19 68
manufactured ammonia and ammonium nitrate and has nominal
production capacities of 100,000 tonnes per annum and 110,000
tonnes per annum respectively. The feedstock is refinery gas
from the adjacent refinery (B.P. Refinery (Kwinana) Pty.
Limited). An almost equal quantity of fuel is obtained from the
same source. The fuel is mainly refinery gas augmented by
naphtha. The refinery gas in each case is stated to be "a
mixture of primarily ethane, propane and butaneâ. Table 4.10
shows the quantities of refinery gas feedstock, the amount of
ammonia and ammonium nitrate produced and fuel requirements for
the years 19 70 to 19 8 0 .
As the operations of Kwinana Nitrogen and the B.P. refinery
are integrated through the supply of feedstock and fuel, any
variation in plant operations will depend principally on the
refinery operations. As indicated in the Commission's Fifth
Report (p . 390) there will be a significant "whitening" of the
barrel between 1980 and 1985 and hence a need for additional
secondary conversion capacity in Western Australia. This added
to a supply of condensate from the North-West Shelf that may
eventuate during the same period and changes in refinery
operations could lead to additional refinery gas being produced.
The use of refinery gas, both as feedstock and fuel, in the
Kwinana Nitrogen plant, would therefore remain attractive.
76
TABLE 4.10
KWINANA NITROGEN COMPANY
FEEDSTOCK PRODUCTION AND FUEL
Tonnes
REFINERY FUEL
FEEDSTOCK
AMMONIA AND FUEL
AMMONIUM NITRATE REQUIREMENT
PRODUCTION
Actual
19 70 23,517 83,530 20,6 60
1971 30,746 113, 559 25,482
19 72 35,443 123, 39 6 29,304
1973 42,579 174, 844 33,814
19 74 48,405 174, 044 42,674
Estimated
19 75 53,400 2 1 4 , 1 0 0 5 1 , 6 0 0
1976 59,000 2 3 3 , 6 0 0 5 5 , 4 0 0
19 77 59,000 2 3 3 , 6 0 0 5 5 , 4 0 0
19 78 59,000 2 3 3 , 6 0 0 5 5 , 4 0 0
19 79 59,000 2 3 3 , 6 0 0 5 5 , 4 0 0
19 80 59,000 2 3 3 , 6 0 0 5 5 , 4 0 0
77
5.0 THE FUTURE
5.1 Demand Forecasts
The Commission records the estimates of future demand
which it has collected. As will appear these vary considerably,
and have not been tested in any depth. They show that even if
the highest estimate of future demand is accepted, there remains
in Australia a considerable surplus of supply from Australian
sources over demand. The course taken in this Report, having
described current use and recorded estimates of future demand is
to examine the question whether there is room to increase the
future demand of at least some of the end users of LPG.
5.2 Future Australian Demand
Estimates made by the Department of Minerals and Energy
in August 1975 are significantly lower than those provided
by Esso, B.P., and Mobil, whose estimates were made in, 1976.
These estimates are shown in Table 5.1* Mobil's high estimate
provides for LPG penetration of the motor spirit market which in
1980 Mobil expects to amount to approximately 900,000 barrels
(more than 70,000 tonnes) per year and in 1985 2,000,000 barrels
(100,000 tonnes) per year. This represents nearly 1% of the
motor spirit market in 1980 and nearly 2 % in 1 9 8 5 . Mobil however
in its submission of October 1974, states that:-
78
TABLE 5.1
LPG DEMAND - AUSTRALIA ' 0 0 0 TONNES
DEPT. OF B.P. ESSO MOBIL
NATIONAL
RESOURCES( 2)
Actual Actual
1974/75 383.8 1975 4 0 5 .6(2 )
Estimate( 1) Estimate(1)
1975/76 386.3 4 1 8 . 0
1976/77 371.2 4 0 8 . 0 1976 422.7
1977/78 374.3 449.0 1977 447. 6
1978/79 3 8 6 . 6 499.0 1978 4 6 4 . 2 4 6 1 . 0
1979/80 402.5 523.0 1979 4 8 9 . 1 5 1 0 . 0
1 9 8 0 / 8 1 414.5 536.0 19 80 513.9 543.0
1 9 8 1 / 8 2 429.1 551.0 1 9 8 1 538.8 584.0
1982/83 443.7 570.0 1 9 8 2 563.7 6 4 2 .Î
1983/84 459.8 587.0 1983 596.8
1984/85 476.5 6 0 5 . 0 1984 6 3 0 . 0
1 9 8 5 / 8 6 6 1 5 . 0 1985 8 1 9 . 0
1986/87 6 2 7 . 0
1989/90 6 5 8 . 0 1990 754. 3 1230.
(1) Other than Department of National Resources details, information based on replies to Commissionâs questionnaire
dated 22nd March, 19 76 .
(2) Petroleum Statistics, Department of National Resources.
79
"future predictions on LPG are subject to much lower degree of precision than any other major petroleum product, due to the complex pattern of supply and demand".
5.3 Future Demand in State Marketing Areas
B.P. has provided estimates of future demand in the
State marketing areas. These are shown in Table 5.2. The
penetration of natural gas into the LPG market is well illusÂ
trated by the Table. Whereas in the past New South Wales was the
major consumer of LPG (see Table 4.4)^ Victoria will, according
to B.P., take over this role and in 1980/81 will consume
nearly 60% of the LPG consumed in all of Australia compared
to nearly 15% in New South Wales.
5.4 Substantial Surplus of Supply over Demand
The Commission recognises that these estimates do
not, except to the extent Mobil assumes LPG penetration of
the motor spirit market, account for any significant changes
in the user demand pattern discussed later in the Report.
The Commission also considers that in the absence of more
detailed investigation, the estimates can only furnish a
guide in dealing with LPG demands. However for the purposes of the present Report, this does not matter. Figure 5.1 compares
the range of forecast demand with estimated production and
demonstrates that on any view there is likely to be a substanÂ
tial surplus of supply over demand in Australia. The question
is what is to be done with this surplus. Its precise extent
is not important.
80
TABLE 5.2
B . P« ESTIMATE OF LPG DEMAND IN STATE MARKETING ARE AS ( 1)
(Tonne s)
Old. N. S. w. Vic. Tas . S. A. ( 2) W. A. N. T.
1 9 7 6 / 7 7 53 72 228 4 23 27 1
1 9 7 7 / 7 8 57 60 2 7 2 5 25 29 1
1 9 7 8 / 7 9 59 71 304 5 27 32 1
1 9 7 9 / 8 0 62 79 310 6 29 36 1
1 9 8 0 / 8 1 66 82 312 6 30 39 1
1 9 8 1 / 8 2 69 87 314 7 32 41 1
1 9 8 2 / 8 3 72 95 316 8 35 43 1
1 9 8 3 / 8 4 74 10 4 319 9 36 44 1
1 9 8 4 / 8 5 76 113 3 2 2 10 38 45 1
1 9 8 9 / 9 0 86 129 337 10 45 50 1
(1) Submission dated April 19 7 6 .
(2) Does not include feedstock for Redeliffs petrochemical complex now considered "shelved".
81
24717/76â4
FIGURE 5.1
2600 . LPG FORECAST DEMAND AND ESTIMATED PRODUCTION
2500 ·
Total Australian Production Oil and Gas fields 2400 - Refineries Petrochemical Plants 2300 .
2200 -
2000 _
1600 .
o 1400
Mobil forecast demand
1000 _
forecast demand Esso
forecast demand B.P.
Petroleum Branch forecast demand
Refinery and Petrochemical Production
300 .
200 .
100
0 α ' 1 1 f 1 ! I I I ' ! ' ' ' ' r ' â · '
70 71 72 73 74 7576 77 78 79 93 8L 82 83 Î 85 86 87 88 f f i 90 Year 82
How would an integrated Australian energy policy, if
there was one, view the use of LPG on a substantial scale
as an automotive fuel? It has already been said that LPG
represents the only alternative to motor spirit. On broad
principles its use would be determined on the basis of: -
Availability
Cost - especially transportation cost
Likely demand - stimulated either by economic preference
or go ve m m e nt po li cy .
There are ample supplies available. Indeed proportionately
to market demand Australian resources are better placed to
provide LPG than any other transportation fuel. Cost must limit
distribution and has required the Commission in this study to
limit its proposals to :-
localities adjacent to resources
localities that can be reached by pipelines with their
superior economics (Melbourne and, hopefully, Adelaide)
localities that can be supplied economically by shipping
(hopefully Sydney).
Distribution costs are high and the Commission has sought
to avoid a mere duplication of the present system for the
delivery of motor spirit, examined in the Commission's Fourth
Report. This has meant:-
(i) far fewer outlets which all concentrate on bulk
supply,·
(ii) concentrated market s> taxis, car pools, delivery
fleets, etc .
83
Major cities, especially Sydney face future environmental
problems with photochemical smog and lead emissions. LPG usage,
particularly if concentrated on the vehicular sector doing
extensive mileage can ameliorate environmental conditions. A
taxi doing 100,000 miles per year is the equivalent of eight
similar vehicles in private hands. Coupled with the Commission's
proposals (see Fifth Report at p . 6 59) for the use of 92 octane
motor spirit and lower compression engines, a significant
arresting effect could be planned for the Sydney vehicular
emissions problems, including photochemical smog.
The Commission has observed that LPG is an underutilised
national resource. This has always been the case with field
production which has been and still is largely exported.
It is likely to be increasingly so of refinery produced
LPG. Natural gas, especially in New South Wales, will partly
displace LPG and the increasing volumes of gas liquids fed
into refining streams (see Fifth Report at p .448) will tend
to increase the production of LPG fractions from refineries.
As there is no real substitute for motor spirit except
LPG this prospect of a double increment in usage should
be most welcome. LPG is an acceptable substitute for motor
spirit and its principal demerits, the cost of distribution
and of conversion of motor vehicles, are offset by the social
benefits derived from a clean burning unleaded fuel.
Specifically, the Commission finds that every encouragement
should be given to an immediate major penetration of the
Victorian market and especially Melbourne . Logistically, such a
move has everything going for it; a secure supply from refineÂ
ries and field, a pipeline delivery system, cheap transportation
and, the Commission suggests, with proper techniques a ready
market.
84
In particular, the Commission refers to the refining
balances appearing in its Fifth Report at p .17 3· These show
that Victoria, having refining capacity surplus to its market
requirements, has been a major exporter of products to other
States, especially New South Wales. This surplus, however,
is likely to be eroded by several factors and to disappear
by 1980 or 1981. A substantial penetration of the Melbourne
market equivalent to say 15% of motor spirit usage, if drawn
from field sources, would appreciably extend the capacity
of present refineries to meet eastern seaboard demand by
extending the life of the Victorian surplus capacity. This
would be a valuable contribution to Australian supply of
transportation fuel.
85
6.0 THE EXPORT MARKET - AUSTRALIA
6.1 Sources of LPG for Export
Prior to the commencement of production from Bass Strait,
Australia exported very little LPG from its only then existing
source of production - refineries.
Since 1970 LPG has been exported from the Bass Strait
fields through Westernport. In the future LPG may become avaiÂ
lable for export from the Cooper Basin and from the North-
-West Shelf. In general, export, present and future, will
come from the processing of natural gas and crude oil from
field production. There have been some instances where refiners
have made application to the Federal Government for export
licences of refinery produced LPG. Such amounts which are
eventuated are small compared to those from oil and gas fields.
6.2 Bass Strait
Propane and butane are produced from gas liquids piped
from the Longford stabilisation plant, at the Esso/B.Î .P .
fractionation plant at Long Island Point, Westernport. They
are stored in refrigerated tanks and then loaded into refriÂ
gerated carriers for overseas destinations and into small, pressurised ships for transportation to the Pacific Islands.
86
Propane and butane shipped to Japan are loaded in 20,000
to 60,000 tonne refrigerated carriers. These LPG carriers,
which deliver the gas to about five refrigerated storage
terminals in Japan, are specially built, floating, refrigerated
containers divided into a series of membrane-structure, stressed
departments made of special alloy steel. The cargo of propane
and butane is its own refrigerant, being continuously recycled
'during transportation. The boil-off of the propane at -43°C
and the butane at -7°C is compressed into liquid, cooled,
then recycled in a continuous cycle back into the gas space
in the tanks.
The first load of LPG comprising 1 6, 342 tonnes (8 , 9 8 3
tonnes of butane and 7,359 tonnes of propane) left Long Island
Point for Japan on 4th July, 1970, in the refrigerated carrier
"Bridgestone Maru 1", pursuant to the contract of Hematite
Petroleum Pty. Limited, a fully owned subsidiary of B.H.P.
with Bridgestone Liquefied Gas Company Limited of Japan. This
contract is for a firm quantity of 4 2 0 , 0 0 0 tonnes per annum
with the option to supply such additional requirements as
the buyer may require on similar terms and conditions as
the firm quantity. For the year ending 31st March, 19 77,
the contracted quantity is 530,000 tonnes. The contract is
for a firm supply for a term of 15 years ending 31st March, 1 9 8 4 and thereafter for successive periods of five ears
unless terminated by either party tendering two years' notice
of termination prior to the commencement of any five year
period.
Three other contracts are for much smaller quantities.
One for 20,000 tonnes is with a Bermuda company. The contract
expires on 31st March, 1977 · The two others are evergreen
contracts with Ocean Gas Australia Pty. Limited, Sydney, and Gas
Supply Company Limited, Sydney, involving annual quantities of
"up to 12,000 tonnes of butane" and "up to a total of 5,000
tonnes of LPG" respectively.
87
Prices in all cases are negotiated several times each
year and approximate the current price on the world market.
An excise duty of $0.0126 per litre or $2.00 per barrel is
paid by the seller. This is approximately $25.00 per tonne
for propane and $22.00 per tonne for butane.
In March 1973, the 63,396 DWT "Esso Fuji" made its maiden
voyage to Australia to load propane and butane pursuant to
a contract by Esso Exploration and Production Australia IncorÂ
porated with an affiliated company, Esso Eastern Products and
Trading. Both companies are incorporated in the United States of
America. The contract does not refer to specific quantities but
covers "such quantities as seller has available for export from
Australia and as buyer can resell to existing or new markets.
Buyer shall endeavour to find sufficient additional markets
for the LPG quantities which seller has available for export
from Australia to enable the export of all such LPG quantities."
The Esso customers for LPG imported into Japan in May
1 9 7 5 were:-
Esso Standard Sekiyu KK
General Gas KK
Mitsubishi Shoji KK
Kyodo Sekiyu KK.
The price paid for the LPG under this contract is mutually
agreed to by the two and is based on LPG import prices with
various adjustments concerning such items as freight, insurance
and quality differentials.
Except for the quantities of LPG supplied to the domestic
market, the above contracts absorb all of Esso's share of
production from the Bass Strait fields.
88
Table 6.1 shows quantities and distribution of LPG exported
from 1970 to 1975 under contracts with B.H.P. and Esso. By
1975 Japan had taken 9 6% of these exports. Exports have been
made regularly to the Pacific and Indian Ocean Islands. Sporadic exports have taken place to Singapore, Taiwan, United Kingdom,
Spain and South America.
6.3 Cooper Basin
The second source for export might be LPG extracted
from natural gas from the Cooper Basin in South Australia.
This would require a pipeline for delivery to seaboard and
jetty loading facilities. As discussed in Chapter 3.55 as
much as 2 5 0 , 0 0 0 tonnes per annum could be available from
this source after 19 8 Î.
6.4 North-West Shelf
The third potential source is from the large gas fields
which have been discovered off the North-West Shelf. This
will not be available until the early 1980's. However as
indicated in Chapter 3.6, the field has the capacity to produce
about 700,000 tonnes per annum which could be available for
expo rt.
The quantity of LPG available as a separate product
from the North-West Shelf depends on the sales quality specifiÂ
cations of the natural gas produced. If the natural gas is to be
transferred by pipeline or exported as LNG (liquefied natural
gas) by ship and then transferred by pipeline, for example
to the United States of America, the "wet gas" must be first treated to remove condensates and LPG. These latter products
then become available for the Australian inland market or
89
TABLE 6 1
A. EXPORTS OF LPG FROM BASS STRAIT (Refrigerated Vessels)
Tonnes
B.H.P ESSC B.H.P. AND ESSO
Year Japan Others Japan Others Japan Others
1970 65,093 â 77,766 - 142,859 -
1971 2 1 9 , 661 52,829 271, 70 5 - 491, 366 52,8 29)
1972 327, 742 17,925 398, 221 - 72 5, 963 17,9255
1973 508, 936 - 484,329 17,3 50 993, 2 6 5 17,3 50)
1974 47 6, 450 - 490, 534 - 9 6 6 , 9 8 4 -
1975 567,151 33,396 546, 028 35,381 1,113,179 6 8 ,7771
TOTAL 2, 165, 033 104, 150 2,268,583 52,731 4,433,616 1 5 6, 88l i t
REFERENCE
Statistical Reviews, Ministry of Fuel and Power (Victoria) .
B . EXPORTS OF LPG - SMALL PRESSURISED VESSELS-"-Tonnes
Pacific and Others
Indian Oceans
1971 3, 20 0 80 0
1972 5 , 6 0 0 40 0 Vessels
1973 7,80 0 3,500 not reported
1974 8,000 1 , 6 0 0 in Part A.
1975 5 , 8 0 0 20 0
REFERENCE Petroleum Statistics, Department of National Resources.
90
export. On the other hand, if shipment of LNG is for direct
fuel use near the seaboard in Japan, the "wet gas" may be
exported after the condensates only have been removed. In
this case, little, if any, LPG would be available to Australia
from the North-West Shelf. The Commission has assumed that
natural gas will be treated in Australia to extract the LPG.
6.5 World Markets and Potential Exports
United Nations statistics on world energy supplies indicate
an apparent world consumption of LPG of 70 million tonnes in
1970, rising to 35 million tonnes in 1973 . Table 6.2 shows the
production, trade and apparent consumption of LPG on a world basis.
Throughout the 1960's, demand for LPG worldwide grew
faster than for most other oil products, 8% to 10% per year.
In some countries, for example in Japan, the rate of growth
in the same period was at a very much higher rate, 30% per
year. By contrast, the United States of America's consumption
grew at 7% per year over the same period. The consumption
of 85 million tonnes in 1973 quoted by the United Nations
statistics was being absorbed 50% in United States, 16% in
Western Europe and 11% in Japan. Except for the U.S.S.R.
where 7% is absorbed, the proportions consumed in other counÂ
tries are small.
World trade, as shown in Table 6.2 is at a level of
approximately 14 million tonnes per year . The major exporting
countries are Saudi Arabia, Kuwait, Australia and Iran, which
export to Japan. The two other major exporters are Canada and
Venezuela, which are the main suppliers to the United States.
Between them, these six exporting countries accounted for about
70% of the world trade in 1973. Japan and the United States as
importers account for more than 6 5% of the world trade.
91
TABLE 6.2
WORLD PRODUCTION, TRADE AND APPARENT CONSUMPTION
OF LIQUEFIED PETROLEUM GASES
(Quantities in million metric tons and
kilograms per capita)
PRODUCTION
From
Refineries
From
Plants
Total
1970 38.712 32.539 71.251
1971 30 . 6 8 1 36.157 76.838
1972 43.155 39 .649 82.804 1973 47.565 39 .211 86 .7 76
REFERENCE World Energy Supplies 1970 -
18, United Nations, 1975 ·
APPARENT
Imports Exports CONSUMPTION
Total Per
Capita
8.474 8. 62 0 70.2 67 19 .5
1 0 . 0 9 0 IO.O6 4 74.178 2 0 . 2
1 1 . 6 2 3 11 .995 83 .037 22.2
13.66 8 14.109 8 4 . 8 1 6 22.3
1973, Statistical Papers Series J, No
92
Australia, with exports of approximately one million tonnes
of LPG per year, or 7% of the world trade, could, under the
consumption and production patterns existing in Australia at
present, continue to participate in this trade to an extent
dependent on the future supply and demand balance throughout the world.
Estimates of the pattern of the future supply and demand
vary considerably. The major importers will still be Japan and
the United States, and the major exporters will be the Middle
Eastern countries. The Commission has studied various estimates
of future supply and demand. Although all agree that the
Japanese market will grow at a fast rate (7.5% to 9% per year
averaged over 19 75 to 19 8 5), the estimates for growth of demand in the United States range from below 2% to above 6% per year in
the same period. Supply and demand balances are given in Table
6.3 for both pessimistic and optimistic growth assumptions.
The supply of LPG has historically come from two major sources, refinery production and natural gas and crude producÂ
tion processing plants. Table 6 . 4 estimates the supply of LPG
from these sources in 1972 and 1980. The volume of the
United States natural gas processing shows a reduction and there
is a very considerable increase, both quantitatively and as a
percentage, from "otherâ sources, which includes particularly the Middle East.
93
TABLE 6.3
FORECAST WORLD LPG SUPPLY/DEMAND BALANCE
(million metric tons)
W.
PESSIMISTIC OPTIMISTIC
1975 19 80 1985 1930 1935
- Supply 36.3 34.9 33.o''V 5 1 . 0 54.6
- Demand 33.1 43.1 47.8 67.9 8 4 .Î
- Surplus (Deficit) (1.8) (9.1) (14.8) 1(16.9) (29.4)
- Supply 5.2 4. 3 3. 6
X
- Demand 2. 6 3. 6 4.4 \
- Surplus (Deficit) 2. Ï 0.7 (0.3)
- Supply 12.4 17.2 1 9 . 6 20.3 27 .0
- Demand 12.3 1 6 . 6 1 9 . 1 20.0 2 6 . 0
- Surplus (Deficit) (0.4) (0.6) (0.5) 0.3 1.0
- Supply 4.4 5. 6 6.9 8.0 1 1 .0
- Demand 10 .8 1 6 . 6 22.2 19.2 26 .9
- Surplus (Deficit) (6.4) (11.0) (15.3) (11.2) (15.9)
- Supply 76.2 103.9 122.7 123.5 - / - - x -
- Demand 75.3 95.1 119.5 123. 5 1 6 0 . 1
- Surplus (Deficit) 0.9 5.8 3 . 2 -
North America Not estimated
REFERENCE
Commissionâs consultants.
94
TABLE 6.4
SUPPLY OF LPG (million tons)
1972
Natural Gas Processing 40.7 United States 29.1
Canada 4. 1
Other 7. 5
Refinery/Petrochemical 33.8 United States 10 .0
Europe 12.1
Japan 3.9
Other 7. 3
TOTAL 74.5
of /0_ 1 9 8 0 % (of
optimistic assumption)
55 6 2 - 7 1 57
39 30 24
6 6 5
10 26-35 28
45 52.5 43
13 13.0 11
16 17.8 14
5 5.5 5
11 1 6 . 2 13
114.5-123 .5
95
In number and size, the LPG projects either under construc tion or planned in oil producing countries is considerable. The
majority of these were first considered seriously only a
few years ago as a result of the growing strength of OPEC
countries and the producers' concern about what they saw as
a valuable natural resource - associated gas produced with
crude oil - being wasted through flaring. Moreover, development
of techniques to transfer the LNG/LPG by ship at reasonable
cost had made exporting the product much more commercially viable.
The potential for LPG recovery from gas at present being
flared is enormous. In 1972, 15 to 30 million tonnes of LPG
could have been produced in the Middle East if all flared
gas was treated for LPG recovery. Actual production was only
3.6 million tonnes, or less than 1 5%. By 198 0, potential
production is estimated at 65 to 70 million tonnes, with
actual production increasing to 2 5% to 3 0 % of this, at 15
to 20 million tonnes. There is considerable uncertainty as
to exactly when the various schemes will come on stream due
to increasing cost and technical and managerial problems.
Export capacity for OPEC countries is estimated in Table
6 .5, showing a "realistic" capacity as opposed to an "optimisÂ
tic" capacity if all projects are commissioned on original
target dates. Quantities of LPG available from the OPEC counÂ
tries will therefore increase very significantly over the years
to 1 9 8 5 and will be the major supply for increased demand.
There is also potential for this capacity to meet the optimistic
estimates of increased demand.
96
TABLE 6.5
OPEC LPG EXPORT CAPACITY
1980 to 1990
(million tonnes)
I98O___ _____19 85 ______19 90
A B A B A B
Abu Dhabi 2. 1 1. 1 3.3 2.2 4. 7 3.9
Algeria 1. 1 1. 1 3.5 2. 5 3.8 2. 3
Dubai 0 . 5 0 . 1 0 . 4 0.4 0. 5 0.5
Iran 1 . 0 1.0 4.0 3.0 5.3 4.3
Iraq 3 . 1 2 . 4 3. 1 3. 1 3. 1 3. 1
Indonesia 0. 6 0.6 1.0 1 . 0 1. 5 1. 5
Libya 0.2 0. 2 0. 2 0.2 0. 6 0.6
Kuwait 6.8 5.1 6.8 6.8 6.8 6.8
Qatar 0.7 0.7 1.6 1 . 1 2. 5 1.5
Nigeria 0.3 0 . 3 0. 6 0. 6 1. 5 1.5
S. Arabia 22.2 10.9 22 .2 1 4 . 9 22.2 19 .2
Venezuela 1.5 1.5 1.3 1.3 1.2 1.2
40.1 25.0 4 8 . 1 37.1 53.7 46.4
A - Assumes projects commissioned on original target dates ("optimistic" basis)
B â Assumes some delay in implementation ("realistic" basis).
REFERENCE
Commission's consultants.
97
For the above reasons the Australian export market for LPG
is a little uncertain. It will largely depend on the growth
in the United States market. At best if this growth is at the
optimistic level suggested above and there continues to be
delays in bringing Middle Eastern facilities to full production
capacity, Australian exports will indeed be competitively sought
after.
On the other hand these Middle Eastern facilities may be
brought to a production level to suit demand and this is likely
if the growth in the United States tends more to the pessimistic
level indicated above. In such a case there could be competition
between Australia and the Middle Eastern countries which would
depend very much on price and prices could come down.
The quantities from Australia, possibly of the order
of one to two million tonnes per year, are small compared
to the Middle East export potential and therefore could be
absorbed in spot purchases. In addition the contracts already in
existence, particularly for Esso with its affiliated company
Esso Eastern Products and Trading could continue if the price
continues to be adjusted to something below the Middle Eastern
prices.
6.6 Shipping Transport - World
The development of LPG transportation is at a relatively
rudimentary stage. Most of the trade consists of small parcel
shipments or very large bulk trade on a back-to-back basis.
Thus, the average capacity of the 415 LPG carriers presently
operating is only 7,500 cubic metres and approximately 70% of the vessels are under 10,000 cubic metres. Most of them operate
in the coastal waters of Japan, the United States and Europe carrying parcels of propane and butane between refineries, small
distribution centres and industrial customers. They carry less
than 10% of the trade.
98
By contrast, a completely separate fleet has been built up
for the Japanese trade composed of large specially built ships
plying on dedicated trade routes between loading terminals in
the Persian Gulf and large receiving facilities in Japan. The
ships are mainly in the 40 to 80,000 cubic metre range . The
latest ships and those on order are generally in the 70 to
8θ, 000 cubic metre range. The ζ% of the world fleet dedicated to
the Japanese trade in 19 74 handled some 4 5% of the LPG tonnage
transported. Vessel sizes have continually increased and al though there are some vessels greater than 8 0 , 0 0 0 cubic metres,
it appears that there is now some standardisation in the 70 to
8 0 , 0 0 0 cubic metre range.
There is not much tonnage between these extremes, although
there is a requirement particularly for the United States trade
where there are limits on port facilities. It appears that some
United States facilities are being increased to take ships of
7 5, 000 cubic metre capacity.
The future seaborne LPG trade is expected to show a much
more varied pattern than the present. After the mid 1980's a
number of standard size ships may well be built for flexibility
of cargo and minimum cost, suited to draft and tankage restricÂ
tions of terminals, and available for more sophisticated spot
and time charter.
Table 6.6 shows an estimate of major quantities of world
LPG moved, and the number of ships in terms of 75,000 cubic
metre equivalents required to handle the quantities. Figure 6.1
shows graphically an estimated supply and demand for LPG
carriers for the years 197 5 to 1980. The oversupply indicated is
between 10% and 2 5% in 1 9 7 7 depending on assumptions about the availability of LPG. Obviously, as the optimistic and
pessimistic lines diverge, so does the estimated surplus.
99
TABLE 6.6
MAJOR LEG TRADE ROUTES AND SHIES REQUIRED 1975 to 19 80 (1)
1975 1980
Tons moved Ships Tons moved Ships
(2) (3) (2) (3)
To Japan
Middle East 5.1 14 7.3 20
Indonesia - - 0. 6 1
Australia 1.1 2 1.6 4
6.2 16 9.5 25
To United States
North Sea - - 2.0 3
Algeria 0.3 1 1.7 5
Middle East - - 5.8 29
0.3 1 9.5 37
To South America
Venezuela 2.3 1 3.0 2
Middle East 0.5 2 1.1 5
2.8 3 4.1 7
Other 0.4 _1 0.4 2
9.7 21 23 .5 71
(1) This is based on the lower estimate of LEG availability. Table
6.4 - the optimistic estimate would require 63 ships on the
Middle East - United States trade in 1980.
(2) Tons moved is million metric tons imported. 3
(3) Ships is number of 7 5 ,000 m equivalents required.
100
FIGURE 6 . 1
LPG CARRIERS : SUPPLY AND DEMAND
Carrying Capacity (million m3)
Under
Negotiation
Firm^^®
Optimistic
Pessimistic
Supply X
Demand
Commission consultants
1U1
But the important point is that until 197 8, when the firm tanker
orders flatten out, there is always an oversupply of tankers
whatever the assumption about LPG availability. Again, this
would indicate a satisfactory potential quantity and price
availability of tankers for Australian export trade providing
"foheign flag" vessels are used.
The number of ships required for the Australian export
trade is small (5 % by 1 9 8 0 ) compared with the total number
of ships in world LPG trade, which indicates that there
will be little difficulty in obtaining the transport required
on spot or back-to-back basis provided "foreign flag" vessels
are used.
102
7 .0 PRICE
7.1 Price Instability
In recent years and particularly since 1973 , the most
notable feature of the LPG market in Australia has been price
instability. This instability has been much more marked with
LPG than with any other petroleum product with a similar end
use and from a consumer's point of view has been most unsatisÂ
factory. Many users particularly rural town gas suppliers which
have come to rely on LPG as their sole source of feedstock for reticulated town gas, have emphasised this price instability
in submissions to the Commission. There is at present a $10
per tonne variation between the market price of LPG propane
and butane, the former commanding the higher price and reflecÂ
ting the greater market value of propane. In the past this has
not always been the case as the price of propane has ranged
from below that of butane to $15 above. LPG produced in
Australia is sold at three price levels:-
(i) ex-re fine ry price ;
(ii) Bass Strait production domestic price;
(iii) export prices.
103
Export prices are mainly associated with Bass Strait
production although some refinery production has been exported.
The variations of selling price for domestic and export LPG
propane are summarised in Figure 7.1. This Figure is construe-
ted from data supplied by various companies in several States.
The trend in prices, together with the dramatic increases folÂ
lowing the action in 1973 of the OPEC countries are demonstrated by the Figure.
The prices at each level vary considerably with different
buyers, sellers and in the case of refineries, location. The
prices are generally in the ranges shown in Figure 7.1, although
the Commission has been informed of several sales outside these ranges.
Precise export prices have been accepted as confidential by
the Commission although it has already been indicated in Chapter 6.2 that they approximate to the world market price. Prior
to 1 9 7 3 these were below all domestic prices but coinciding
with the world trend in oil prices they have since then risen
to a level consistently above domestic prices. There can be
significant variation according to the quantities involved,
term of contract and, until January 1974, the quality. Prior
to this, LPG was sold with little distinction between propane
and butane. The Prices Justification Tribunal, in its report
of 11th October 1976, quotes the present export price of proÂ
pane as $1 0 4 . 0 0 per tonne.
Bass Strait domestic sales were originally made at prices greater than the export sales from the same source. At the
same time, however, they were priced lower than ex-refinery
sales. Price escalation was similar to ex-refinery prices prior
to the 1973 worldwide increases and continued to 1975, when
they were considered by the Prices Justification Tribunal.
The present price of $66.88 is the justified price set by the
Tribunal in September 1975·
104
110
100
90 -
80
:e
70 -;onne
60
50
40
30
20
FIGURE 7.1
PRICE TRENDS OF AUSTRALIAN LPG PROPANE
Bass Strait Export Prices
Ex refinery Prices
Bass Strait Domestic Prices
1970 1971
1 I I
1972 1973 1974 1975
Year
t
1976
105
Ex-refinery prices, originally the highest of the three
levels, have escalated at a much lower rate than the world
prices. Periodically the Prices Justification Tribunal has
set justified price increases which differ for each refiner.
There is now a considerable range of prices, generally about
$7 5 to $96 per tonne, which depend on the location and the
refiner. This is, however, below all export prices known to
the Commission but considerably above the domestic price for
Bass Strait LPG. The recent decision of the Prices Justification
Tribunal could reduce these prices considerably below this
level and this is discussed below in Chapter 7·3.
7.2 Comparative Costs
In August 197 5 Esso submitted the following comparative
costs per therm for LPG and other alternative fuels:-
TABLE 7.1
COMPARATIVE COSTS OF LPG AND OTHER FUELS
Domestic Users Industrial Users
Cents/Therm Sydney Melbourne Sydney Melbourne
LPG 67 62 30 30
Heating Oil 22 22
Fuel Oil 16 16
Natural Gas 25
Manufactured Gas 94 70
In Melbourne, LPG is almost three time s the price alternative fuels for domestic purposes and approximately double
for industrial users. The reason for this cost differential is
106
the need to use high pressure vessels for storage and transporÂ
tation. Some economics can be achieved in bulk handling of IPG
and this is reflected in the fact that LPG is more competitive
in industrial uses.
In Sydney LPG is competitive with manufactured gas, but
is expected to become less attractive when natural gas replaces
manufactured gas.
In country areas and provincial cities where natural gas
is not reticulated, LPG is a premium fuel for industrial,
domestic and commercial purposes.
7.3 Reasons for Price Instability
The reasons for price instability have been many and
include:-
7.3.1 Category 'A1 Product in the Allocation Formula
for Indigenous Crude
Refinery produced LPG was until now not classified as
a Category 1 A' product in the allocation formula for indigenous
crude. Thus the past prices for such LPG were determined on the
basis that it was manufactured from imported crude the price of
which has escalated rapidly since 1973 . To this extent, it has differed from other petroleum product competitors in the market
place which are considered for purposes of justifying their
price, to be manufactured substantially from indigenous crude oil, the price of which has remained nearly constant except for
the $2.00 per barrel levy imposed by the Government in August
1975.
107
The recent decision of the Federal Government to include
LPG marketed ex refineries as a Category 'A' product as from
1st January, 19 77 , thus allowing its price to be assessed on
the basis that it too is largely manufactured from indigenous
crude oil, may if the recommendations of the Prices JustificaÂ
tion Tribunal in its report of October 1976 are implemented,
reduce its domestic market price in the short term, that is
while indigenous crude price remains at its present comparaÂ
tively low figure . LPG prices could therefore move more in
accordance with the pattern of other liquid petroleum fuels.
The Prices Justification Tribunal under Section 16 of
the Prices Justification Act instituted an inquiry which began
on 10th August, 1976 to determine the price of refinery produced
LPG supplied by B.P. Australia Limited and sold domestically
except for use as a petrochemical feedstock.
The Prices Justification Tribunal concluded that the justiÂ
fied prices for LPG we re:-
$42.00 per tonne in Melbourne
$48.00 per tonne in Perth
$55.00 per tonne in other places.
The Tribunal found that the j'ustified price for butane
rich LPG should be $10.00 per tonne less than the above prices.
It reviewed the price in the light of the value of
allocation to producers which was estimated at $6 3 . 6 9 per tonne.
Several approaches were considered:- ( i )
(i) Notional price less value of allocation entitlement:
$12.00 per tonne - Melbourne;
108
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
August 1973 prices plus non-allocation cost increases
less value of allocation entitlement: $6 5 . 0 0 per
tonne - Melbourne;
Fuel oil equivalent less value of allocation entitleÂ
ment: $28.31 per tonne;
Import parity price less value of allocation entitleÂ
ment: high price but difficult to assess transport
costs;
Same proportion of the price of regular motor spirit in Australia as it is in Singapore before allowing
for the effect of the crude oil policy in Australia.
Price then adjusted by value of allocation entitleÂ
ment: $82.43 per tonne;
Price not to affect sales of fuel oil or natural
gas which are priced at $47.00 and $5 0 . 0 0 per tonne
respectively, as claimed by B.P. LPG delivery costs
were accounted for; one estimate was $30.00 per tonne;
Export price less value of allocation entitlement:
$40.31 per tonne;
Ampol's refinery gate costs calculated in accordance
with its Refinery Gate Transfer Pricing System;
Comparisons with prices of other petroleum products
based on offtake provisions in refinery processing
agreements.
109
In reaching its conclusions as to justified prices, the
Prices Justification Tribunal has done so on the basis that
the new prices:-
(i) should not be so low that they would have the effect
of reducing the refinery production of LPG below
present levels;
(ii) should not be such that they would create a substanÂ
tial new demand for LPG by displacing other fuels from
established markets; and
(iii) should not be such that they would frustrate the
Ministerâs intention of assisting the gas industry
to curtail costs.
The recommendation therefore did not give the full advanÂ
tage of $6 3 . 6 9 per tonne value of allocation but apparently
placed the level of price above competing fuel costs.
Resulting effects of this recommendation if implemented
would be:-
(i) To make it attractive for refinery producers to export
LPG especially in Victoria where any excess production
would be difficult to sell. The export price is
$104.00 per tonne. The domestic price is $42.00 per
tonne. Even if disposal on the domestic market was
possible this would certainly recoup any losses based
on the value of the allocation lost by foregoing such
domestic sales. The Commission understands that B.P.
is considering the export of 20,000 tonnes per year of
surplus butane .
110
With natural gas being introduced into Sydney there
will be a slowing down in the growth of the LPG market
demand. Coupled with this the more severe refining
which will result from the lead phase down program
will tend to produce more LPG. The latter will also
occur in Victoria.
(ii) To widen the price difference between refinery proÂ
duced LPG and that obtained in emergencies from Bass
Strait. Although an advantage to the consumer it
emphasises the instability of prices.
(iii) To highlight an inconsistency between -
- indigenous crude based refinery produced LPG priced
at $42 per tonne at Westernport
- indigenous "natural" LPG priced at $66.88 per tonne
at Westernport
There is no quality advantage for LPG from either
source. A transport advantage exists for the lower
priced LPG especially in Sydney where transportation
from Bass Strait costs approximately $60.00 per
tonne. Thus the cost of naturally produced LPG is $126.88 per tonne compared to refinery produced LPG
at $55.00 per tonne.
7.3.2 Immobility
The market price for LPG has shown considerable variation
from State to State, and even within States. The Prices
Justification Tribunal has found that there is a difference in
111
ex-re finery prices of $20.00 per tonne for Sydney over MelÂ
bourne. It cannot distinguish Brisbane and Adelaide from the
Sydney level and Perth appears to be $7·00 per tonne lower than
Sydney.
Typical of this variation between States is the 9 cents
per litre retail price for automotive LPG propane in Melbourne
compared with the 13 cents per litre retail price charged in
Sydney.
Within States the variation can have a significant freight
component but if this is excluded, there are still significant
variations. A south coast New South Wales municipality (Bega)
informed the Commission that it was paying $103.51> which
included $56.72 per tonne for the propane and $4 6 . 7 9 per tonne
freight. It claimed that other councils paid between $58.00 and
$75.00 per tonne.
During a period of shortages of LPG in April and May 1974>
a northern New South Wales council (Lismore) was required to
pay $63.48 per tonne above the normal contract price of $ 5 6 .59 per tonne for delively from Sydney rather than Brisbane. Such
shortages have been described by one council (Parkes) as "the
annual winter shortage" and "the annual winter debacle".
Typical of the supply arrangements for gas utilities are
the conditions on supply in 1975 to Lithgow City Council by
Shell regarding prices:-
"(a) The prices quoted above are applicable as at 31st December, 1974, and are subject to any subsequent increases authorised or recommended by the Prices Justifi cation Tribunal during the contracted period.
112
"(b) Our offer is based on the supply of L.P.G. from our Clyde Refinery but should, for any reason, we be unable to supply from that source, we will make our best efforts to secure supplies from third parties. (Either local N.S.W.
refineries or Bass Strait producers.)
"(c) If, as mentioned in (b) above, we are unable to supply ex Clyde, all additional costs so incurred will be to the account of Council."
With the present high cost of LPG transport from the Bass
Strait fields, such clauses which generally apply to LPG supply
can more than double the cost of LPG to the consumer . The
present price of $55 per tonne plus freight from Sydney, because
of demand or supply fluctuations or industrial problems, inÂ
creases to $126.00 plus freight from Sydney.
These price variations between States and with in States
reflect LPG immobility compared to other liquid fuels: -
(i) the high cost of transport;
(ii) the shortage of road and rail vehicles and facilities;
(iii) the shortage of major storage facilities;
(iv) the embryonic nature of Australian coastal sea transÂ
port vessels and facilities.
Moreover the production from refineries does not always
meet the market requirements of the refinery's supply area.
The availability of LPG has been tied to seasonal requirements,
for example winter heating which coincides with the period
in refineries when LPG butane for example is required to
113
24717/76â 5
maximise motor spirit production within the refinery. Such
seasonal variation has in the past led to a variation in price
for LPG from refineries.
7.3.3 Export Prices
LPG exported from Australia comes almost entirely from
Bass Strait where it is extracted during production of natural
gas and crude oil. Exports began in 1970 and until 1973 the
prices were generally in the range of $11.00 to $16.00 per
tonne f.o.b. Long Island Point. During the latter half of 1973
and the first half of 1 9 7 4 there was a very considerable
increase. The price rose from a level of $15.00 per tonne to
$75.00 per tonne, averaged for propane and butane. The propane
price is generally $10.00 per tonne greater than the butane
price.
Increases since mid-1973 have been gradual with the propane
export price now $104.00 per tonne as reported by the Prices
Justification Tribunal.
The discrepancy between export and domestic prices has
widened as a result of general increase in world market prices
to which the Australian export prices are tied and they could
widen further owing to a decrease in domestic refining prices
resulting from the decision to include LPG in Category 1A 1
products. The latter has led the Prices Justification Tribunal
to recommend a propane price of $42.00 per tonne in Melbourne,
over $62.00 per tonne less than the export price.
The export prices are tied to the world market prices,
which in July 1976 was reported to be $US 120 or greater for
a 50/50 propane/butane mix. This price came after a general
fall in prices throughout the world, (see Petroleum Intelligence
114
Weekly, 12th July 1976) . The same article reports a general
expectation by traders that because of the increased LPG
production capacity of Middle Eastern countries now coming on
stream, there will be a significant decrease in prices. Although
the potential production capacities have been referred to by the
Commission in this Report at Chapter 6.5) the Commission has
no information as to the accuracy of he traders' estimated
future price of $8 0 . 0 0 per tonne.
7.3.4 Levy of $2.00 per Barrel
There is a compensating mechanism with respect to LPG
production from "natural" resources and that from refineries.
The $2.00 per barrel imposed in August 1975 on crude oil and
LPG produced from Australian oil and gas fields was later
amended to apply only to the present producing fields. The
return to the Bass Strait producers when selling on the domestic
market is $66.88 per tonne less $2.00 per barrel (approximately
$2 4 . 0 0 per tonne), leaving $4 2 . 0 0 per tonne, the same as
recommended by the Prices Justification Tribunal for Melbourne
refineries. Similarly, exports at $104.00 per tonne would return
to the producer $8 0 . 0 0 per tonne after paying the $2.00 per
barrel levy.
7.4 Flexibility of Production
7.4·! Production from Natural Gas
LPG is produced from Bass Strait by "drying" wet natural
gas to make it suitable to meet the specification requirements
for pipeline distribution to and by the Gas and Fuel Corporation
in Victoria. As such, the quantity of LPG produced depends
on the offtake of the natural gas, and the "wetness" of the
raw production gas. The producer thus has little control over
the quantity of LPG produced.
115
7.4·2 Production from Crude Oil
On the other hand, the amount of LPG produced from the
process of stabilising Bass Strait crude oil can be varied
and still meet quality requirements for ship transfer around
the Australian coast and pipeline transfer to the three VicÂ
torian refineries. Local refiners can increase the production of
motor spirit from indigenous crude oil if more LPG, particularly
butane, is left in the crude stream. In view of the imminent
shortages of white end products and refinery capacity, the
Commission considers it in the national interest that the
optimal amount of LPG from the point of view of refinery
production should be left in the crude stream. One consequence
of the high world parity price for LPG exported from Bass Strait
and the relatively low price compared with world parity reÂ
covered by producers from Bass Strait crude oil is that it
induces producers to extract as much LPG as possible from the
crude oil stream.
7.5 The Future
Esso Long Island Point inland sale price for propane is
$66.88 per tonne f.o.b. and for butane $63.90 per tonne f.o.b.
In May 19 76 the Esso export price from the same source was
for propane $101.98 per tonne f.o.b. and for butane $9 3 . 6 5
f.o.b. These export prices have recently been increased to
approximately $104.00 per tonne for propane. The inland sale
prices are prices approved by the Prices Justification Tribunal.
The export prices are tied to world market prices. On every
tonne sold either domestically or for export from this source
the producers pay a levy to the Australian Government of about
$24.00. Thus in each case the return to the producers is the
price set out above less the levy.
116
The ex-refinery price for LPG resulting from decisions
of the Prices Justification Tribunal prior to the Tribunal's
recommendation of 11th October, 197 6, ranged for propane between
$75-00 per tonne in Melbourne to $95.00 per tonne in Sydney
and for butane between $65.00 and $85.00 per tonne . By its
most recent decision the Prices Justification Tribunal recom mends these prices to be:-
Propane $42.00 per tonne in Melbourne
$48.00 per tonne in Perth
$55.00 per tonne in Sydney.
The Tribunal recommends that butane be priced $10.00 per tonne less than the propane price.
If, in the national interest, the domestic LPG market
should be encouraged to grow, as the Commission reports that
it should, LPG must be able to compete in price with alternative
fuels and the producers of LPG must have the incentive to turn
their product into the Australian market. At least price
regulations and controls should not provide the producers with
the strongest incentive to export. At the present time this is
precisely what they do. For the price of LPG to relate
appropriately to the price of other petroleum fuels such as
motor spirit, those other fuels should be priced on the basis of
manufacture from crude oil at world parity prices. In terms of
a national energy policy, the Commission has more than once
referred to the need, if Australian energy resources are to be
appropriately husbanded and exploited to bring the price of
Australian crude oil up to world parity. (see Fourth Report at p.227). On the other hand the producers of LPG must receive the
same return for their product on the local market as they
receive on the export market. Neither in the case of crude oil prices nor in the case of LPG prices does the Commission
117
advocate increases flowing through to producers as windfall
profits. Levies of the sort imposed on LPG may prevent this and
have already been discussed by the Commission in its Fourth
Report at p. 220. But there can be no doubt that if present price
distortions are allowed to continue, the very substantial
resources represented by Australia's reserves of LPG will
continue to be exported, to the detriment of the nation as a
whole.
The development of the LPG market depends upon competitive
and stabilised prices and this in turn depends to a large
extent upon the existence of a comprehensive and efficient
storage and transportation network. At the present time because
much of the demand is for town gas utility purposes, particuÂ
larly in high offtake areas such as Sydney and New South Wales
country centres, the offtake is very seasonally orientated. When
natural gas is introduced in New South Wales it will take over
some of this seasonal demand and some of the industrial base
load from LPG. What is needed for the development of the market
is a broader year round offtake. Such an offtake would result
from development, particularly in the Sydney, Melbourne, AdeÂ
laide high use triangle, of the market for LPG as an automotive
fuel and as chemical feedstock. The development of these
markets, which is discussed later in this Report will have the effect of making this indigenous resource attractive to
consumers.
118
8.0 STANDARDS
8.1 Variation in Standards
The Commission reports on the undesirable variations in
the legislation, all at a State level, which regulates safety
standards, quality and conditions of sale for LPG.
8.2 Legislation
The following State Acts and Regulations apply to LPG: -
TABLE 8.1
STATE ACTS AND REGULATIONS
Victoria
Queensland
New South Wales
South Australia
Western Australia
Liquified Petroleum Gas Act 1958
The Gas Act of 19 65 Liquefied Petroleum Gas Act 1961
Liquefied Petroleum Gas Act i9 6 0 and
Liquefied Petroleum Gas Regulations 19 65
Liquid Petroleum Gas Act 1965
In general they provide for: -
(i) quality and specifications of LPG;
119
(ii) construction standards- and materials, performance
and safety of gas fittings;
(iii) installation of gas fittings and containers;
(iv) restrictions on manufacture and sale;
(v) conditions of sale, including odour.
But currently the provisions of these Acts and Regulations
are inconsistent with respect to various aspects of LPG quality
and safety standards, so that different standards apply in
different States.
8.3 Standards Association of Australia
The Standards Association of Australia and the Australian
Liquefied Gas Association have published a number of Australian
Standards for LPG. These include:-
Australian Standard 1596 - 1973 - GAA L.P. Gas Code
(Metric levels)
Australian Standard 142 5 - 19 73 - GAS Code for the use of L.P. Gas in Internal Combustion Engines(Metric
levels) published by the Standards Association of
Australia
A.L.P.G.A. Liquefied Petroleum Gas Specifications and Test
Methods - Revised Metric Edition, September 11,
1973 published by the Australian Liquefied PetroÂ
leum Gas Association
120
8.4 Need for National Uniformity
The Commission considers that standards for LPG quality,
use and safety should be uniform and apply throughout Australia.
At the very least this would facilitate interstate movements
and reduce the costs, eventually borne by consumers, in meeting
different standards in different States. The need for uniformity
will grow as the source of LPG proliferates to more production
areas in various States in Australia, and as LPG becomes more
widely used in the community. The Standards Association of
Australia should be made responsible for publishing uniform
standards to apply throughout Australia and these should be
given the force of law by Federal legislation. It will of course
be necessary for standards to be kept up to date and the
legislation amended accordingly.
The Commission restates what it has said several times in
different contexts - there is no room for "break of guage" reguÂ
lation in twentieth century energy policies.
121
9.0 TRANSPORTATION AND DISTRIBUTION
9.1 General Comparison
LPG is transported and distributed in seagoing vessels,
or road and rail vehicles or containers specially designed
for the purpose, capable of withstanding comparatively
high pressures in the order of 17 atmospheres (kg/cm^) and,
where refrigeration is used, low temperature. The containers
are heavy, particularly those designed for high pressure operaÂ
tion. Special safety features and construction materials are
required. Transportation is therefore expensive when compared
with the transportation of other petroleum products.
9.2 Methods of Transportation
The methods used for transportation and distribution a re : -
(i) Large bulk, from production centre to main distribuÂ
tion centre in the market area. This is usually by
pipeline or sea transport.
(ii) Medium bulk, either interstate or intrastate from
production centre to main or subsidiary distribution
centre or direct to major customer. This is normally
by rail or road.
122
(iii) Small bulk, from distribution centre to customer
- either domestic, commercial, industrial or automoÂ
tive. This is normally by road and intrastate.
(iv) Package distribution in cylinders. This covers the
greater part of the domestic offtake, and small
offtake for other purposes. Again it is mainly within
individual States by road or rail on normal goods vehicles. The LPG cylinder obviates the need for
special transport containers.
Each of these methods and their cost will be discussed
in general terms to provide a background to understanding
the problems and cost of transportation.
9.3 Large Bulk
9.3.1 Pipe line
Product is generally moved from the production centre
to the main distribution centre by this method. Pipelines
are normally used from the refinery, or other production centre
(such as Westernport) to the main distribution centre within
the State or geographic area served. Delivery is from refinery
pressure or refrigerated storage to bulk pressure or refrigera ted storage in the receiving centre . In Australia to date pipeline movements of LPG have been relatively short.
Gas and gas liquids pipelines existing or planned in
the Westernport/Altona/Geelong area are:-
(i) Longford to Long Island Point - Gas Liquids
This is a 2 5 cm diameter 190 kilometre long pipeline
conveying a mixed stream of gas liquids (ethane,
propane and butane) from the Esso B.H.P. Gippsland
123
gas processing and crude oil stabilisation plant
at Longford to the Long Island Point fractionation
plant near Hastings on Westernport Bay.
(ii) Long Island Point to Dandenong - LPG
There is under construction a 10 cm diameter 5
kilometre long pipeline for conveying LPG propane and
butane from the Long Island Point fractionation plant
((i) above) to the Gas and Fuel Corporation storage
and distribution centre at Dandenong, Victoria.
(iii) Long Island Point to Altona - Ethane Gas
This is not an LPG line but conveys ethane gas through
a 25 cm diameter 79 kilometre long pipeline from
the Esso/B.H.P. Long Island Point fractionation plant
to the Altona petrochemical complex on the southern
outskirts of Melbourne. An extension to this system is
under construction from Altona to West Footscray, a
distance of 6.3 kilometres. The extension will carry
ethane gas to a chemical plant now being erected.
(iv) B.P. Refinery Crib Point to Dandenong - LPG
This is a 10 cm diameter 39 kilometre long pipeline
conveying LPG propane and butane from B.P. Westernport
refinery to the Gas and Fuel Corporation distribution
centre at Dandenong, Victoria.
(v) Shell Geelong Refinery, Corio to Shell LPG
Depot, Lara - LPG This is a 10 cm diameter 3.5 kilometre long pipeline
conveying LPG propane and butane from the Shell
Geelong refinery at Corio to the Shell LPG storage
and distribution at Lara, Victoria, some 60 kilometres
south-west of Melbourne. Adjacent to it is an LPG
bottling plant.
124
Less versatile and sophisticated LPG pipeline systems
operate in conjunction with refineries in other capital cities
of Australia. Pipeline transportation is the lowest cost method
of handling large volumes of LPG. The economics deteriorate as distance increases relative to volume. Large pipeline netÂ
works have been built up for example in the United States and by
1970 over 7 2% of propane sold was moved by pipe line s.
9.3.2 Sea Carriage
The second method for handling large bulk movement of
LPG in Australia is sea carriage in small ocean going tankers,
plying interstate or on long intrastate hauls. These are also
used to supply the Pacific Islands. For some time foreign
flag ships capable of carrying about 400 to 1,000 tonnes of
LPG propane have been operating the coastal trade on a spasmodic
seasonal basis, generally on single voyage charter. Single
voyage permits granted by the Australian Minister for Transport
are required for these movements which have been used particuÂ
larly to relieve local shortfalls such as those occurring
seasonally in Sydney in recent winters.
'Milk run' shipments are made to the Pacific Islands
with a number of drops of small volumes loaded either at
Brisbane, Geelong or Westernport. Tasmania and Adelaide have been fed by shipments from Geelong and Westernport. There have
been sporadic movements in other areas.
9.3.3 The Bulk Transport Problems
Westernport is the main source of LPG for large bulk
interstate transfer. The area of greatest need is the market
area adjacent to Sydney where the excess of demand in winter
over the capacity of the local refineries to supply has already
125
risen to 4 5* 000 tonnes. Unfortunately for a number of reasons
movement of LPG from Westernport to Sydney is extremely diffiÂ
cult. The cost of such movement is about $50 to $60 per tonne.
Some of the reasons for this high cost of transportation are:-
(i) Small Non-refrigerated Tankers
The tankers presently used around the Australian
coast are very small pressurised non-re frigerated
vessels. The Long Island Point Westernport loading
facilities were designed for loading refrigerated
LPG into large refrigerated overseas vessels. To
load small pressurised tankers it is necessary to
use an improvised 10 cm loading line from intermediate
pressure vessels. Moreover, the large export LPG
tankers and large crude carriers have priority of
access to the loading jetty. These two factors result
in loading rates and ship queueing problems which
can cause a small LPG tanker to take two to three
days to load, instead of less than the normal 24
hours.
(ii) Lack of Discharge Facilities
Sydney has no proper discharge facilities for receiÂ
ving LPG from tankers. Generally the tankers discharge
direct into road vehicles at Oyster Cove west of
the Gladesville Bridge on the south side of the
Parramatta River. The discharge period is in conÂ
sequence several days instead of less than 24 hours.
Moreover, much of the LPG has then to be carted
by road to an LPG depot on the south side of Sydney
for storage and distribution. This additional cartage
can cost $7 per tonne.
126
(iii) Australian Crew Rates of Pay
Australian pay rates must be paid to ship crews
from the time of commencing loading to the time
of completion of discharge. This alone adds some
$10 per tonne incremental cost to the cost of LPG
transported from Westemport to Sydney.
9.3.4 Potential Freight Savings
There are potential savings of about $40 per tonne, or 2
cents per litre, to be achieved by the use of ships of larger
capacity, which would accept refrigerated casgoes, and the proÂ
vision of adequate discharge and storage facilities located at
Botany Bay or Port Kembla. Either port with these facilities
could handle LPG for Sydney far cheaper than is presently the
case. The Commission is aware that bulk storage tankage not preÂ
sently in use exists at these ports which might be converted to
become an LPG main installation fed from sea going tankers. The
type of tanker and its size is dependent naturally on the market that can be developed.
9.3.5 Fully-pressurised Ships
These ships are generally designed to carry LPG and
anhydrous ammonia. They have a maximum capacity of about 2,000
cubic metres. The cargo is usually carried in from two to six
uninsulated cylindrical pressure vessels. The working pressure
is equivalent to the vapour pressure of the cargo at the maximum
anticipated ambient temperature, considered to be 45°C. The
design pressure of the fully pressurised tanks is usually 17.5 to 18.0 atmospheres. This high pressure results in heavy and
expensive tanks built of carbon steel, normally horizontal and
cylindrical in shape arranged either below or partly below deck and mounted in cradle-shaped foundations. Tanks below deck are
127
equipped with domes penetrating the deck on which all connecÂ
tions necessary for loading, discharging, sampling and gauging
of level, pressure and temperature are placed.
9.3.6 Semi-pressurised Carriers
According to Gazocean, Paris, which specialises in this
type of sea carriage, above a certain tank size it is more
economical to install a refrigerating plant and maintain a
reduced pressure in the tank.
Tanks are still cylindrical pressure vessels but designed
for a pressure between 4 and 8 atmospheres. The tanks are
insulated and the boil-off reliquefied.
Earlier semi-pressurised ships ranging up to 5*000 cubic
metres had tanks constructed of carbon steel suitable for
a service temperature down to -5°C or -10°C, but semi-presÂ
surised and fully-pressurised tankers with low temperature steel
tanks down to about -45°C and pressures of about 5 to 8
atmospheres are now common.
These ships are very flexible and are able to heat or
cool the cargo during loading or during the voyage and to
raise its temperature when discharging. In addition to IPG
and ammonia, some of them are able to carry solvents when
tanks, supports and wash bulkheads are designed for a higher
specific gravity than is usual for LPG and ammonia cargoes.
As a secondary barrier is not required where the cargo is carÂ
ried in pressure vessels, this type of ship is competitive with
fully-refrigerated atmospheric pressure LPG ships at least to
their present maximum capacity of about 12,000 cubic metres.
128
9.3.7 Fully-refrigerated at Atmospheric Pressure
Of these Gazocean states that the possibilities and ecoÂ
nomic advantages of transporting LPG at atmospheric pressure
were not fully appreciated until the transportation of LNG was
considered. From the experiences gained in LNG investigations,
the transportation of LPG at atmospheric pressure and low
temperature was also found to be economic for comparatively
large ships.
The first fully-re frigerated ship intended for LPG entered
service in 1961. The tanks, which are usually designed for
a minimum service temperature of about -50°C and a maximum
working pressure of about 0.28 atmosphere are insulated selfÂ
-supporting and prismatic in form. The prismatic tanks enable
the designer to make better use of the under-deck capacity and
the hull is either single skinned or double skinned with always
a double bottom.
The tanks are longitudinally divided into two liquid compartments freely interconnected.
The tanks are insulated either with plastic foam or
glasswool or perlite.
9.3.8 New Insulation Tank System
A new insulation system has recently been developed by
engineers of Shell International Marine. The system is based on the use of rigid foam polyurethane sprayed on the interior
surface of the inner hull of a double hulled ship. The foam
thus acts as both the primary barrier and insulation for the
129
LPG. The inner hull which might be tank quality steel, forms
the secondary barrier. As the liquid gas has a boiling point
well below ambient temperature, the insulation will function
as a liquid barrier. This is because of the temperature gradient
through the insulation: any permeation of LPG into the insulaÂ
tion must be in the form of vapour only.
9.3.9 Bulk Shipping Costs
The Commission has consulted agents for an international
shipping company involved in transportation of liquefied gases.
A schedule of costs was provided for shipment of LPG from
Westernport to Sydney for a range of annual movements, ranging
from present volumes of 20,000 tonnes per year to long term
movements of 778,000 tonnes per year. In addition costs for
substantial quantities to be transported on a "milk run" from
Westernport to Sydney, Newcastle and Brisbane were provided.
Table 9.1 gives these costs on the basis of a foreign ship
crewed by: -
(i) a foreign crew at foreign crew rates;
(ii) a foreign crew at Australian rates for single voyage
permits;
(iii) an Australian crew excluding any additional capital
cost charges to provide additional facilities required
by agreements with Australian unions.
Current activities in the transportation of propane from
Westernport to Sydney to overcome a shortfall from Sydney refineries during the winter period and to supplement requireÂ
ments of feedstock prior to the introduction of natural gas are
short term arrangements and the cost of hire of vessels and the
130
SHORT AND LONG TERM CHARTER SHIPPING COSTS FOR L.P.G.
Vessel Propane Size Capacity
Cubic Metres Tonnes
Rotation
Theoretical Actual
Days
Volume P/A Theoretical Actual
Tonnes Tonnes
Foreign Crew
Theoretical Actual 57Te $/Te
COST PER TONNE
Foreign w/Aust. Rates for S.V.P. Theoretical Actual 57Te $/Te
Australian Crew No aaded crew facilities Theoretical Actual
$/Te â¢$/Te
SHORT TERM -
900
1500
Westernport-Sydney
450 5*j-6 7
855 5*5 - 6 7
8
8
27,000 20,700
51,300 40,000
42.85
27.60
50.00
36.25
47.00
30.00
55.00 56.00 66.00
39.50 36.60 47.75
LONG TERM - Westernport - Sydney
1500 855 5*5-6 51,300 25.00 28.00
6000 3,400 5 230,000 14.50 16.50
20000 11,300 5 768,000 8.50 9.25
34.00
17.50
10.00
LONG TERM - Westernport-Sydney-Newcastle-Brisbane
6000 · 3,400 11 186,000
20000 11,300 11 350,300
30.50
17.00
33.00
19.00
34.50
20.00
positioning and repositioning of vessels is relatively high for
such operations. Such arrangements result in costs of $39-50 per
tonne for a vessel carrying 85 5 tonnes, to $55-00 per tonne for
a vessel carrying only 450 tonnes. The quantities moved in one
year could amount to 40,000 tonnes for the larger vessel or
2 0 , 7 0 0 tonnes for the smaller vessel.
These costs are higher than are theoretically necessary if suitable loading and unloading facilities we re available.
At the discharge port only limited storage capacity exists
and discharge is made with a combination of terminal capacity
plus road trucks. The delay at the loading terminal results
from the rate of occupancy of the single loading berth by large
export LPG tankers and crude oil tankers, which have priority
over small coastal LPG vessels.
Added to this is the problem of extended loading time
involved with pressurised LPG as against refrigerated, say
36 hours compared with 1 5 to 18 hours.
These delays therefore contribute an additional $18.00
per tonne for the smaller vessel rate and $9 . 5 0 per tonne for
the larger vessel.
The crewing situation which has prevailed for coastal LPG traffic over the past two years involves a foreign crew with
supplementary Australian rates of pay whilst the vessel is operÂ
ating on a single voyage permit. Prior to that foreign crew
operations had been permitted but up to date there has been no
gas transport in vessels subject to all Australian crew rates of pay and conditions. As these are particularly high, they should
be avoided if possible.
The supplementary Australian rates of pay have added $3.25
to $5.00 per tonne to the normal rates paid to the foreign
crew. An Australian crew, however, would add $11.50 to $16.00
132
per "bonne before any provision is made for bhe general upgrading
of crew accommodation facilities demanded by Australian crews.
In the longer term the market for LPG could be expanded
considerably and there would be a demand for vessels on long
term charter to be dedicated to the Westernport to Sydney supply
route. Facilities for loading and unloading would then have
to be upgraded and significant savings could be made in
transport costs depending on the annual quantities moved. In
this case assuming 2 4 hours for both loading and unloading and
allowing entry and departure from ports at all hours, the rate
could be progressively lowered from $28.00 per tonne for annual
shipments of 51)300 tonnes to $1 6 . 5 0 per tonne for 230,000
tonnes and $9 . 2 5 per tonne for 768,000 tonnes if this eventuaÂ
ted. Such rates are based on foreign crews with supplementary
Australian rates of pay. Australian crews would notably increase these costs.
For transportation of substantial volumes from Westernport
to Sydney, Newcastle and Brisbane as a "milk run" operation,
and using a single price which would be applicable to all ports,
the cost of transport would be somewhat higher. Rates given
to the Commission are $33.00 per tonne for annual movements
of 1 8 6 , 0 0 0 tonnes and $1 9 . 0 0 per tonne for movements of 380, 300
tonnes.
9.4 Medium Bulk
9.4.1 General
Rail and road, and combinations of both have traditionally
been the main means of handling LPG in Australia for distribuÂ
tion within a State from the production centre to main or
subsidiary storage or direct to customers. Because of the
133
relatively low level of market offtake so far developed in
Australia, this has also been an important means of handling LPG
interstate. Rail movement has been complicated by the various
rail gauges in eastern Australia, and particularly has this
affected the movement of LPG from We stern port to Sydney and
northern New South Wales.
Within each State, systems of main and satellite distribuÂ
tion installations based on rail/road transport have developed
according to existing and expanding market needs. Thus, adjacent
to Melbourne there are storage and distribution centres at
Dandenong, Derrimut and Lara, and in country areas such as
Albury. The Commission has insufficient information to study
or comment on these intrastate networks, their efficiency
or operating costs. However, the Commission is concerned that
shortages of LPG propane in some areas such as Sydney are
limiting the development of the market for this product, and
has examined the methods and costs of transfer of LPG from
Westernport to Sydney by combinations of rail and road.
9.4.2 Costs of Rail and Road Carriage
New South Wales standard gauge rail cars have capacities
of 35 tonnes and 55 tonnes, and can be loaded from road vehicles
at either the Dynon Road, Melbourne Southern Standard Gauge
Terminal or at Albury. The road vehicles themselves can be
loaded at, for instance, Dandenong, along with other road
vehicles. The rail cars, after filling from road vehicles,
can be hauled by rail to the receiving centre and discharged
to storage or other road vehicles. Dynon Road is also equipped
to handle container-type movements, that is 10 tonne LPG pres sure vessels which can be loaded on a flat top road vehicle at
Dandenong, trans-shipped on to a "flat top" rail car at Dynon
Road, and transported by rail to the receiving centre where it
can be again handled on to a road vehicle and finally delivered
direct to customer or sub-installation.
134
Cost of these methods of handling LPG propane from Western-
port to Sydney approximate $65 per tonne, which can be reduced
by $10 per tonne if back-hauling of, say, ammonia can be
arranged. The turn round of a rail car is seven days, Western-
port/ Sydney, which gives an overall transfer capacity per car
during the main offtake period of some 1, 2 5 0 tonnes per 35 tonne
rail car and 2,000 tonnes per 55 tonne rail car. Each 10 ton
container can handle 5 5 0 tonnes during the nine months main
offtake period. Road loading facilities at Dandenong and Dynon
Road may need to be reviewed as the transfer quantities by this
means increase. In the short term and until adequate facilities
become available in Sydney for the receipt of ships cargoes
of LPG, this combination of rail and road transport provides
an alternate i eans of transport from Westernport to Sydney
at a cost which is not unfavourable when compared with existing
sea transport costs, and in some circumstances can be cheaper
when all aspects of intermediate handling are taken into
account.
Table 9.2 taken from figures which have been supplied
to the Commission represents an industry view of the cost:-
135
TABLE 9.2
COMPARISON OF TRANSPORTATION COSTS
Sea/Road
Sea" freight - Westernport Sydney unloading
Road transport - Sydney unloading/Sydney
installation
Rail/Road (Rail) (Tankers)
(including road haulages to Dynon Road
Melbourne - delivery to Sydney
installation)
per tonne
$56.70
7.00
$63.70
$65.00
Rail/Road (Container Tankers) $61.00*
(including road haulage - Victoria and
Sydney - delivery to Sydney
installation or customer)
* This figure can be reduced by $10 per tonne if ammonia is
backhauled. The amounts available for backhaul are almost
10,000 tonnes per annum.
9.5 Small Bulk
9.5.1 General
LPG is distributed in small bulk quantities from the
distribution centre, whether prime or secondary, to the cusÂ
tomer, domestic, commercial, industrial, automotive and so on. The Commission has included in this section costs of the
following activities
136
terminal handling
road delivery-
customer storage.
9.5.2 Terminal Handling
The terminal handling charge covers labour, supervision,
fuel and electricity, maintenance and the like. It may also
include amortisation of capital charges, taxes and insurance.
Terminal handling obviously has a fundamental impact on the
ultimate cost to the consumer. One figure furnished to the
Commission for a small pressurised installation in Sydney
was $4·00 per tonne handled. Relevant United States figures
for a large installation with high construction costs have
been estimated and indicate the impact of present day inÂ
flation costs on terminal handling charges, which could
apply to any major new terminal in Sydney. The effect of this
high construction cost proliferates through the other aspects
of maintenance and insurance, so that even the unit cost without
capital charge is high.
137
TABLE 9.3
TERMINAL COSTS: 1974 and 1979
19 74 1979
Annual Costs - $US millions
Capital charges @ 20% of total cost 7. 84 13.7
Fuel and electricity 1.00 1.7
Labour and supervision 0 . 6 0 0.9
Maintenance @ 3% of plant cost 1.00 1.9
Taxes and insurance @ 5 % of plant co st 1.64 2.6
TOTAL ANNUAL COSTS - $US million 1 2 . 0 8 20.8
Annual Throughput - million cubic metres 1.125 1.125
Unit Cost with Capital Charge
$US per cubic metre 10.75 18.5
$US per tonne 19.9 34.2
$A": : ' per tonne 1 6 . 2 2 7 . 8
Unit Cost without Capital Charge
$A per tonne 5.7 9.5
-* JSA1.00 = $US 1.23
138
9.5·3 Road Delivery
Road delivery is made in special high pressure vehicles
designed for the purpose and varying in capacity from about
5 to 15 tonnes. The cost of a 15 tonne vehicle with prime
mover is about $1 1 8 , 0 0 0 compared with an equivalent 15 tonne
motor spirit vehicle with prime mover at $78,000. The additional
cost for the special features of LPG handling is about $40,000.
Delivery costs in these vehicles have been estimated to the
Commission in one instance at 12 to 15 cents per tonne mile, and
in another for average metropolitan delivery at $13 to $21 per
tonne, depending on drop size and distance. Delivery can be
direct to customer storage, built and financed by the marketer,
or, as in the case of automotive sales, to a reseller outlet
such as exist particularly in the Melbourne area.
9.5*4 Customer Storage
The costs of storage vessels at the customer premises
normally financed by the marketing company, and exclusive
of installation costs are presently: -
Thus for a 4.5 kilolitre tank and an annual throughput
of 50 tcnnes and capital charge of 20%, the customer storage
cost is $7.00 per tonne.
1 kilolitre (0.5 tonnes)
3 kilolitre (1 . 5 6 tonnes)
4.5 kilolitre (2.35 tonnes)
6.5 kilolitre (3.4 tonnes)
$ 750
$1,300
$1,750
$2,200
139
9.6 Package Distribution
9.6.1 General
The significant cost associated with this method of transÂ
port and distribution is the cost of the container and not the
cost of the fuel. Relevant approximate costs a re:-
1 0 8 kgm/cylinder (domestic in situ) $5 0 .0 0 .
The financing of cylinders is a complex matter and depends
on the policy of the marketer and the competition in the market
place. In the ideal marketing situation, the customer pays a
fixed annual rental for the use of the cylinder, irrespective of
how much gas he uses. In an extremely competitive situation,
variations in gas price and cylinder rental are very pronounced.
As the cylinders cost far more than the gas contained in them
(for a 43 kgm cylinder, the gas represents about 5% of the
cylinder cost), the control over containers can become more
financially significant than the sale of the gas. The transport
of cylinders to country areas is not now as extensive as it
was. The handling charges of a 43 kgm cylinder (weight when full
approximately 85 kgm) are substantial.
9.6.2 Costs
The main costs involved in cylinder filling are associated
with the following operations : -
filling cylinder at city depot;
transport from depot to rail;
rail to country area; transport to agent's depot;
agent's depot to consumer and return.
9 kgm/cylinder (caravan)
43 kgm/cylinder (domestic)
$20 .00
$ 4 0 .00
140
Additionally, there are : -
the agentâs commission;
risks of lost and damaged cylinders;
bad debts;
damaged cylinder valves.
Table 9.4 sets out the cost of supplying gas in a
cylinder, assuming it is a 43 kgm cylinder valued at $30,
is used four times in a year and has to be filled at a
city depot and transported to and from a country centre,
with the account being handled by an agent.
141
TABLE 9.4
COST OF SUPPLY IN A CYLINDER
Filling cost say $0.70
Transport depot to rail say $0.30
Rail to country area say $1.50
Transport to agent's depot say O CO O Agent's depot to consumer Return transport charged
say $0.30
(say 80% o f forward)
Depreciation and mainten-say $1.20
ance (say 20%) say $1.50
Value of back-up cylinders say $0.50
Agent's commission say $2.00
Value of gas a t depot
Profit - before tax
$8.30
say $2.00
say $2.00
$12.30
The variables are all open to adjustment depending on the
type of operation. However the components in the calculation are
inescapable.
142
10.0 ADDITIONAL USES
10.1 Overseas Comparisons
Before considering additional uses for LPG in Australia
it is worth looking at market patterns and uses in other
countries. The Commission has examined consumption patterns for the United States of America, Japan and Western Europe for the years up to 1985 and estimated LPG consumption by end use secÂ
tor. These are set out in Tables 10.1, 10.2 apd 10.3.
The extent and pattern of use differs markedly in these
three areas, for the following reasons:-
(i) United States of America The shortage of natural gas will cause LPG to play a bigger part in utility usage, particularly for peak
shaving. However, domestic/commercial use will suffer
by inroads from electricity, and there will be a
switch to naphtha feed for petrochemicals in both
cases because of price. LPG as an automotive fuel will
continue to grow.
(ii) Japan The largest growth is in the industrial sector, because of environmental pressure, balanced by a drop in petrochemical feedstock offtake due t© over capacity in the industry and movement of production
143
TABLE 10.1
UNITED STATES LEG CONSUMPTION BY END USE
Domestic and commercial
Agriculture
Town gas
Manufactured gas
Industrial
Petrochemica1
Motor spirit manufacture
Automobile
TOTAL
Million tonnes
1970 1975 1980 1985
% % % %
4 0 . 3 36 32 29
7 8 9
1 . 1 2 5 9
9 8
6. I* 6 6 8
4 5 · 4 * * 23 13 10
19 18 18
7 . 1 _ z 8 9
1 0 0 . 0 100 100 100
3 7 , 0 8 8 3 8 , 1 0 0 4 3 , 1 0 0 4 7 , 8 0 0
* includes others
includes refinery fuel.
-SHf·* assumed included in petrochemical
REFERENCE For year 1970: 1973 Gas Facts, American Gas Association.
For 1975, 1980, 19 8 5 : Commissionâs consultants.
144
TABLE 10.2
JAPANESE LPG CONSUMPTION BY END USE
19 70 1975 1980 19 85
(1) (1) (2) (2)
% % % %
Domestic and commercial 50.0 45.7 50 50
Town gas 2.7 4. 2 4 4
Industrial 17.6 19 .9 22 25
Petrochemica 1 8.0 15.3 10 7
Automobile 21 .7 14.9 14 14
TOTAL 100. 0 100.0 100 100
Million tonnes 6, 591 12,372 16,000 22,200
REFERENCES
(1) Nobuyuki Nakahra, The Japanese Energy Situation, The Present
and the Future, The APEA Journal, 1973. Excludes
small export market.
(2) Commissionâs consultants.
145
24717 /76â 6
TABLE 10.3
WESTERN EUROPE LPG CONSUMPTION BY END USE
Domestic and commercial
Town gas/manufactured gas
Indust rial
Petrochemica1
Automobile
TOTAL
Million tonnes
* Includes other uses.
REFERENCES
1 9 7 2 19 75 1 9 8 0 1 9 8 5
% % % %
32 33 41 40
9 7 5 -
41* 42 32 31
12 12 16 22
6 6 _6 7
100 100 1 0 0 1 0 0
1 2 , 5 0 0 12,3 00 1 6 , 6 0 0 1 9 , 1 0 0
1972: World Seaborne Trade in LPG and Chemical Gases
1975 to 1985: Commission's consultants.
146
capacity offshore. The automotive offtake remains high and continues to grow in quantum.
(iii) Western Europe
A common feature of the countries in this region
is the growth of LPG for automotive purposes, both by quantum and percentage. Here too a general
shortage of naphtha and local availability of LPG will
swing petrochemical feedstock towards LPG. Natural gas
will replace manufactured gas and will erode indusÂ
trial offtake of LPG.
Different circumstances in terms of supply, transportation
tnd price limit the direct significance of these comparisons
;o the Australian scene. However, indirectly, they are sign if i-
:ant so far as they indicate areas where markets can be
leveloped.
The Commission turns to the future Australian scene and
considers four possible ways by which the market for LPG might
>e expanded.
(i) Conversion to motor spirit.
(ii) Direct automotive fuel.
(iii) Petrochemical feedstock.
(iv) Refinery feedstock.
147
10.2 LPG Conversion to Motor Spirit
10.2.1 Advantages and Disadvantages
Obviously greater quantities of LPG could be used in
Australia as automotive fuel, either by converting it to motor
spirit or directly as fuel. LPG can be converted, by refining,
to a motor spirit component, and thus absorbed into the motor
spirit pool . The method is similar to that used in Australian
refineries to convert LPG such as propylene, butylene and iso
butane to motor spirit components through polymerisation and
alkylation plants.
The Commission notes that one of the functions of the
Pipeline Authority, established by the Pipeline Authority Act
1 9 7 3 , is to ensure that condensate, petroleum gas and other
substances derived from natural gas are retained and processed
in Australia in order that they may be available to augment
supplies of motor spirit and similar fuels obtained from
indigenous sources - Section 13 (1)(f).
The major portion of the LPG propane and butane gases
available in Australia is from natural gas and crude oil
production in Bass Strait. In the future more will become
available from similar sources in the Cooper Basin and NorthÂ
West Shelf. LPG from these sources does not contain any
unsaturated hydrocarbons such as propylene or butylene which
must therefore be produced by processing through specialist
refining plant. These highly reactive hydrocarbons then react
with other hydrocarbons to form motor spirit components.
148
An advantage of converting LPG to motor spirit components
is that the product, being a high quality motor spirit blending
stock, can be absorbed into the normal motor spirit pool
and distributed through this system. Another advantage is
that the plant can be designed to handle the complete range
of hydrocarbons present in the feedstock, that is propane
and butane, in the proportions contained therein, and within
limits, to accept variation of these proportions from the
producing centre. A disadvantage of conversion is that inherent
limitations in the refining process will always prevent realisaÂ
tion of more than about 70% of the energy in the LPG converted.
Moreover, the process is highly capital intensive, involving
steam cracking, butane isomerisation, ethylene alkylation, proÂ
pane dehydrogenation, and propane/butane alkylation. These proÂ
cesses are more common in the petrochemical industry and
have not all proven coimiercial records. This comment applies particularly to propane dehydrogenation. There is however a
greater potential in upgrading butane, iso butane and propylene
to motor spirit, particularly in an existing refinery.
10.2.2 Submissions on Conversion
The Commission has studied a number of submissions based on the processing of LPG from Bass Strait or Cooper
Basin, or natural gas liquids from Cooper Basin. All such
submissions were based on plants designed to process the
feedstock containing the natural proportion of propane. Some of the technical aspects of these proposals are shown in
Table 10.4. These submissions were all "scopingâ or "broad
brush" submissions. They indicated therefore only processes
which might be theoretically used for the purpose. Costs were approximate. Cost of land, general infrastructure, jetty and
149
TABLE 10.4
LPG CONVERSION PROPOSALS
Scheme A - Cooper Basin
Intake 400,000 tonnes per year LPG
Product 219,100 tonnes per year motor gasoline
component
9 7 , 6 0 0 tonnes per year ethylene
Plant LPG fractionation
Thermal cracker
Butane isomeriser
H.F.* alkylation
Capital cost $A 62 million minimum
(1974)
Operating cost $A 4. 5 million per annum
Hydrofluoric acid
150
TABLE 10.4 (continued)
Scheme B - Cooper Basin
Intake 2 5 , 0 0 0 barrels per day natural gas
liquids including LPG
(8 5 0 , 0 0 0 tonnes per year @ 9 . 7
barrels per tonne)
Product 1 8 , 0 0 0 barrels per day gasoline
component
(6 7 5j0 0 0 tonnes per year @ 8 . 8 barrels per tonne)
Plant Natural gas liquids fractionation
Propane dehydrogenation
Butane isomerisation
Polymerisation unit
Alkylation unit
Capital cost
(1974)
$A 6 0 million
Operating cost $A 12 million per annum
151
TABLE 10.4 (continued)
Scheme C - Bass Strait
Intake propane 15,023 BPSD (420,000 tonnes per year)
isobutane 6,190 BPSD (228,000 tonnes
per year)
normal butane 7,0^5 BPSD (192,000 tonnes per year)
TOTAL 2 9 , 2 9 8 BPSD (840,
per
00 0 tonnes
year)
Product Scheme 1 Sdheme 2 Scheme 3
Gasoline BPSD 13,770 1 1 , 6 0 0 1 2 , 0 6 0
Ethylene MM lb s/ ye ar - 367 454
Fuel Gas MM BTu/hour 560 553 836
Propane BPSD 7,690 3, 557 -
Plant Scheme 1
LPG fractionation
Butane isomerisa tion
H.F. alkylation
Propane dehydroÂ
genation
Schemes 2 & 3 LPG fractionation
Butane isomerisaÂ
tion
H.F. alkylation
Propane Pyrolsis
Cracker
Scheme 1 Scheme 2 Scheme 3
Capital cost (1973) ($US million) 56.5 54.75 56.41
Operating cost
($US million)
6.5 7.7 10.0
152
pipeline facilities, tankage and so on have either been estiÂ
mated in broad terms or not included. Costs have risen considerÂ
ably since these estimates were made.
The following characteristics seem to bear upon the ecoÂ
nomics of direct reduction of LPG to motor spirit: -
(i) The motor spirit component produced is relatively
light but of high quality particularly with regard
to its octane blending characteristics.
(ii) The product is a blendstock and cannot be marketed
as a motor spirit . Therefore the LPG processing
complex must be sited close to the motor spirit
pool blending facilities of a petroleum refinery.
Alternatively the motor spirit components must bear a
transport cost to such a refinery. The cost of
shipping motor spirit component from Spencer Gulf to
Sydney where it is most needed is estimated at $6.00
per tonne.
(iii) Much of the other product from the complex is gas
which is disposed of as fuel gas would be sold
cheaply but which can be sold as ethylene for petroÂ
chemical manufacture. A sophisticated chemical complex adjacent to the LPG conversion refinery might pay $100
to $200 per tonne for ethylene. This would greatly
improve the economics of the LPG conversion refining.
153
(iv) All the submissions made show adverse economics
where:-
(a) the LPG feedstock is valued at $A90.00 per tonne
based on export value Westernport/Spencer Gulf;
(b) motor spirit component is valued at $1 2 3 . 0 0
per tonne, the equivalent to import value.
High capital servicing charge resulting from the
relatively high capital cost of the schemes adds
a further cost element, even when high value is
applied to ethylene produced as a feedstock for
petrochemicals .
Mobil Oil Australia Limited in its letter dated
27th May, 19 75 informed the Commission that the
following policies should be adopted in relation
to LPG:-
"The premium nature of LPG as a fuel should
be recognised and accordingly, in Australia, it should be utilised directly as LPG and not converted to another fuel, specifically motor spirit. The reasons for this are twofold:-
(a) The conversion of LPG to gasoline will
involve a considerable energy loss in the con version process. Thus, converting LPG to gasoline would involve a sub-optimal utilisation of this resource compared to utilising the LPG directly.
(b) The establishment of facilities to convert LPG to gasoline would require considerable in vestment and the costs of this investment would, of course, have to be reflected in a higher
selling price for gasoline."
154
Esso Australia Limited, in its letter dated 19th
August, 1975 informed the Commission that:-
"While it is technically feasible to convert LEG into gasoline, any refinery built with this as the primary objective would require considerable en gineering and development work on some of the proÂ
cesses involved before its commercial application and economic viability could be established. This develop ment and evaluation is quite complex. Moreover, so long as LEG prices in world markets command a sigÂ
nificant premium over crude oil, the economic justi fication of such conversion plants would be suspect."
10.2.3 Conversion Impractical and Undesirable
The Commission concludes from all the submissions made
that unless changes in technology occur or the cost of processes
decreases or the value of feedstock and/or products becomes
markedly different because of normal market value fluctuations
or because of Government intervention, it is not economically
practicable or in terms of energy management, desirable to
establish plant designed solely to convert LEG to motor spirit
components.
10.3 Direct Use as a Motor Fuel
10.3.1 Can the Market be Expanded?
The alternative to conversion of LEG to a motor spirit
component is to use it directly as a fuel, by modifying the
engine of the vehicle to operate on LEG.
The advantage of this method is that it uses the total
energy of the fuel source as a fuel with in the efficiency
limits of the engine. However, it presents problems in logistics
because LEG must be handled through pressurised systems and
because the cost of distribution is relatively high compared
with normal motor spi rit.
155
In Australia, as in the United States, and most other
countries, LPG propane is used. Once LPG propane has been
established as the preferred fuel, it would probably not
be economic to market LPG butane for the same direct automotive
purposes. Butane suffers some disadvantages in octane rating
and volatility and its absorption into the automotive market
would require it to be mixed with LPG propane. Such a mixture
is marketed for automotive purposes in Holland, Belgium and
Italy, and may contain as much as 5 0 % butane.
LPG has been used directly as a motor vehicle fuel for
some time, both overseas and in Australia, particularly in
Victoria. Consideration has from time to time been given
to extending its use as such, particularly in view of environÂ
mental advantages that its use has over the use of motor spirit.
Of particular note is the report of the Bureau of Transport
Economics, Department of Transport "Liquefied Gas as a Motor
Vehicle Fuel", published in April 19 74. The conclusions reached
in that report were unfavourable. However additional information
now available has led the Commission to re-examine the matter.
10.3.2 LPG as an Automotive Fuel
LPG can replace premium grade (98 RON) or standard grade
(89 RON) motor spirit as the sole fuel in an internal combustion
engine. Engines can be manufactured or modified to run alterÂ
natively on LPG or motor spirit, or on LPG only. Equipment for
the LPG operation of motor spirit engines consists of a storage
tank for the liquid, fuel lock valve, pressure regulator
and a gas-air mixing device on the intake manifold. The storage
tank is a pressure vessel, heavier than the normal motor
spirit tank. It is normally installed in the boot of the
vehicle or on the roof.
156
The original carburettor is removed for operation solely
on LPG and is replaced by the gas-air mixer. In operation,
the LPG fuel system draws liquid from the tank by a means
of a valve in the gas-air mixer which is controlled by the
driver, and passes it through a vacuum fuel lock which shuts
off the flow of fuel when the engine stops. The liquid is
then heated by coolant water in a liquid-to-gas convertor
which regulates the outlet gas pressure in accordance with
engine demand. The gas-air mixer measures air flow and meters
the flow of gas into the engine air stream to provide a uniform
air-fuel mixture over the entire engine and speed range.
Schematic diagrams of a typical system are shown in Figures
10.1 and 10.2
The mixture fed to all cylinders of an LPG engine is
entirely gaseous, as distinct from mixture with motor spirit,
where a mist of air, vapour, and liquid droplets is fed to
the engine. In the latter case, the composition of the mixture
varies due to deposition and revaporisation of liquid in
the inlet manifold. Consequently, an LPG engine may be operated
with a leaner fuel-air mixture than is used for a motor spirit
engine.
In the case of dual-fuel operation the original carburettor
is retained, the gaseous LPG is injected between the carburettor
and the air intake filter through a gas-air mixer, and a
control is provided to change from motor spirit to LPG
operation.
157
CONVXkm MUST IE 1EIOW LEVEL OF UPPEX XAD1ATOX TANK
TO PUSH Φâ . IUTTON SWITCH
TO IGNITION SWITCH
WATE1 OUTUT, CONNECT TO SUCTION SIDE 07 PUMP
VACUUM SWITCH (WHEN USED)
VAPOX LINE (HOSE) WATfl INLET, CONNECT TO ENGINE SIDE OF THEIMOS1AT fiiiei LIQUID FUEL INLET M O M L P G SUPPLY TANK
LPG- conversion unit for petrol engine,
Source t Brooklands-Machins Pty. Ltd. Victoria.
159
SCHEMATIC DIAGRAM FOR
1 LP-GAS MOTOR FUEL TANK (A) Filler valve (B) Vapor return valve (Cl 10% Outage valve (D) Vapor vent (E) Relief valve (F) Vent line to outside of vehicle (G) LP-Gas valve (H) LP-Gas high pressure hose line (K) Fuel gauge 2 HYDROSTATIC RELIEF VALVE
Vented to Outside of Vehicle
Q FILTER AND VACUUM FUEL *3 LOCK Prevents flow of fuel when engine stops with ignition switch on (H) LP-Gas inlet
line (L) Connects to intake manifold vacuum
CONVERTER
Two stage regulator and converter (Ml Water inlet or outlet from engine (Brass Fittings) (P) Hand Primer
(Q) Balance line connection
5 AIR CLEANER Low profile design, dri-type (R) PVC Connection 6 CARBURETOR
Ï ) Idle
adjustment screw (S) Balance line connection
-J CONTROL PANEL (W) Push button primer switch (V) 12 Volt battery connection.
LP-GAS OPERATION
Pamphlet
10.3.3 Conversion of Spark Ignition Engines to LPG
In the United States and Australia most conversions
use the one fuel only in the vehicle, that is a single
fuel system. It is estimated that in the United States 300,000
vehicles are LPG fuelled and that in Japan about 250,000
taxi cabs are operating on LPG as a sole fuel. (LP Gas News
- Australian Liquefied Gas Association - February 1976).
Fleet owners, certainly in Australia, are likely to prefer
engines converted to engines manufactured to run on LPG, since
the former can be reconverted to motor spirit and more readily
resold.
There are many considerations involved in choosing between
LPG and conventional automotive fuels. The key factor in such a
decision is likely to be one of the economics involving
matters such as conversion costs, price and availability of
fuel, engine performance and storage facilities required. The
conversion of a motor spirit engine to a single fuel gaseous
operation, which includes modifications to optimise the engine,
results in a vehicle the performance of which is virtually no
different from the motor spirit version.
As the vapour pressure of LPG greatly exceeds that of
gasoline (approximately 860 kPa v 62 kPa at 24°C), the LPG must
be stored in pressure vessels in vehicles. There are two ways
LPG is drawn from these pressure tanks:-
vapour withdrawal
liquid withdrawal.
160
Vapour withdrawal is used in hot climates on small stationÂ
ary engines. If a large amount of gas is withdrawn from a
container, the container or discharge regulator freezes and gas
flow will stop. Another disadvantage of vapour withdrawal
is that fractionation occurs, so that the first gas withdrawn
will be rich in the higher vapour pressure components, for
example propylene.
For all road use in Australia, liquid withdrawal is
used.
10.3.4 Advantages of LPG as an Automotive Engine Fuel
Some of the advantages of using LPG as automotive fuel in a spark ignition engine are:-
(i) lower cost of LPG, depending upon location;
(ii) longer engine life, particularly in respect of cylinÂ
der bore wear during cold starting. This is because
LPG, being gaseous when it enters the cylinder, does
not wash off the walls. However, it is necessary to
ensure that suitable valves and valve seats are used,
generally stellited or similarly hardened.
(iii) as a consequence of (ii), the effective life of
lubricating oil is longer as a result of the absence
of fuel dilution.
(iv) reduction of deposits on surfaces and spark plugs owing to the cleaner combustion characteristics of the
fuel. Consequently the frequency of top overhaul and
plug servicing can be reduced.
l6l
(v) easier cold starting, because of the gaseous nature
of the fuel.
(vi) since LPG enters the engine in gaseous form, the
mixture distribution to the cylinders is more often
uniform than with motor spirit. Consequently, engines
operating on LPG can utilise leaner mixtures, giving improved economy.
(vii) Exhaust emissions are greatly reduced in LPG engines
compared to those running on motor spirit. The simpÂ
lest type of LPG fuel conversion will reduce signifiÂ
cantly the carbon monoxide and hydrocarbon exhaust
emission when compared with a motor spirit engine. If
an LPG-only installation is tuned for low emissions, a
considerable reduction in oxides of nitrogen can be
effected as well (but at the expense of a drop in
engine performance). Improvements of the order of 1 0 %
are possible for all three pollutants by adjustments
such as variation of the air/fuel ratio and ignition
timing alternations. Of course, there is no emission
of lead to the atmosphere from LPG fuelled engines, as
the octane rating of automotive quality LPG is sufÂ
ficiently high to do without the addition of lead.
These reduced emission characteristics make LPG proÂ
pane particularly suitable for vehicles, such as
forklift trucks, operating in relatively closed air
spaces, such as large warehouses or docks.
(viii) reduced possibility of pilferage of fuel, since it has more limited and specific application.
(ix) vehicles with low annual mileage that spend a large number of engine hours at idle or in low speed ranges
exhibit increased durability when fuelled on LPG.
162
(( i i i ) * * * * * * x) Lead usage in the total automotive pool is reduced,
(see LP Gas News February 19 76 , p .19)
10.3.5 Disadvantages of LPG as an Automotive Fuel
Some of the disadvantages of using LPG as automotive
fuel in spark ignition engines are: -
(i) the expense of engine conversion, estimated at some
$400 to $ 6 0 0 per vehicle.
(ii) lower power output because the amount of heat per
litre is less than that for motor spirit (LPG 26 Mj/lj
motor spirit 32 Mj/l). Given similar engines less
power is produced by LPG resulting in less kilometres
per litre. However, if the trouble and expense is
taken to increase the compression ratio, cool the
fuel/air intake and obtain a more suitable valve
timing and distributor advance curve, this effect can
be minimised.
(iii) carrying a gas bottle results in loss of vehicle
space and marginal (1% to 2%) increased weight;
also special safety precautions may be necessary.
The size of the gas bottle does of course depend
on the range required of the vehicle, but in commerÂ
cial vehicles (delivery, taxi and the like) the
bottle can take up carrying space unless strategiÂ
cally located to avoid this. Being pressure vessels,
the bottles are heavy and must be inspected at
regular intervals.
(See LP Gas News, February 1976, p.19)
163
(iv) at the moment, a very inferior system of market
distribution and transportation.
10.3.6 Octane Rating
The comparative octane rating of motor spirits and LPG
marketed in Australia are referred to in Chapter 2.4 of this
Report and set out in Table 2.3.
The two types of Knock Test Procedure (RON and MON)
were discussed in the Commission's Fifth Report (p .40). Briefly
they measure the comparative tendency of the fuel under test to
"knock" in a standard single cylinder test engine under certain
fixed test conditions. The Research Method (RON) is less severe
than the Motor Method (MON) which employs higher speed, higher
inlet air temperature and more spark advance, but both, parÂ
ticularly the latter, give a prediction of road anti-knock
qualities of the fuel being used. The higher the figures, the better the fuel quality with respect to knock characteristics.
Australian motor spirit and LPG have a higher RON than
MON. For motor spirit generally, RON better predicts the relaÂ
tive performance of motor fuels under low engine speed condiÂ
tions in a car, MON under high speed and high output conditions.
LPG is more reactive than motor spirit to operating severity,
particularly with regard to air inlet temperature and speed, and
therefore is best rated by the Motor Method. However, Table 2.3
shows that LPG propane has a higher rating than Australian motor
spirit in both RON and MON.
Propylene has a relatively poor MON which highlights the necessity to restrict the percentage of this in combination with
LPG propane used for automotive purposes, and the advantages of
LPG propane obtained from crude oil/natural gas production which
164
does not contain propylene. The LPG produced in refineries
or petrochemical complexes in Australia can vary greatly in
respect to propylene content. As LPG is presently used primarily
for burner applications, this variation is of little consequence
to most users. However, it could be a serious disadvantage
to automotive users. A moderate propylene content in propane
is not a disadvantage to engines used for light duties with
low compression ratio. Overseas experience indicates that up to
2 5% propylene can be tolerated.
In the United States, a Natural Gas Processors Association
specification has been established for heavy duty (HD5) propane
which limits the propylene content in automotive LPG to 5%
volume. A similar specification does not yet apply in Australia,
although the propylene content of the market pool of LPG
marketed in Australia has tended to fall during the last decade
because of:-
(i) the increased amount of LPG propane from crude oil/
natural gas production which does not contain
propylene;
(ii) the increased offtake of propylene for petrochemical manufacture which removes it from the LPG market
pool;
(iii) the increased production of motor spirit from alkyla tion plants in refineries. This absorbs more propylene
within refineries, particularly as more iso butane
becomes available from Australian oil and gas fields.
LPG propane which meets the HD5 specification and which
is distributed specifically for automotive purposes is available
from some refineries.
165
10.3.7 Comparison of Fuel Costs - LPG and Motor Spirit
The retail cost of LPG per unit of energy is substantially
less than motor spirit. The following are approximate retail prices in Melbourne and Sydney in September, 1976.
TABLE 10.5
COMPARATIVE RETAIL PRICES
Cents per Litre
LPG PREMIUM REGULAR
MOTOR SPIRIT MOTOR SPIRIT
Sydney 12 - 13 16.5 1 5 . 8
Melbourne 9 13 - 17 12 - 16
The market price of both motor spirit and LPG are fluid,
and the same prices do not apply in each State. Nevertheless,
Table 10.5 shows that LPG in a major capital city where
it is available for automotive purposes through retail outlets
has a substantial price advantage as a fuel when compared
with motor spirit.
The National Roads and Motorists Association in Sydney
carried out some tests over a period of two years, with
the following results:-
166
TABLE 10.6
NATIONAL ROADS AND MOTORISTS ASSOCIATION
PASSENGER CAR TESTS
Commencing in April 1970, the NRMA tested a 1968 Holden HK
automatic equipped with 186 CID engine and converted to LPG by
ATECO Pty. Limited, Sydney, New South Wales, using the Impco
Kit.
Test Results LPG Motor
Spirit
Miles driven 14,062 14,062
Fuel consumption, total gallons 1,03 5 6 9 2 . 6
Cost per gallon, cents 25.25 46.1
Total fuel cost, dollars 258.75 319.29
Fuel cost, cents per mile 1.84 2.27
Oil consumption, pints per 1,000 miles 0 .4 0* 1.33
Total cost of oil, dollars 6.27 20.55
Total fuel and oil cost, cents per mi le 1 . 8 8 4 6 2 . 4 1 6 6
Acceleration; 0-50 mph, seconds 9.4 9.0
Top gear; 30-50 mph, seconds 9.4 7.0
* Oil life, as determined by Ampol tests,
15,000 miles for LPG fuelled vehicles.
would be at least
Weight of equipment for LPG to provide 400 mile range:
regulator, carburettor, etc. 3 2 lbs.
2 tanks 112 lbs.
fuel 120 lbs.
TOTAL 264 lbs.
167
TABLE 10.6
(continued)
Weight of equipment for motor spirit to provide 360 mile range:
equipment 20 lbs. (estimate)
tanks 30 lbs. (estimate)
fuel (16.5 gallons) 129 lbs.
TOTAL 1 7 9 lbs.
REFERENCE
"What to Expect with LPG in Fleet Car Fuel Conversions",
Truck and Bus Transportation, August, 1972.
168
10.3.8 Exhaust Emissions
The question of exhaust emissions from motor vehicles,
the degree and extent of their control, the lead reduction
program and its effect on Australian refineries' economics
and the Australian consumer are dealt with extensively in
the Commission's Fifth Report (Chapters 9, 10 and 11).
Since the use of LPG as a spark ignition motor vehicle
fuel can considerably reduce volume and toxicity of exhaust,
the Commission shortly reviews the pollutants in vehicles'
exhausts and the effect on them that the use of LPG propane
as an automotive fuel may have. In Chapter 2.5, the Commission
describes the burning qualities of LPG and in Table 2.5 compared
the exhaust emissions from motor spirit and LPG.
The four main types of atmospheric contaminants emitted
from vehicles are:-
carbon monoxide
unburnt hydrocarbons
oxides of nitrogen
lead (particulates).
Carbon monoxide, a toxic gas, is emitted from all gas
and liquid fuelled engines, but the leaner mixtures possible
with LPG fuel have the effect of reducing emissions when
compared to motor spirit.
Hydro carbons, with important exceptions, react with oxides
of nitrogen under the influence of sunlight to form smog.
Hydrocarbons can be generally classified as paraffins, not
considered to be- smog formers, aromatics, only moderately
reactive to form smog, and olefins, which are cracked products
169
chemically unsaturated and very reactive . The degree of reacÂ
tivity of hydrocarbons in addition to their quantity is an
important variable in any study of vehicular hydrocarbon
emission.
In passing through the combustion chamber, most hydroÂ
carbons are converted to water vapour and carbon dioxide. The
remainder are present in the exhaust as unchanged fuel and as
paraffins, olefins and aromatics from the partially combusted
fuel. It is the olefins and aromatics which result in smog
causing eye irritation and throat burning fumes.
An LPG which consists mainly of propane will have relaÂ
tively small amounts of reactive hydrocarbons in exhaust gas
compared to motor spirit exhaust. Even exhaust from an LPG
containing propylene could be expected to contain lower unburnt
hydrocarbons compared to motor spirit. This is because in a gas
fuelled engine the gas and air are thoroughly pre-mixed and it
is possible to obtain an accurate distribution to the cylinders.
LPG burns at a slow uniform rate resulting in steady, controlled
combustion chamber pressures. On the other hand in a motor
spirit engine, although air can be distributed satisfactorily,
it is not always possible to obtain a thorough mixing of
the fuel with the air, resulting in a different air/fuel
ratio in each of the cylinders of the engine. This means
that the engine has to be tuned for the cylinder with the
weakest mixture to prevent misfiring and that the other cylinÂ
ders will be relatively rich. This causes more unburnt hydroÂ
carbons and carbon monoxide to be emitted in the exhaust from a
motor spirit engine, particularly during acceleration periods.
When travelling under steady state conditions, there is a
low pressure in the manifold. As the throttle is opened the
pressure will change fairly rapidly passing through the dewpoint
of the motor spirit suspended in the manifold, causing fuel
to be deposited on the manifold walls. To overcome this an
170
accelerator pump is usually included and this means that
from the unusually rich mixture fed to the cylinders, surplus
motor spirit is emitted as unburnt hydrocarbons. With a gaseous
fuel the dewpoint conditions are not encountered (LPG being
admitted to the engine as a gas) and there is no need for
an accelerator pump, so that during the transient conditions
of acceleration the gas engine emits markedly less unburnt
hydrocarbons.
In general, exhaust emissions from engines using LPG
are lower than those from motor spirit fuelled engines, and
are reduced according to the refinement of the conversion
equipment. If an LPG only installation is tuned for low
emissions, a considerable reduction in oxides of nitrogen can be
effected. This is achieved by using ignition-timing schedules
with a high degree of retardation, but such adjustment results
in loss of engine performance.
The other major emission from motor spirit combustion,
lead, is not present in LPG.
Studies carried out in the United States give an indication
of the degree of reduction of contamination as shown in Table
2.5.
171
The extent to which the use of LPG reduces pollution
in automotive exhausts varies during the tests. There is
no doubt however that there is a general and meaningful
reduction in the hydrocarbon, carbon monoxide and nitrogen
oxides emissions when LPG propane is used as a fuel. This
means that the various regulations which have been introduced
State by State up to ADR.27A limiting vehicle emissions will be
easier to meet with LPG fuel than with motor spirit. In addition
there are no lead emissions. The concepts and costs of the motor
spirit lead phase down programs in Australia have been extenÂ
sively studied and commented on by the Commission in its Fifth
Report (Chapter 11.6). The use of LPG propane as an automotive
fuel eradicates lead particulate emission altogether, and to the
extent that this fuel can replace motor spirit, it will reduce
the lead content of the pool of motor vehicle fuels.
10.4 Greater Use in Australia of LPG as a Motor Fuel
The environmental and, at least in the case of some
vehicles, economic advantages of burning LPG as a motor vehicle
fuel invite answers to the following questions
(i) Can Australia use more LPG in its motor vehicles
and if so which motor vehicles and where?
(ii) As compared with motor spirit, what will this cost the
consumer?
(iii) How can the most desirable quality and specification
be maintained?
(iv) What will be the impact on pollution levels and
on the lead phase down program?
172
10.5 Increased Absorption
The 1974 Australian offtake of LPG propane for automotive purposes was only about 20,0 00 tonnes . Of this, 75% was absorbed in Victoria where the main network for market ing LPG as an automotive fuel presently exists.
10.5-1 Current Offtake
The present export of LPG propane, surplus to the AustraÂ
lian inland market requirements, of 475*000 tonnes for 1 9 7 5
represents only some 5 - 0 % of the total Australian automotive
market for motor spirit. Therefore it is obviously preferable to
attempt to market LPG propane in those areas:-
(i) to which it can be most easily transported;
(ii) where the major concentration of users of the preÂ
ferred type of motor vehicle exists so that the lowest
cost distribution can be achieved. "Preferred type
vehicles" embrace State and Federal "pool" vehicles
such as post office vehicles, local government vehicÂ
les, taxi fleets, delivery vans and the like. PreferÂ
red type vehicles are discussed in more detail in Appendix 10.1.
While the Commission does not have information specifically·
relevant to the number of such preferred type vehicles
in particular areas, Table 10.7 shows a survey in
September 1971* which gives an idea of the "spread" of vehicles
over Australian cities, within which the percentage of preferred
type vehicles should be substantially constant. The three main areas which seem to select themselves on these bases
are the metropolitan/suburban areas of:-
173
(i) Melbourne, because of its high population of motor
vehicles, and its proximity to the LPG propane sources
at the three refineries at Altona, Geelong and WesÂ
tern port and the Bass Strait production source at Long
Island Point, Westernport.
(ii) Sydney, because it has the highest population of motor
vehicles and is adjacent to two refineries at Clyde
and Kurnell. It has presently no easy access to a
field production source of LPG.
(iii) Adelaide, third in the list of motor vehicle populaÂ
tion, close to one refinery at Port Stanvac, and
potential supply of LPG by pipeline from the Cooper
Basin.
10.5.2 Estimates of Future Offtakes
The Commission has received some estimates of future
and potential offtake of LPG propane for automotive purposes.
These estimates vary considerably.
B.P. Australia Limited in May 1975 estimated the future
offtake as:-
1 9 7 5 23,000 tonnes
1 9 7 6 4 6 , 0 0 0 tonnes
19 77 77,000 tonnes 1978 97,000 tonnes 1 9 8 0 1 4 4 , 0 0 0 tonnes.
Another oil company, Mobil Oil Australia Limited, in
its 1976 forecasts of LPG demand, Table 5-1» has included
the following for automobile use:-
174
1978 48 , 0 0 0 to nne s
1979 6 5 , 0 0 0 tonnes
1 9 8 0 73,000 tonnes
1 9 8 1 8 1 , 0 0 0 tonne s
1 9 8 2 1 0 5 , 0 0 0 tonnes
1985 162,000 t onne s
1990 3 0 7 , 0 0 0 tonnes
By contrast, Santos Limited and Delhi International Oil
Corporation, in their submission dated 17th October, 1975,
informed the Commission of estimates of potential offtake of LPG
for these purposes in 1 9 7 2 / 7 3 in the following terms:-
"... If the government decides to support the expan sion of domestic LPG markets, both by converting government vehicle fleets and by minimising excise duty on LPG for automotive use, substantial new markets could be created.
Some idea of the potential size of these markets is given below.
"If government departments in N.S.W. and S.A., both State and Commonwealth, decide to substantially convert their vehicle fleets from gasoline to LPG, the additional demand for LPG in the two States would be approximately as
follows (the volumes have been calculated on the basis 1972/3 gasoline usage):-Table 7: New South Wales Government Fleet Usage State C ommonwe aIt h
Government Government
Gasoline bbl/day 815 580
LPG replacement tomes/year 26,540 1 8 , 8 9 0
South Australian Government Fleet Usage Gasoline bbl/day 2 7 0 180
LPG replacement tonnes/year 8 , 7 2 0 5, 8 6 0
"Total potential government usage of LPG in 1972/73 would thus have been 60,000 tonnes. However even more significant sales volumes could be achieved in the two States if LPG excise duty were low enough to permit
vehicle conversion to be an economic proposition, as shown below:-
175
Table 8 Estimated Potential South Australian Automotive LPG Market Year 100 Per Cent 60 Per Cent
Penetration Penetration
(000s tonnes) (000s tonnes) 1 9 7 4 13 8
1 9 7 5 24 14
1 9 7 6 36 22
1 9 7 7 48 29
1 9 7 8 61 37
1 9 7 9 75 45
1 9 8 0 84 53
1 9 8 1 104 62
"In making these estimates we have assumed excise duty at half the rate applying for gasoline. A maximum of 60 per cent of penetration of the potential automotive LPG market has been chosen because it is assumed that LPG from the Adelaide refinery would be able to capture some 40 per cent of the market. In New South Wales
the potential market for automotive LPG is much larger and we have assumed that South Australian LPG should capture half the potential market, the other 50 pe r cent of the market being taken by LPG from local refine-ries.
Table 9 The Estimated Potential Sydney/N.S,W. Automotive LPG Market - (000s tonnes) Year 100 Per Cent 50 Per Cent
1975 30 15
1976 80 40
1977 120 60
1978 154 77
1979 186 93
1980 234 117
1 9 8 1 2 6 0 130"
It is not clear in these estimates what proportion of the
Government usage in the State is within the capital cities, but
if one assumes 75%, and at the same time applies this proportion
to Melbourne, on the basis of relative total vehicle population
as in Table 10.7, the summarised potential offtake 1972/73 for
State and Federal Government vehicles, Sydney, Melbourne and
Adelaide could b e :-
176
177
TABLE 10.7
NUMBER OF MOTOR VEHICLES GARAGED WITHIN 15 MILES OF REGISTRATION ADDRESS IN CAPITAL CITY URBAN AREAS, 30 SEPTEMBER 1971
(Thousands of vehicles)
CATEGORY SYDNEY MELBOURNE ADELAIDE BRISBANE PERTH HOBART CANBERRA DARWIN TOTAL
A. Cars, station 829.3 735.2 280.7 265.9 256.8 44.7 53.5 11.9 2478.0
wagons and light commercial (53%) (58%) (64%) (41%) (66%) (31%) (93%) (54%) (55%)
vehicles (carry ing capacity less than 20 cwt)
B. Trucks, carrying 35.6 25.5 9.3 8.6 10.1 1.8 1.7 2.1 94.7
capacity under 4 tons (45%) (47%) (45%) (24%) (47%) (26%) (88%) (48%) (42%)
C. Trucks, carrying 17.0 15.6 6.9 6.6 6.4 1.3 0.6 0.7 55.1
capacity over 4 tons (31%) (37%) (31%) (21%) (29%) (19%) (81%) (36%) (30%)
TOTALS: 881.9 776.3 296.9 281.1 273.3 47.8 55.8 14.7 2627.3
Source: A.B.S. Survey of Motor Vehicle Usage, 30 September 1971.
NOTE: Figures in brackets represent proportion of vehicles garaged within 15 miles of registered address in capital city urban areas to total number of vehicles in same category registered within the State or Territory. The estimates of the numbers of vehicles by vehicle type provided by the 1971 Survey of Motor Vehicle Usage are based on data supplied by the owners of the vehicles. These estimates may differ marginally from Statistics of Motor Vehicles on Register derived in the 1971 Motor Vehicle Census. The Table excludes Other Truck Types, Motor Cycles and Buses.
Sydney
Melbourne
Adelaide
TOTAL
34)0 00 tonnes
2 9 . 0 0 0 tonnes
11.000 tonnes
74.000 tonnes.
Again, ignoring LPG source, and prorating Melbourne on the
same basis of relative total vehicle population as in Table
10.8, and assuming 75% South Australia to Adelaide the potential
LPG market 1975/1981 in Sydney, Melbourne and Adelaide, based on
these estimates could be : -
TABLE 10.8
ESTIMATED POTENTIAL AUTOMOTIVE OFFTAKE OF LPG
('000 tonnes)
Year Sydney Melbourne Adelaide Total
1975 30 26 18 74
1976 80 71 27 178
19 77 120 10 6 36 2 6 2
1978 154 136 46 33 6
1979 186 165 56 40 7
1 9 8 0 234 20 7 63 50 4
1981 260 230 78 568
The Commission has not had made available to it any other
estimates of future or potential offtake of automotive LPG
apart from the above, and has not been able to explore the
bases and build up of the three estimates supplied. NevertheÂ
less, the quantum of these, particularly the potentia1 market
indicates an area of offtake worth exploring in much more
detail, particularly when account is taken of the quantity of
LPG propane being absorbed in other world capital cities for
these purposes.
178
10.6 Price and Cost
10.6.1 Current Prices
The usage of LPG as an automotive fuel is obviously-
influenced by its relative cost to the consumer when compared
with motor spirit. A comparison of these costs in Melbourne in
September 1976 on the basis of actual cost per litre, with and
without excise duty, and relative cost value per unit of energy shows:-
TABLE 10.9
COST COMPARISON BETWEEN MOTOR SPIRIT AND PROPANE
Melbourne, September 1976
Nominal Retail Price
Without excise
With excise
Premium Motor Spirit
10.4c/litre
15.3c/litre
LPG Propane
7.Oc/litre
9.Oc/litre
Energy Cost
Without excise With excise
0.30lc/megajoule 0.276c/Mj
0 .4 4 2c/megajoule 0.354 /Mj
10.6.2 Future Price Movements
The prices of LPG propane at September 1976 were largely
related to export parity, and therefore to the price of crude
on the world market. When LPG propane was available in Sydney
for automotive fuel at 12 cents per litre, plus a surcharge
of 1 cent per litre to compensate for part of it having come
from Westernport, with the resultant high freight cost of
$60 to $100 per tonne, premium motor spirit in Sydney was
16.7 cents per litre. Yet motor spirit, both in Sydney and
Melbourne, had a retail price reflecting the percentage content of low priced indigenous crude, used in its manufacture. In
179
the 1 9 8 0 * s , the price of motor spirit must rise as the cost
of crude processed becomes higher due to either or both the
increased proportion of imported crude feedstock and an increase
in the price of indigenous crude.
By contrast, the price of LPG produced by refineries could
fall as the result of the October 1976 recommendation of the
Prices Justification Tribunal. The price of LPG from oil and
gas fields, which is orientated largely to import/export parity
is likely to remain constant or even fall as schemes for LPG reÂ
covery and distribution from the Middl*'East soften the world
market. The nett effect could be a differential in favour of LPG
relevant to premium motor spirit of 1 5 cents per litre and an
energy differential of approximately 0.3 cents per megajoule.
This comparison is based on excise remaining as at present.
Since there is a Government guarantee of excise relativity
remaining in favour of LPG for a minimum of five years (see
Chapter 4.8 of this Report), the above moves in future prices
should provide a positive incentive for development of LPG
propane as an automotive fuel replacing motor spirit in "preÂ
ferred vehicles". This incentive would be further improved by a
Government guarantee of this relativity remaining for an even
longer period, say 15 years, or even by the reduction of excise
on LPG used as an automotive fuel for road travel which might
very well be in the overall national and consumer interest.
The justification is the reduction of air pollution and the
protection of the consumer from the full impact of lead phase
down.
180
10·7 Quality
Spark ignition engines, originally designed for motor
spirit fuel, and converted to LPG propane fuel can be tuned
to maximum power on LPG, with resultant emission characteristics
somewhat better than for motor spirit. The degree to which
the optimum blend of acceptable power availability coupled
with optimum emission characteristics can be achieved and
maintained in the engine is affected negatively by the inclusion
of, or appreciable variation in, propylene content of the
LPG propane, since propylene is a much inferior fuel for
automotive purposes than propane. It has been estimated that up
to 25% propylene in automotive LPG propane can be tolerated, but
to minimise engine maintenance costs and achieve optimum power
with best emission characteristics, that is to provide a fuel
which will have maximum market acceptability and market capture,
it is preferable to have a fuel with a lower propylene content
than 25%. This problem has been recognised in the United States
where a separate specification for propane (HD5) used as an
automotive fuel has been established. This provides that:-
Propane HD5 shall be a special grade of propane for motor
fuel and other uses requiring more restrictive specificaÂ
tions than commercial propane and shall conform to the
following specifications:-
Vapour pressure: The vapour pressure at 100°F as determined
by NGPA LPG Vapour Pressure Test shall not be more than
200 psig pressure.
95 per cent boiling point: The temperature at which 95
per cent of volume of the product has evaporated shall
be -37°F or lower when corrected to a barometric pressure
at 7 6Î mm Hg, as determined by NGPA Method for Determining
Residues in Liquefied Petroleum Gases.
181
Volatile sulphur: The unstenched product shall not contain
volatile sulphur in excess of 10 grains per 100 cu. ft.
as determined by the NGPA Volatile Sulphur Test.
Corrosive compounds: The product shall cause no more
discoloration to a polished copper test strip when such
product is subjected to the NGPA LPG Corrosion Test than
the discoloration of standard copper strip Classification
1, as described in ASTM Method D 130-56, Table 1, Copper
Strip Corrosion by Petroleum Products.
Dryness: The product shall be dry as determined by the
NGPA Propane Dryness Test (Cobalt Bromide Test).
Composition: The propylene content of the product shall
not exceed five liquid volume per cent, and the product
shall contain a minimum of 90 liquid volume per cent
of propane.
There is no difficulty in meeting such a specification
with propane produced from natural gas or crude oil production,
since such does not contain unsaturated hydrocarbons like
propylene. However there could be problems with automotive
LPG propane produced from refineries or petrochemical complexes.
One would expect that the maximum quantity of propylene would
be absorbed within a refinery as feedstock to polymerisation
and alkylation plants, or within petrochemical plants, but
this will be influenced by the degree of conversion within
the refinery and the availability of iso butane to absorb
unsaturates in alkylation plants.
An alternate strategy adopted in some European countries
such as Holland, Belgium and Italy is to market a quality of mixed LPG propane/butane for automotive purposes. A typical
specification is:-
182
Vapour pressure
lbs/sq.in. gauge @ IOC F
Propane liquid Vol. %
9 5% evaporation at
Propylene liquid Vol. %
Volatile sulphur g/100 cu.ft.
Corrosion copper strip
Water content Cobalt Bromide Test
15 min.
30-40 min.
-40 F
1 5 - 2 0 max.
20-30 max.
1 max.
pass
(Reference: Liquefied Petroleum Gases, Williams & Lorn,
1974)
The present Australian market has so far been developed
on a United States basis. In particular the automotive converÂ
sion kits are of United States design.
The Commission feels it imperative that the LPG producing
and marketing organisations and the Australian Liquefied PetroÂ
leum Gas Association consider the quality and specification of
LPG automotive fuel which will best serve the long term
production picture and market development in Australia to ensure
maximum absorption of LPG from the former and maximum penetra tion of the latter, and then take action accordingly.
10.8 The Environmental Impact of Greater Use of LPG
The Commission has referred to the reduced atmospheric
contaminants of carbon dioxide, unburnt hydrocarbons and NOx
in the exhaust emissions of automotive engines fuelled with LPG
compared with motor spirit, and has pointed out that propane is
preferable to propylene because the former produces less reacÂ
tive (smog producing) exhaust hydrocarbons. This, and its lower
octane rating, represent two main reasons for excluding propyÂ
lene as far as possible from premium LPG propane automotive
fuel.
183
The preferential marketing of LPG in a city area can
have a synergistic effect on contaminant reduction because
fleet operated vehicles such as taxis travel between 5 0 , 0 0 0
and 100,000 miles per annum, whereas private motor cars generÂ
ally travel only 10,000 miles per annum. The conversion of one
taxi will have the same effect as converting five to ten private
cars, and the taxi has a better chance of contributing posiÂ
tively to exhaust effluent reduction in central city areas which
are the highly emission polluted areas.
The use of LPG propane has the same effect on the
automotive motor spirit pool as the use of unleaded motor
spirit, and the conversion of one taxi with lead particulate in
exhaust reduced to nil can allow 20 to 30 private cars to use
present quality motor spirit while achieving a lead/air conÂ
tamination in a city area equivalent to a 2 $ % reduction in lead
in motor spirit from present levels.
The Commission has not attempted to quantify the impact
of this on the lead phase down program discussed in depth
in its Fifth Report. However, it is certainly in the right
direction.
10.9 LPG for Petrochemical Manufacture
Petrochemical manufacture in Australia is based on either:-
(i) gases or feedstock direct from refineries;
(ii) gases from natural gas and crude oil production;
(iii) naphtha, which is a light gasoline/kerosene liquid fraction and is imported or obtained
refineries;
type
ex
184
(iv) special feedstocks, generally imported with a partiÂ
cular reference to the end use.
It is unlikely that LPG would replace other feedstocks
in categories (i) or (iv). It is unlikely to replace existing
feedstocks for the fertiliser plant adjacent to Kwinana refiÂ
nery, for the petrochemical complex at Altona, adjacent to the
refinery there, or for the petrochemical plants within Clyde
refinery and Geelong refinery. The same comment applies to
category (ii). This refers in particular to ethane piped
from Westernport Bay to the petrochemical complex at Altona.
Some gases from Moonie are used for ammonia production in
Brisbane.
The question whether additional LPG can be used in AustÂ
ralia for petrochemical manufacture turns on its ability to
replace naphtha in part of the Sydney I.C.I. petrochemical
plant, and of the Newcastle and Brisbane fertiliser plants. LPG
butane can be so used. Technically, the replacement of naphtha
by butane in these cases is possible although some capital expenditure would be required for special storage and possibly
for plant modification.
Consolidated Fertilisers Limited in its submission dated
8th May, 1975> informed the Commission that this expenditure
has been estimated to add $13.4 per tonne to butane if used as a
feedstock, and that it was estimated therefore that the
landed cost of LPG butane at Newcastle, in 19 75 to be competiÂ
tive with naphtha at that time would need to be in the order of
$55 to $ 7 0 per tonne.
185
The potential offtake for LPG butane for fertiliser manuÂ
facture in Newcastle and Brisbane was estimated in 1975 to total
240,000 tonnes a year. There is no doubt also considerable
potential offtake into Sydney for the production of olefinic
(unsaturated) hydrocarbon feedstock as base petrochemical feedÂ
stock. Moreover, naphtha is used at present in Newcastle
and Brisbane as a feedstock for town gas manufacture, and
here again LPG butane can be used probably as an alternate
feedstock.
The Commission estimates from figures available to it
for naphtha offtake to these sources that the equivalent
potential LPG butane offtake could be:-
TABLE 10.10
POTENTIAL BUTANE OFFTAKE TO REPLACE NAPHTHA
AS PETROCHEMICAL FEEDSTOCK
(Tonnes per Annum)
Brisbane - fertiliser plant 8θ,000 - town gas 20,000
Newcastle - fertiliser plant 100,000
- town gas 20,0 00
Sydney - petrochemical feedstock 300,00 0
TOTAL 580,00 0
Part of this potential LPG butane offtake could be absorbed
by natural gas if and when it becomes available to the relevant
city at a competitive price and further study would be necessary
to establish more accurately the potential market for LPG butane at a series of price levels. Nevertheless, the Commission
186
sees this potential offtake of LPG for petrochemical manufacture
sometimes allied with town gas manufacture as one well worth
considerable further investigation, particularly relevant to the period post 19 8θ .
The availability of LPG butane from natural gas and
crude oil production in Australia has been estimated at:-
TABLE 10.11
ESTIMATED FUTURE BUTANE SUPPLIES FROM FIELD PRODUCTION
('000 Tonnes per Annum)
1977 8 2 1
1980 954
1985 949
While production from present sources may decline, the
production from the North-West Shelf may be available in the
manner indicated in Table 3.9·
The Commission considers that there is a big potential
market and sufficient LPG from Australian sources to supply
it. The problem is the viability of LPG as an alternative
feedstock, and this in turn depends upon the cost and logistics
of supply and distribution from the point of production to
the market.
10.10 Refinery Feedstock
The Commission has discussed in this Chapter the use
of LPG propane directly as an automotive fuel, and the converÂ
sion of LPG propane/butane in a separate refining complex into
^otor spirit blending stock. There is a third way in which
187
LPG can be used to increase the motor spirit available from
Australian refineries. LPG butane can be fed directly or
as part of the crude feedstocks, by crude spiking, into the
refinery and there absorbed, subject to vapour pressure limitaÂ
tions, directly into the motor spirit blending pool. The iso
butane can be used in alkylation units to process more propylene
and butylene for motor spirit blending stock. This use of
iso butane will become increasingly important as the more
severe refining required under lead phase down conditions
increased the production of unsaturated propylene and butylene
within refineries.
The Commission has referred in Chapter 3.14 to the position
in the United States refineries vdiere the butane supply from
within refineries is in deficit compared with the demand
for motor spirit production.
TABLE 10.12
BUTANE PRODUCTION AND DEMAND IN UNITED STATES REFINERIES
Years Butane Supply Butane Demand for
from Refinery Motor Spirit Production
1967 2.0 MM tonnes 5.9 MM tonnes
1971 2.1 6.8
1975 1.0 7.3
1 9 8 0 2.4 10.8
1985 3.1 13.7
A summary of Australian refinery production of LPG butane
for sale from company submissions gives total availability
figures as follows:-
188
1971
1973
1975 1978
1980
6 2 , 4 6 6 tonnes
49,977 tonnes 3 3 , 6 2 1 t onne s
34,120 tonnes
36,797 tonnes
This indicates a considerable reduction in 1975, but a
marginal buildup thereafter, although some refineries for
example the Shell refineries at Clyde and Geelong, the Ampol
refinery at Lytton and the B.P. refinery at Westernport, show a
very small or nil availability in 1978/1980.
The Commission has not been able to test these figures,
which do not mirror the United States experience in all
refineries .
Table 10.11 shows the unlimited production of LPG butane
from natural gas and crude oil production in Australia. This
consists roughly of 50% butane/iso butane. Where it is produced
adjacent to an indigenous crude oil source it is probably
capable of transportation to a refinery by âspiking" the crude,
that is, injecting additional LPG butane into the crude up to
vapour pressure limitations.
The Commission does not have available to it sufficient
information to analyse critically the potential offtake for LPG butane from production fields to refineries in Australia
on the above basis, but the United States experience suggests
that considerable further study of how to maximise use of LPG
butane/iso butane in the Australian motor spirit pool by this
route is warranted.
189
10.11 The Australian LPG Market can be Expanded
The Commission concludes that there is room for substantial
expansion of the domestic LPG market as a direct motor vehicle
fuel and a petrochemical feedstock. However the exploitation
of this market requires expanded transport and distribution
facilities. The Commission in the next Chapter examines the
extent of needed expansion and how this can be achieved.
In assessing the potential of LPG in the transport sector,
the Commission draws a distinction between propane on the one
hand and butane, iso butane and the unsaturated compounds proÂ
pylene and butylene on the other hand. The latter components all
have the potential to upgrade to motor spirit and to a limited
extent, this already takes place in refineries. An increase in
such use is feasible and should be encouraged. It will, to an
extent, offset the need for the increasing quantities of imports
needed to satisfy a demand for light end products, in particular
motor spirit and distillates.
The Commission's assessments of LPG used directly as an
automotive fuel relates to propane or a predominately propane
mixture. The use of propane, which is already used to a limited
extent in Australia, if increased, will similarly offset the
need for the increasing imports needed to satisfy the increased
demand for transport fuel. Conversion of propane to motor spirit
blending components however has been demonstrated to the CommisÂ
sion to be costly and wasteful of energy.
The direct use of butane and iso butane on their own as an
automotive fuel is feasible and is found in other countries. The
Commission considers that its favourable findings on the use of
propane as a direct automotive fuel, together with the fact that
butanes are blended in motor spirit or upgraded to motor spirit
renders it unnecessary to create an additional market to use
these gases on their own as a direct automotive fuel.
190
APPENDIX 10.1
PREFERRED AUTOMOTIVE VEHICLES FOR CONVERSION
TO LPG PROPANE FUEL
Purpose and Scope
On the basis that only a minority of motor vehicles will
be converted to LPG propane usage, while the majority continue
to be fuelled by motor spirit, the Commission has identified on
a broad basis the types of motor vehicles operating in urban and
suburban areas most suitable for conversion to LPG given current
and probable future supply logistics.
The Commission deals with the matter under three heads:-
1. Basis for Selection
2. Analysis of Vehicle Population for Selection
3. Economics of Vehicle Conversion.
1 . Basis for Selection
a. Vehicle Duty Cycle
Vehicle duty cycle is a primary factor to be taken into
account in selecting the vehicles capable of best using current
and probable future propane supply and distribution. Any vehicle
with a long range duty cycle or a duty cycle with appreciable
long range segments needs to be refuelled at places remote from
191
its base, whereas a vehicle with a short range duty cycle able
to return to base as necessary does not have this problem and
fits in better with the present and probable future logistics of
LPG supply and distribution in the Australian capital cities.
The duty cycle of the vehicle as it affects engine operating
conditions is also an important factor. Vehicles with low or
high annual mileage that spend a large number of engine hours at
idle or in low speed ranges exhibit increased durability when
fuelled on LPG propane.
b . Vehicle Owner Category
The vehicle owner category is an important factor for
selection as it affects supply logistics, maintenance and
implementation of conversion policy. Federal, State and local
Governments represent a prime owner category for LPG conversion.
Their vehicles are fuelled, maintained and dispatched from
central locations and are not often operated outside their
fuelling range.
In the private owner category, there are fleet owners and
owners of one or a small number of vehicles. The former are
preferable because:-
(i) The fleet owner can install storage and fuelling
equipment at a lower cost per vehicle, and maintenance
can be centralised;
(ii) A proportion of the fleet can be kept for short range
work on LPG, while long range work is done by other
vehicles fuelled by motor spirit which presents no
remote fuel supply problem.
192
2. Analysis of Vehicle Population for Selection
a . Automobiles (Cars and Station Waggons)
The vehicles selected in this category are private taxi cab
fleets and Government motor pool and emergency vehicles. The
taxi cab has the proper duty cycle operating predominantly in
urban and suburban situations. The vehicle spends a great deal
of time at idle or in low speed modes. The taxi is a private
fleet vehicle which is fuelled, maintained and dispatched from
one or more central locations. The vehicle is motor spirit
powered, rarely operates remote from a refuelling station, and
may do a high annual mileage operating up to 2 4 hours per day,
so that is has a relatively high effect on air quality from its
exhaust. Government vehicles, Federal, State and local GovernÂ
ment, both car pool and emergency vehicles are motor spirit
powered, fuelled, maintained and dispatched from central locaÂ
tions. As Government vehicles, the policy to convert to LPG can
be readily implemented. The duty cycle of the average police
vehicle is applicable to LPG conversion. The vehicle usually
operates continually in the same general urban/suburban area
with a large percentage of engine time operating at idle.
Similar comments apply to Government pool vehicles.
b . Light Trucks
Both open and closed light commercial type vehicles and one
to four tonne trucks are combined in this category because they
have similar duty cycles and vehicle weights.
The vehicles selected in this category are Government mail
trucks and delivery vehicles. Such vehicles are motor spirit
powered, and fuelled, maintained and dispatched from central
locations. The urban mail delivery vehicle is a low annual
mileage, high fuel consumption vehicle, continually repeating
the same route, with much of its time at idle.
193
Private fleet vehicles with modes of operation similar to
the mail truck are suitable for LPG. This would include, for
instance, large fleet delivery or service vans with light loads
continually operating in one area, such as air freight pick up
and delivery trucks, bread cartage, dry cleaners vans.
c . Heavy Trucks and Buses
This category includes rigid and articulated trucks of four
tonnes and over, and buses. Most of this category are excluded
because they are diesel powered or operate remote from base.
Exceptions might be municipal sanitation vehicles, or liquid
concrete trucks. These vehicles are fuelled, maintained and
dispatched from a central location, and have a large percentage
of engine time in low speed, idle and compacting trash or
turning over concrete.
d. Other Vehicles
Forklift trucks and similar materials handling vehicles are
sold commercially fuelled with LPG. These vehicles have comÂ
parable fuel consumption characteristics to motor spirit powered
vehicles. They are used in situations such as large warehouses
or docks, where their emission characteristics give them an
advantage in closed air space.
3. Economics of Vehicle Conversion
The Bureau of Transport Economics in its report "Liquefied
Petroleum Gas as a Motor Vehicle Fuel" of April 1974, referred
to earlier, developed a parametric model in the form of a
computer program which was designed to investigate the level of
savings which would accrue to owners of motor spirit driven
motor vehicles converting to LPG operation.
194
The Commission notes that:-
(i) The model takes into account only fuel savings, and
ignores maintenance savings and any consequence of
reduction in air pollution.
(ii) It uses a 10% consumption penalty against LPG as
compared with motor spirit.
This model can be used to feed in variations of annual
mileage, fuel cost differential (motor spirit/LPG) and fuel
consumption to arrive at financial break even points. Distance
travelled per annum and the price differential motor spirit as
against LPG are the critical factors.
The Commission discusses below some broad applications of
the principles of this economic study to three classes of
vehicles, taxis, police vehicles and mail vehicles, to indicate
its application. A conservative fuel cost differential of 4
cents per litre relevant to current Melbourne prices is used in
each example. As previously discussed at p .180, this differenÂ
tial could be 15 cents per litre in the future.
a. Taxis
The following estimates of taxi operation are based on
taxis operating in the transport districts of Sydney, Newcastle
and Wollongong, where there were in 1975 some 3 , 6 4 6 taxis in operation, of which 3)366 operated in Sydney. In this district,
taxis travelled on the average 7 2 , 0 0 0 miles per annum at 1 6 . 3
miles per gallon (5· 8 km/litre). They used 44)000 gallons of
motor spirit per day for the 2 6 2 ,5 1 2 , 0 0 0 miles travelled.
The 10% consumption penalty then gives 5·3 kms/litre
consumption of LPG.
195
Assuming LPG conversion cost of $500 per vehicle, and
prices per litre of motor spirit and LPG of 13 cents and 9 cents
respectively which approximates the relevant prices in Melbourne
where LPG is marketed more widely as an automotive fuel, break
even point for fuel costs alone is ten months.
TABLE
Kilometres per year 110,000
Petrol consumption, km/litre 5 · 8
LPG consumption, km/1itre 5 . 3
Cost motor spirit, cents/litre 13
Cost LPG cents/litre 9
Motor spirit consumption,
litres/year 20,000
LPG consumption, litres/year 23,000
Motor spirit, cost/year $2,000
LPG, cost/year $1,980
Difference, motor spirit/LPG $020/year
LPG conversion cost $500
Period to break even 10 months
b . Police Vehicles
The Commission has data from the Sydney Metropolitan
Area Police Transport Branch where 1,234 motor vehicles and
200 motor cycles consume some 3 4 , 0 5 0 gallons of motor spirit
per week. Assuming the consumption of four motor cycles to
be equivalent to one vehicle, this gives a total of 1,284
vehicle equivalents consuming 1,7 7 0 , 0 0 0 gallons per annum,
or 1,379 gallons per day motor spirit. The equivalent daily consumption of LPG with a 10/ consumption penalty would be
1,517 gallons motor spirit.
196
The following Table indicates a break even point for
these vehicles on fuel consumption alone of eighteen months.
However, the Bureau of Transport Economics report "LiqueÂ
fied Petroleum Gas as a Motor Vehicle Fuel", of April 1974
(p.35) makes reference to cost experiences on LPG conversion of
police vehicles and states an annual reduction of oil and
maintenance cost per vehicle LPG/motor spirit of $133.73.
The inclusion of this figure reduces the break even point
to just over' one year.
TABLE
Motor spirit consumption per vehicle
LPG consumption per vehicle
Cost - motor spirit
Cost - LPG Motor spirit cost
LPG cost
Difference - motor spirit/LPG
Oil/maintenance reduction
LPG conversion cost
Period to break even - fuel
Period to break even - fuel and
maintenance
6,269 litres/annum
6 , 8 9 6 litres/annum
13 cents/litre
9 cents/litre
$ 8 1 5 per annum
$620 per annum
$195 per annum
$133.73
$328.73 $ 5 0 0
2.6 years
1.5 years
c . Australian Postal Commission Fleet
Part of the fleet of the Australian Postal Commission
in New South Wales is 2 73 light vans, of which 20 2 are in
the city fleet and 71 in the country fleet. In total, these
vans travelled 8,232,981 kilometres in the year 19 75/7 6, and
197
6
consumed 1.519 x 10 litres motor spirit. This gives a motor
spirit consumption of 5 * 5 6 4 litres/van/year, and with a 10%
penalty, an equivalent LPG consumption of 6,120 litres/van/year.
The following Table indicates a break even point for
these vehicles on fuel consumption alone of 2.9 years, so
that the inclusion of oil/maintenance saving, as with the
police vehicles, will reduce this to 1.6 years. While these
vehicles are replaced every two years, the LPG conversion kit
would be transferable with minor labour cost only, so that the
viability of conversion is still sound.
TABLE
Motor spirit consumption per van
LPG consumption per van
Cost - motor spirit
Cost - LPG
Motor spirit cost
LPG cost
Difference - motor spirit/LPG
LPG conversion cost
Period to break even
5,564 litres/annum
6,120 litres/annum
13 cents/litre
9 cents/litre
$723 $550
$173 $500
2.9 years
198
l l . o EXPANDING TRANSPORT AND DISTRIBUTION FACILITIES
11.1 The Importance of Supply Logistics
Figure 11.1 shows the LPG production for Australian refineÂ
ries and oil and gas fields up to 19 8 5 , and also, for
comparison, present estimated consumption by oil companies and
the Department of National Resources. Some 5 5 % to 6 5% of the LPG
is propane. The important point is the considerable shortfall
that exists between the production of LPG and the capacity, of
the Australian inland market, as presently estimated, to absorb
it. This discrepancy exists already between Gippsland Basin proÂ
duction and estimated Australian market requirements, and inÂ
creases when account is taken of potential production from the
Cooper Basin and North-West Shelf.
The main areas of potential for development of LPG market
absorption are Sydney, Melbourne and Adelaide in particular,
and in that order of importance, with Brisbane following.
These areas, apart from Melbourne, are those also with the
greatest potential shortfall of light products from existing
refineries to meet market requirements. It is obvious that
the logistics of supply are going to have a tremendous influence
on the market which will be developed and satisfied in each
of these areas. The Commission turns to examine some aspects
of these logistics in each area.
199
FIGURE 11.1
LPG FORECAST DEMAND AND ESTIMATED
2600 . . -. . â ......... ;........
Tote L Australian Production
2400 Oil and Gas fields
-Refineries
2300 Petrochemical Plants
2200
1900
1700
Mobil forecast demand
1100
1000
: Esso forecast demand
B.P. forecast demand
Petroleum Branch forecast demand
Refinery and Petrochemical Production
100 -
0 " ' 1 r I t I " - t - I 1 â | t- r - - 1 i , | â , · i , ,
73 71 72 73 74 75 36 77 38 79 30 SL 82 83 M 85 86 87 88 ® 90 Year
200
11.2 Logistics of Supply
11.2.1 Melbourne/Victoria
This area is the one most advantageously placed for the
development and supply of an expanded market. There are three
refineries suitably placed to feed LPG to different geographic
areas of the urban, suburban and high density provincial areas,
and these supplies can be easily augmented by pipeline supply
from the production area of Bass Strait. The area has already
enjoyed the benefits of wide supply of natural gas for some
time, and has not been adversely affected by LPG shortages
such as have occurred in other States.
There is a well developed road and rail system for LPG
handling to rural areas, where the main competition to LPG
use is the well developed electricity distribution grid based
mainly on Gippsland brown coal deposits augmented with hydro
electric power.
However, there does not seem to be any basic logistics
problem in this area which cannot be overcome by development
of existing facilities or concepts.
11.2.2 Adelaide/South Australia
One refinery serves this area for petroleum products
but it is unable to meet all requirements, and additional
supplies have to be brought in by ship, rail or road (or
combination thereof) from Victoria. There is great potential for
development of the LPG market, but the order of this potential
is much less than for Melbourne or Sydney.
201
The Commission is not aware of any major logistics problem
which would preclude satisfactory service of the area from
similar sources and by similar means to those existing already
to meet short term needs. In the longer term , there is need
to install pipeline facilities to transport LPG from the Cooper
Basin area to a seaboard loading point. From there an extension
to provide pipeline distribution to the Adelaide area seems
logical. The preferable route might be a mixed liquids pipeline
to Port Stanvac part of the liquids to be processed adjacent
to or in conjunction with the existing refinery and the balance
of LPG propane and butane to be sold on the inland market
and the excess exported.
Variations of this may be feasible. The Redcliffs petroÂ
chemical complex could be incorporated, again using pipelines
for feed and for by-product transfer to the refinery. The
Commission has been able to study this on a broad brush basis
only, but again the logistics of supply are relatively simple,
with refinery supply being augmented in the short term from
Victoria and in the longer term by pipelines from the Cooper
Basin.
11.2.3 Sydney/New South Wales
This is the main problem area, because of distance from
supply and the quantity and spread of requirements.
(i) The potential for development of the LPG for autoÂ
motive fuel markets in Sydney, followed by Newcastle
and Wollongong, is greater than any other area and is
presently the least developed. An increase in demand
of 100,000 tonnes per annum of LPG propane for this
purpose could be achieved with relative ease, provided
it was available in dispersed areas and at the right
202
price. Moreover, the environmental benefit of using
LPG as an automotive fuel is much more marked in
Sydney than in other Australian capital cities. FurÂ
ther, Sydney is already short of light products such
as motor spirit and the position will continue to grow
worse .
(ii) Natural gas is about to be reticulated into Sydney
and through trunk pipelines to other New South Wales
areas. Reticulated gas will replace some of the
LPG currently used by commercial and industrial secÂ
tors, either directly or by substitution for town gas.
However, the arrival of natural gas may not reduce the
offtake of LPG, but simply lead, in a complementary
manner, to other usages. Price and distribution faciÂ
lities then become most important, with major bulk
handling facilities largely contributing to improving
its market acceptability.
(iii) From the point of New South Wales gas utilities,
particularly those in rural areas, the supply and
price of LPG in recent years has been most unsatisÂ
factory. The New South Wales municipal gas industry
has traditionally filled an important place in develo ping country areas, complementing the electricity
industry and assisting the latter in handling costly
peak load conditions. A growth assumption of 4% per
annum would appear reasonable on present parameters. A
higher figure may be optimal and could be achieved
if energy optimisation were attempted. Much could
be achieved by a reliable source of supply at what the gas industry considers to be reasonable prices,
both of which would be considerably assisted by
sea transport to a bulk seaboard installation with
satisfactory access to Sydney.
203
(iv) The potential offtake of LPG butane in Sydney for
petrochemical manufacture and Newcastle for fertiliser
manufacture, coupled with town gas until natural
gas is available, may be in the order of 4 5 0 , 0 0 0
tonnes per annum above the capacities of the local
Sydney refineries to supply, provided that its supply
and cost can be on a better basis than the naphtha
presently being used. This predicates bulk shipments
handled through bulk seaboard facilities, completely
or partly separate from the LPG propane bulk faciliÂ
ties suggested above.
There are two aspects of the logistics of supply to Sydney,
long term and short term.
a . Long Term Supply
The Commission has not received any submission to suggest
that the construction of an LPG pipeline from a production
source to Sydney, either for LPG alone or for LPG in combination
with some other carried material, could be a viable proposition,
in the short or long term on present information. A combined
liquids pipeline from Cooper Basin to Sydney was suggested
as a possibility in conjunction with a new Sydney refinery
discussed in the Commission's Second Report, but this was
not developed. LPG might be carried in the "Project Sans-
wopple" (South Australia - New South Wales Oil Products
Pipeline Enterprise) proposed by Williams Brothers - CMPS
Engineers in April 1974 should this become a commercial propoÂ
sition. However, on the presently available information in the
long term supply will be by sea transport from, for instance,
Westernport discharging to bulk facilities located at Botany Bay
or Port Kembla, on the assumption that Port Jackson would be
environmentally unacceptable.
204
b . Cost of New Bulk Facilities
New bulk facilities for LPG could cost $500 to $1,000
per tonne capacity in Australia. A recent estimate for a large
installation of 100,000 tonnes LPG propane (183,500 cubic
metres) in the United States was:-
TABLE 11.1
ESTIMATE OF COST OF STORAGE FACILITY
Size - 100,000 tonne (183,500 m3)
Capital cost of LPG Receipt Terminal, 1974 and 19 79
(millions of dollars) (U.S.)
Refrigerated storage
Unloading facilities
Site
Other
Safety
TOTAL
1974 1979
15.6 27.3
11.0 19.2
1.5 2. 6
2.0 3.5
3.0 5.2
33.1 57.8
Planning, design and
construction loan interest 6 . 1
TOTAL 39.2
10,7
68.5
205
c. Alternatives
However, there are two alternative strategies which might
provide Sydney with bulk installation facilities for LPG at a
lower capital cost than new facilities. For the purposes of this
discussion the Commission assumes a minimum 100,000 tonnes per
year throughput, requiring a 10,000 cubic metre (5,000 onne)
semi-pressurised refrigerated LPG ship, making at least two
round trips per month to Westernport. Such a ship could in fact
handle almost twice this amount, so that it has capacity to
cater for market development.
(i) No. 4 jetty, Port Kembla Harbour is designed for
LPG handling, and can accept a ship up to a nominal
10,000 tonne capacity. Pipelines exist from the jetty
to a 5,000 tonne nominal capacity refrigerated storage
tank originally used for ammonia. Some of these
facilities are suitable with modifications to receive
and store LPG, with the extent and cost of modificaÂ
tions to be established. Indicative terminal costs on,
say, 100,000 tonne per year throughput would be around
$4 to $5 per tonne all inclusive, with sea freight, harbour fees and incidentals to be added. The cost of
transfer of LPG propane from Port Kembla to the Sydney
market area should be less than $10 per tonne so that
the total receipt, handling and- distribution cost would be less than $ 1 5 per tonne.
(ii) The Commission believes that facilities exist at
the Botany Bay/Boral/l.C .I. Botany complex for the
handling of LPG or naphtha. The Commission has no
details of berth availability, pipelines or storage, but it is obviously a facility to be considered
further should LPG butane become a viable feedstock
206
for I.C.I. Botany petrochemical manufacture. It is
also worth investigating further the receipt of LPG
propane into the Sydney market area by this means,
although the initial indications favour the facilities
at Port Kembla, described in (i).
d . Availability of Sea Tankers
The Commission has assumed for this study the availability
and use of a 10,000 cubic metre (5)000 tonne propane) semiÂ
refrigerated foreign flag vessel operating mainly on the AustÂ
ralian coast with Australian pay rates for crew. The Commission
has not had the time to clarify the costs of using such a vessel
in this way although a broad brush study indicated transport
costs of $ 1 5 to $20 per tonne on the basis that this vessel
could load through main LPG facilities at Westernport and
discharge to a seaboard installation at normal rates at, say,
Port Kembla. This assumption is not out of line with Figure
11.2 which shows estimated LPG transport costs in 1979 for
larger vessels operating generally greater distances.
The effect of this long term supply method is further
developed in Tables 9.1 and 11.4.
e . Short Term Supply
The development of the major bulk sea transport and
seaboard installation facilities will take time critically to
analyse in detail so as to formulate an optimum strategy, and time to achieve. In the interim, the Commission considers it
advantageous to commence development of the Sydney market, even
if the profitability is marginal only in this initial developÂ
ment .
207
FIGURE 11.2
LPG TRANSPORTATION COSTS IN 1979 ($US)
Tanker Size Year of (thousand mu Launch
$ (u s )/L o n g Ton / 30
One way distance in 000s nautical miles
1979
1979
1974
1974
Reference: Commission1s Consultants
208
The Commission has therefore looked at the logistics
of supply to the Sydney market in this interim period, and
concluded firstly that full road transport is not possible
because of costs and resultant road density of the LPG carriers.
However a combination of road/rail/road, using rail tank cars
from the Dynon Road, Melbourne southern terminal of standard
gauge line to Sydney deserves to be examined in detail.
The line haul equipment required to move product between
the Dynon Road terminal in Melbourne to a terminal in Sydney
under optimum conditions based on a three trip fortnight turn
round cycle, 2 5 fortnights per year, would be:-
TABLE 11.2
ROAD/RAIL EQUIPMENT REQUIREMENTS
35 tonne Rail Tank 75 tonne Rail Car Tank Car
Tonnes per Tonne s pe r Trips per Cars Trips per Cars
Annum Fortnight Fortnight Fortnight
50,000 2, 000 57 19(5) 27 9(2)
75,000 3, 00 0 82 27(7) 40 13+(3)
100,000 4,000 114 38(9) 54 18(5)
The number of cars in and out of terminals in any one
day (average) are shown in brackets.
The loading of rail tank cars in Melbourne is assumed
to be by road tanker from a loading point such as Dandenong, although the installation of pipeline facilities would be much
more satisfactory if viable .
209
On the assumption that neither the traffic route nor hours
of operation are restricted, one 15 tonne tanker could move
75 tonnes per 24 hours Dandenong/Dynon Road, or 1,000 tonnes
per fortnight allowing for maintenance and so on.
Thus,
2 tankers = 2, 000 tonnes per fortnight = 5 0 , 0 0 0 tonnes per annum
3 tankers = 3, 000 tonnes per fortnight = 75 *000 tonnes per annum
4 tankers = 4,000 tonnes per fortnight = 100,000 tonnes per annum.
One special loading point around the clock at Dandenong could handle up to four tankers.
Similar road delivery facilities operating 24 hours per
day would be required at Sydney, although here there could
be flexibility of pick up by customers or by longer haulage
trucks to country areas.
For basic logistic purposes, the following calculation
is made by reference to modules of 1,000 tonnes per fortnight.
210
TABLE 11.3
ESTIMATED ROAD/RAIL TRANSPORT COST
MELBOURNE TO SYDNEY
1,000 tonnes per Fortnight Module
A = 1 road tanker capacity 15 tonnes (Melbourne end)
B = \ loading point 24 hours at refinery
C = \ unloading point at Dynon Road (24 hours)
D = 9.5 x 35 tonne rail tank cars or 4.5 x 75 tonne cars E = \ loading point Sydney terminal
F = Customer unloading point own limitations
G = 1 road tanker Sydney end
N.B. Costs applicable to B and F are included in other costs
and therefore do not appear in the following calculation.
Indicative Costs Tonne
A + G = fixed + variable = $12.00
C + E (based on 100,000 tons per annum) =
fixed + variable = 9 . 6 0
D = fixed + variable = 32 .00
Indicative Total Price per Tonne $53.60
(This does not take account of refinery or customer costs if
applicable.)
The alternate road/rail/road combination using container
tankers, as discussed in Chapter 6, appears less economical to the extent of $5 per tonne transferred, indicative costs being:-
Melbourne refinery terminal to rail $9.00 per tonne Rail freight + fixed costs $40.00 per tonne
Sydney delivery $9.00 per tonne
$5 8 . 0 0 per tonne
2 1 1
f . Costs
The Commission, has, on the basis of a number of assumpÂ
tions, prepared Table 11.4 comparing present costs for distribuÂ
ting LPG propane ex Westernport to customers in Sydney, with
estimated future costs, both short term and long term, if: -
(i) The Sydney market is developed to take an additional
100,000 tonnes per annum;
(ii) An appropriate sea-going tanker is acquired;
(iii) Loading and discharging facilities are established.
The short term estimates assume rail/road transportation,
the long term sea/ road transportation. In both cases the
estimates are no more than broad brush and directional. The
Commission appreciates that many of the assumptions can be
challenged. Further study would, of course, enable the cost
estimates to be revised.
The cost in the short term for Westernport LPG will not
reduce greatly. In the long term it may reduce on much larger
market and more efficient transportation and distribution,
but even then not to an amount as low as that of LPG sold from
Sydney refineries .
11.3 The Growth of the Australian LPG Market should be
Encouraged
The important consideration is whether, despite these
directional indications of increased cost, Government should
encourage the growth in Australia of the LPG market as an
automotive fuel and petrochemical feedstock.
212
Further study is undoubtedly warranted. On the material
available to it, the Commission recommends that this market
should be encouraged and repeats,the reasons:-
(i) The use of LPG in large fleets of vehicles operating
in inner city areas, such as taxis, post office vans
and delivery vans, will assist greatly the control
of motor vehicle emission pollutants at a cost less
than other means for achieving the same level of pollutants.
(ii) Sydney is experiencing shortages in the supply from
local refineries of light end petroleum products,
such as motor spirit. As the Commission has pointed
out in earlier Reports, these shortages are likely
to increase. Butane, both as a refinery feed or blend
stock can be used in part to offset these shortages.
(iii) Increased use of LPG in the manufacture of town gas,
petrochemicals and fertilisers enlarges the market
with resultant economies of scale from greater use
of transportation and shore facilities.
Furthermore, it must always be remembered when comparing
the cost of marketing LPG and its retail price with those of
motor spirit, that whilst the wholesale price of LPG produced
from Australian oil and gas fields relates to high world parity
prices, motor spirit prices relate to the artificially low
price of indigenous crude oil. In a later Chapter, the CommisÂ
sion explains why it considers that this cost and price
relationship may change. The price of Australian crude oil will
almost certainly move to world parity. Furthermore the proporÂ
tion of expensive foreign crude used to manufacture local motor
spirit will certainly increase rapidly. On the other hand, with
greater supplies of LPG available on world markets, the world
price of LPG may well fall.
213
TABLE 11.4
LPG PROPANE
SYDNEY - COST TO DELIVER TO CUSTOMER (NON PROFIT)
PRESENT FUTURE
Sea/Road Rail/Road
(Short
Term)
Rail/Road
(Long
Term)
Sea/Road
$/tonne $/tonne $>/tonne $/tonne
LPG f.o.b. Westernport 66.88 66.88 66.88 66.88
Freight to Sydney 56.70 61(3) 53.60 20
Road transport - Sydney
terminal 7
Terminal handling cost 4 2(2) 2(2) 5
Distribution cost 15 5(1) 5(1) 10
Customer storage cost 7 7 7 7
Other administrative
charges 5 5 5 5
TOTAL - cost per
tonne $161.58 $1 4 6 . 8 8 $139.48 $113.88
TOTAL - cost per
litre (no excise) 8.2c 7.4c 7.1c 5.8c
TOTAL - cost per
litre (including
2c/litre excise -
automotive) 10.2c 9.4c 9.1c 7.8c
NOTES
(1) Some delivery will be direct to customer, and incorporated in
freight cost.
(2) Deliveries to customers will not incur terminal handling charge
(3) This is lower rate of two applicable.
214
12.0 EFFECT OF WORLD PARITY COSTS
The Commission has attempted to estimate the movement
of crude prices, both foreign and indigenous, and LPG export
prices over the years 1980, 19 85 and 1990. The following Tables
assume that the price of imported crude will escalate at no
greater rate than estimated world rates of inflation. It further
assumes that Australian crude will move gradually to world
parity over the period of the next 15 years.
TABLE 12.1
VALUE - LIGHT ARABIAN CRUDE
The escalation of the present price of light Arabian crude,
taken at f.o.b. $US 11.55 per barrel, at an inflation rate
of 7% to 19 80, 5% to 1 9 8 5 and to 1990, and allowing an
additional $5 per tonne freight rate to eastern Australia,
produces the following prices:-
1976 >
0
per tonne (fob) + $5 freight = $ 75/tonne 1980 $A 91 per tonne (fob) + $5 freight = $ 96/tonne 1985 SA117 per tonne (fob) + $5 freight = $122/tonne 1990 m
> M -
1 0
per tonne (fob) + $5 freight = $147/tonne
(assumes $A1.00 = $US 1 ,. 23)
215
TABLE 12.2
VALUE - AUSTRALIAN CRUDE (BASS STRAIT)
The Commission has arbitrarily escalated the present price
of $A4.35 per barrel ($32 per tonne) for indigenous Bass Strait
crude towards world parity as follows:-
1 9 8 0 - $A10 per barrel or $74 per tonne
I9 8 5 - $A1 5 per barrel or $111 per tonne
1990 - $A20 per barrel or $148 per tonne
TABLE 12.3
VALUE - AUSTRALIAN REFINERIES' CRUDE INTAKE POOL
Using the above prices and the estimated ratio of indigeÂ
nous to imported crude in Figure 5·1 of the Commission's Fifth
Report, the pool price for crude in Australian refineries will
be: -
PERCENTAGE POOL CRUDE VALUE
Indigenous Imported $A/tonne
1976 67
1980 60
1985 25
1990 7
33 $ 4 6
40 $83
75 $119
93 $147
216
TABLE 12.4
VALUE - LPG - WESTERNPORT F.O.B .
Two sets of figures have been calculated based on value
of gas oil and 0.3% sulphur fuel oil - West Coast, United States
of America, after taking account of the differential handling
and marketing costs there and the freight cost to transfer.
A. LPG VALUES BASED ON EQUIVALENCE WITH
0.3% SULPHUR FUEL OIL IN INDUSTRIAL USE IN U.S.,
1980 1985 1990
Value of 0.3% sulphur fuel oil
U.S.A. ($US/tonne) 102 1 0 6 122
Calorific equivalent price of
LPG (SUS/tonne) 115 120 138
LESS
Differential handling and
terminalling costs ($US/tonne) 15 15 15
Differential distribution and
marketing costs ($US/tonne) __5 __5 5
TOTAL 95 100 1 1 8
Equivalent to $A/tonne 77 81 86
LPG freight costs 10 13 16
LPG value f.o.b. Westernport 67 68 70
217
24717/76â 9
B. LPG VALUES BASED ON EQUIVALENCE WITH GAS OIL
IN DOMESTIC AND COMMERCIAL USES IN U. S. A
1980 1985 1990
Value of gas oil (U.S.A.)
$US/tonne 99 107 123
Calorific equivalent price
of LPG $US/tonne 109 1 1 8 136
PLUS
Form premium for LPG v gas oil
$US/tonne 16 16 16
TOTAL 125 134 152
LESS
Differential handling and terminalling costs (total)
Differential distribution and
marketing costs (total)
15
22
15
22
15
22
TOTAL 88 97 115
Equivalent to $A/tonne 72 79 93
Less freight costs 10 13 16
LPG value f.o.b. Westemport
$A/tonne 62 66 77
218
These Tables, though based on arbitrary assumptions and
broad assessments suggest that while the cost of crude oil
to Australia increases progressively to equate with world
parity prices, Australia will obtain a relatively diminishing
nett back for export LPG, despite marginal increases in 1990.
The difference is great enough to warrant the assumption that
the present export values of LPG are liable to fall markedly,
and that the growing need for increasingly expensive imported
crude oil will then provide a considerable economic incentive
to using indigenous LPG in Australia, to the extent possible,
as a substitute for the products of crude oil, particularly
light end products.
Now, however is the time to start to open up LPG markets
in Australia. To stand aside now and allow the present market
pattern of limited user to remain, can only result in the waste
and perhaps total loss of the opportunity to make adequate use
of a valuable natural resource.
219
13.0 EXCISE
There are two forms of excise tax on LPG:-
(i) Excise on LPG used for automotive purposes;
(ii) Excise on LPG produced from naturally occurring
sources.
13.1 Excise on LPG used for Automotive Purposes
The Liquefied Gas (Road Vehicle Use) Tax Act 1974 (No. 76)
and the Liquefied Gas (Road Vehicle Use) Tax Collection Act 1974
(No. 77 ) provide for the payment of a tax of 2 cents per litre (9.09 cents per gallon) on liquefied gas when used for propelÂ
ling a road vehicle as frcm 1st November, 1974. This rate is
4 0 .7% of the rate of excise duty on motor spirit which is 4.905
cents per litre or 22.3 cents per gallon. The Treasurer stated
that for a period of five years from 1st November, 1974 the tax
would retain this relativity to the excise duty on motor spirit,
except that one half of any increase in motor spirit duty during
that time would be added to the tax on LPG.
The reasons for imposing excise and imposing it at this
rate we re:-
2 2 0
(i) Revenue was being lost when LPG was replacing motor
spirit as automotive fuel;
(ii) Vehicles using LPG as automotive fuel contribute to the cost to the community of roads;
(iii) Use of LPG as automotive fuel reduced pollution to some extent;
(iv) A tax rate of less than 50% relative to motor spirit would encourage conversion of "preferred vehicles"
close to major supply sources, such as Melbourne
and later possibly Adelaide;
(v) Industry needs a firm base on which to plan ahead, and therefore a guarantee of relativity over some
time base was necessary.
The Commission has already recommended the development
of the market for LPG as a motor fuel particularly in the
Melbourne and Sydney areas. An excise rate relative to motor
spirit of less than 2 5% would be necessary to encourage use in
Sydney and Brisbane because of the additional transport costs.
Adelaide has not yet available a source of LPG from a production
field. The market for LPG for automotive purposes in Melbourne
has not developed on the existing excise basis to the extent the
Commission considers desirable in the national interest.
221
24717/76â 10
The Commission agrees that some tax should be imposed
on LPG used for automotive purposes to cover road use but
considers the present tax to be too high to encourage the
necessary Sydney market development. It agrees also that a
"planning and development" period is essential, but considers
that a five year period from 1st November, 1974 is too short,
and that the period should be extended.
The Commission proposes that the existing excise on LPG for
road vehicles should be reduced to 1 cent per litre, with a
retention of this relativity to he duty on motor spirit
up to 1 9 9 0 except that 2 5% of any increase in motor spirit
duty during that time would be added to the tax on LPG.
13.2 Excise on LPG Produced from Naturally Occurring Sources
The Government in the 1975/76 budget (August 1975) intro duced an excise of $0.0126 per litre or $2.00 per barrel
approximately on production of crude oil, condensate and natuÂ
rally occurring liquefied petroleum gas, with immediate effect.
This levy did not apply to natural gas or refinery products,
although its price effect was expected to spread down into the
latter.
The excise regulations were amended in 1975 so that drawback could not be recovered on the export of LPG. In effect
the excise became a levy on LPG for both the domestic and export
market. It became operative from 19th August, 1975.
222
The Commission considers that the LPG market in Australia
should be encouraged. Price distortions either by subsidising
petroleum fuels made from artificially cheap Australian crude
oil or keeping the domestic price for LPG below its export
price inhibit the growth of the LPG market. The use of a tax
such as this levy selectively would enable Government to
encourage the market while at the same time preventing price
increases flowing through to producers as windfall profits.
223
14.0 ESSENTIAL SUPPLIES
A considerable proportion of the municipal gas undertakings
and rural gas utilities outside areas served or about to be
served by natural gas are now dependent on LEG, either as
feedstock or in substitution for manufactured gas. This has
been discussed in detail in Chapter 4· LEG has become an
essential supply as a utility in the areas so served.
In June 1 974» during a period of acute LEG shortages
in New South Wales, the New South Wales Government established
an LEG Supply Committee to endeavour to rationalise supplies
of LEG to municipal gas undertakings operated by local governÂ
ment authorities. This was done through the Department of Mines
which has a significant role to liaise with LEG producers
on matters of supply when requested, although it does not
become directly involved in market considerations of LEG,
or the logistical aspects of storage, supply and delivery
by private industry interests to industrial and commercial
customers. As the Government had no facilities of its own,
it relied on the assistance of the LEG industry. In general,
the LEG Emergency Transport Committee (operated by representaÂ
tives of industry) arranged the supply and allocation of LEG
from various sources.
224
The Queensland Government,, in its 19 74 Annual Report
on the operation of "The Gas Act of 196 5" commented on the
unfavourable supply conditions for LPG: -
"Industrial and refinery problems caused difficulties for the gas industry , and as in the past , this Department (Gas Engineer and Chief Gas Examiner) has used its good offices to negotiate with all concerned to ease the impact on both companies and consumers. Unfortunately, rationing had again to be imposed."
The 1973 Annual Report referred to "supply difficulties
with LPG an annual problem for some time" and "gas rationing
again in 1 9 7 2 ".
Similar problems do not exist in Victoria, with its supply
of natural gas and its close proximity to a major LPG source;
Tasmania has not to date had problems of shortage no doubt because of its basic strength in hydro electric energy; South
Australia has been protected by its supplies of natural gas
and proximity to LPG source; Western Australia is largely
self-contained.
However it must seem inappropriate from the viewpoint of
consumers in New South Wales and Queensland that a basic utility
like LPG runs short and is rationed While at the same time hundreds of thousands of tonnes are being exported from Western-
port .
At a Senate inquiry into the availability of LPG in 1971,
Esso Australia Limited made the following statement:-
"We have made undertakings to the State Governments concerned in eastern Australia; we are prepared to make the same undertakings to this Committee or anybody else concerned that we will not see a shortage of gas in
Australia because we are sending gas overseas. If LPG is needed to meet shortages, LPG is available frcm Long Island
225
Point. This, of course, is subject to this specification problem -- but that can be overcome to meet spot
situations ."
The Commission is of the opinion that the wrong strategy
has been used to overcome this problem in the past. Growth
has been restrained in an attempt to keep demand within local
supply capacity. Instead the market should have been developed
to a higher plateau so that the logistics of supply from say
Westernport become economic, The bigger the market the more
economic LPG becomes. If this essential concept were recognised
the need for any Government intervention to maintain essential
supplies of LPG would be obviated.
The Commission recommends that the Australian Government
engage the State Governments and particularly the Government
of New South Wales in discussions concerning the use of
LPG. The Commission has commented elsewhere on the inappropÂ
riateness of generalised solutions being applied to "hot spot"
problems" (Fifth Report at p. 577) · LPG can be used to ameliorate
"hot spot" problems involving districts where vehicular emisÂ
sions are too high.
State Governments should encourage the use of LPG by offering major fleet owners reductions in registration costs if
the fleet (or a substantial percentage thereof) converts to LPG.
The reductions should ideally bear some relation to the cost of
conversion. This Commission suggests consideration be given to
reducing registration charges to a nominal $1.00 in the initial
year and $ 0 % over the next five years.
Governments, both Federal and State, should set an example
by converting their own fleets, the fleets of their instrumenÂ
talities and local government vehicles.
2 2 6
The Commission1s broad estimate is that subject to supply
and with policies aimed to produce a vigorous penetration of the
market up to 15% of motor spirit consumption could be backed off
in favour of LPG in the long term. The Commission notes that the
use of condensates in refinery streams should also increase the
output of refinery LPG.
Market penetration will be assisted if energy costs become
rational. Present low cost petroleum products based on cheap
indigenous crude distort Australia's energy economy by en couraging the consumption of motor spirit from indigenous
crude and failing to support alternative fuels such as coal,
electricity, diesel fuel etc. by investment which should but
does not reflect their cheapness and superior economy. No
effective conservation of resources seems possible until this
position is rectified and much of the Commission's work is based
upon the proposition that a program of rationalisation of energy
economics wi 11 be perceived to be essential and unavoidable.
227
15.0 POLICY CONSIDERATIONS
15.1 Natural Resource
LPG is a natural resource which is not being replaced
and therefore it is properly the concern of Government to
ensure that it is used in a manner which best serves the
national interest. There are a number of matters which are
relevant to this.
(i) LPG is produced from the stabilisation of natural
crude and the "drying" of natural gas before marÂ
keting. As long as there is a market offtake, internal
or external, for these two products then there will
be production of LPG frcm naturally occurring sources.
In the past in such areas as the Middle East, the
LPG was "flared", that is burnt as a flare, because
it had no market or means of distribution. In AustÂ
ralia it cannot be pumped back whence it came without
becoming largely lost. E en if, for instance, underÂ
ground caverns existed for storing LPG, there would be
a limit to their capacity.
Therefore quantities of LPG produced beyond the abÂ
sorption capacity of the Australian market must be
exported.
2 2 8
(ii) Presently known LPG reserves in Australia, because
they are a naturally occurring non-replacing resource,
have a terminal life depending on usage. This same
comment also applies, however, to the other source
of relevance, indigenous crude oil. Here the terminal
life on present usage compared to reserves
is much shorter. Indigenous crude resources could
be extended by the quantity of LPG utilised from
naturally occurring sources which can be substituted
for products derived from crude.
As the supply of indigenous crude dwindles more
imported crudes must be used, which generally will
be heavier, and exacerbate, in New South Wales parÂ
ticularly, the shortfall which exists already of
locally refined ligjit products. Therefore the use of
LPG as a substitute for motor spirit within Australia
presents an opportunity to extend the life of
Australia's indigenous resources.
(iii) Australia, though it has not yet chosen to use
much naturally derived LPG has a conveniently located
source in the Gippsland fields, well placed to supply
the Victorian market with LPG and reasonably placed,
subject to shipping costs and the development of
terminals, to supply New South Wales and possibly
Queensland.
In the very long term, perhaps fran 1990 onwards,
Australia may have to turn to the North-West Shelf for
its continuing supply. The development of this area
seems likely to be orientated around the production of
natural gas, but gas liquids and LPG will also be
produced in large volume.
229
Initially the immense investment needed can only
be met by the proceeds from large volume exports.
The liquids should be retained as refinery feedstock
(see Fifth Report at p .455) and LPG should be phased
out of exports to the extent necessary to supplement
the then dwindling supply from the Gippsland fields.
This latter resource should increasingly be regarded
as dedicated to internal consumption on the eastern
seaboard because of the relatively convenient locaÂ
tions of the source and the markets.
15.2 Foreign Exchange
The export of LPG earns considerable foreign exchange.
The export of 1,081,250 tonnes in 1975 at some $90 per tonne
f.o.b. earned $97? 312,500. The price of Arabian Light crude
during the first quarter of 1 9 7 6 was $ 7 0 per tonne f.o.b.,
so that allowing $5 per tonne foreign freight cost, the export
price of LPG would have bought almost 1.3 million tonnes of
Arabian Light crude for Australia. The Commission has had
suggested to it that the most advantageous deal to be achieved
from this export of LPG would be to barter it against supplies
of motor spirit, (short on the eastern coast) or supplies of
crude. However, the Commission considers it unlikely that any
country with a deficit of LPG, such as Japan or the United
States, would have a surplus of either motor spirit or crude oil
to barter on a bilateral basis. It considers that the normal
commercial strategies of LPG export sale and crude purchase are
the only ones practical.
230
Granted a fixed energy requirement in Australia for petroÂ
leum products at any one time, there is really no difference
between using an indigenous crude to meet these requirements
directly, or exporting indigenous natural gas and LPG to
purchase foreign crude to meet the same need. Of course, to the
extent that the LPG can be used directly to replace natural
crude products, it provides a secure source of supply. Moreover
it becomes economically preferable as LPG export prices drop
relative to foreign crude and because it saves the refining cost
including refinery fuel. The Commission has some information
suggesting that in the medium to long term there might be some
downward pressure on the international price of LPG.
15.3 Environmental
The Commission considers there are adequate reasons for
Government action to divert LPG to the Australian market as an
automotive fuel. The direct use of LPG has many environmental
advantages.
(i) It is a low sulphur product with clean burning characÂ
teristics when used as a direct energy source by
burning in furnaces or home heating. It reduces
the sulphur dioxide content of stack gases compared
with even low sulphur fuel or gas oil. Sydney has a
developing problem with this type of atmospheric
pollution, though this will be probably mitigated to a
large extent when natural gas becomes available in
substantial quantities. LPG can still play an imporÂ
tant complementary role to natural gas for sulphur
dioxide pollution control both in cities and in areas
where natural gas is not available as a reticulated
product.
231
(ii) LPG occurs, or is extracted, virtually as a marketable
product. By comparison, crude oil requires sophisÂ
ticated refining, which uses some 10% o f the intake as
refinery fuel for processing. To the extent then that
LPG can be used as a replacement for refined products
from crude oil it reduces the air pollution resulting
frcrn this 10% refinery fuel combustion. This can
reduce air pollution in areas such as Sydney where
refineries in environmental terms are seen to be
disadvantageously placed.
(iii) Environmental pollution by exhaust gases from motor
vehicles has been discussed in considerable detail
by the Commission in its Fifth Report. Earlier in
this Report the Commission presented the environÂ
mental advantages of the use of LPG as a direct
automotive fuel, particularly in metropolitan areas,
and particularly again in Sydney where the problem
is greatest because of topography, climate and high
density traffic. The Bureau of Transport Economics
report of April 1974 on "Liquefied Gas as a Motor
Vehicle Fuel" estimated the annual quantity of LPG
required to operate 10% of cars, station waggons and
light commercial vehicles garaged within 15 miles of
Sydney in 19 71 as 1, 12 5, 300 barrels per annum, which
converts to 107,905 gallons per day. The daily usage
of motor spirit in taxis alone in Sydney at present is
in the order of 45)0 00 gallons which would account for
about one-third of this total usage after arbitrarily
increasing the former by 2 5% to update the figures.
Consideration should be given to a compulsory requireÂ
ment that Sydney taxis use LPG. Each taxi so converted
in annual mileage covers several times the mileage
of private vehicles. Conversion of taxis and similar
high usage vehicles has a large multiplier effect
on the diminution of noxious emissions and lead.
2 3 2
State Governments could play an important part in enÂ
couraging LPG in high usage vehicles. The Commission has proÂ
posed that State Governments consider reducing significantly the
registration fees upon vehicles converted to LPG.
15.4 Crude Oil Pricing
The appropriate and adequate integration of LPG resources
into Australia's energy economy needs a sufficiently researched
energy policy.
The continuing problem of the price of indigenous crude
creates a major distortion in the energy economy. Most of the
recommendations made in this and earlier Reports are based upon
an increase in the price of Australian crude in the short term.
Only by so doing can rational and economic energy usage be
established. In this connection the recent (30th September
1976) Industries Assistance Commission report on Crude Oil
Pricing which recommends that indigenous crude rise to 49% of
import parity plus the $2 per barrel levy from 1st January 1980
merely postpones the problem and continues a pricing policy
which encourages the misapplication of resources. It is diffiÂ
cult to see under such circumstances how conservation policies
in restraint on consumption can be generated under conditions
that involve artificially low prices, or alternatives encouraged
in the face of competition from refinery products that do not
bear their true value. These policies have in part been responÂ
sible for the near total exclusion of field resource based LPG
from automotive consumption in Australia in the face of the proÂ
ducers' understandable preference for exports at world parity
prices and if continued can only, in whole or part, have the
same effect.
233
16.0 SUMMARY
16 .1 Since 1970 Australiaâs motor spirit and therefore
transportation fuel needs have been substantially met
with products manufactured from Australian crude oil.
Since 1973 this crude has been available to Australian
refineries at one-quarter to one-third the price of imporÂ
ted crude oil.
16 .2 As the Commission pointed out in its Fifth Report
(p .34) of the several hundred grades of crude oil available
on the world market, the quality of Bass Strait crude
ranks it among the top half dozen. Moreover it is a crude
oil eminently suited to the nation's petroleum products
demand pattern.
16.3 With respect to indigenous crude oil Australia has pursued a strong and definite if sometimes inappropriate
policy. At the centre of this policy lies the implicit
dedication of indigenous crude oil to the nations hydroÂ
carbon reserves. Australian crude is refined in Australia
and its products are consumed by the Australian public.
234
16.4 An essential rationale behind such a policy recognises
that Australian transportation must have a secure supply
of petroleum products. Few nations are so overwhelmingly
dependent upon long and short distance transportation;
our major centres are separated by hundreds, if not
thousands, of miles; our omestic shipping is very espen-
sive; even our cities are sprawling aggregations; all pla cing a high premium on transportation hydrocarbons.
16.5 Demand for petroleum products in Australia continues
to grow and a number of present programs concerning lead,
sulphur and noxious emissions all tend to increase consump tion.
16 . 6 Australia's reserves of crude oil are diminishing.
They are finite and significant fresh discoveries seem
unlikely. After 19 8θ the present rate of supply from Bass
Strait will not be maintained. Gradually more and more
expensive and less suitable imported crudes will have
to be used.
16.7 Only LPG is a feasible substitute for motor spirit
between now and 1990. Yet granting all the dedication
that successive governments have applied to the national
retention of indigenous crude oil, no part of any similar dedication seems to have been applied to LPG. Not merely a
similar but in transportation terms, an identical national resource to the nation's crude oil resource has thus year
after year been exported almost as if it was self-renewing.
16.8 LPG where derived from field sources has been an
underutilised energy resource which has contributed far
less than its potential to Australia's energy economy.
Before looking to reverse this position it is worth
examining how it ever occurred.
235
16 .9 When in the second half of the 1900's LPG came ashore
in large volumes as an unavoidable part of both oil and
gas streams, Australia lacked, as it still lacks, an energy-
policy. Little or nothing was done to plan the incorporaÂ
tion of LPG into domestic energy consumption and it was
exported on a faut de mieux basis at low prices. It is
still being exported though the price has increased as a
result of the dramatic lift in crude oil prices after the
historic discontinuity of October 19 73 . As in so many other
sectors of the petroleum economy Australia has continued to
act as if nothing ever changed.
16.10 The lack of a recognisable energy policy has resulted
in the Bass Strait fields being administered as to natural
gas and LPG substantially as a local or Victorian resource.
For natural gas it has meant that the Victorian-Sydney
pipeline has not been built and at a greatly increased
cost very much more expensive natural gas has been brought
to New South Wales from the Cooper Basin where reserves
may well not sustain adequate supply beyond 1 9 8 4 / 8 5·
For LPG it has meant that in the absence of absorption
in a Victorian market, LPG has been exported.
16.11 A national energy policy would have developed both
natural gas and LPG as an eastern seaboard resource. A
pipeline for natural gas may yet have to be built from
Victoria to New South Wales.
16.12 LPG consists of two groups of gases with markedly
different properties, the propane gases (C3) and the butane
gases (C4) (2.1). Moreover LPG is drawn from two sources,
refinery production and field production, that is from
the crude oil or natural gas streams (1.3). At the present
time the greater quantity of LPG produced in Australia
comes from field production.
236
16.13 Where LPG is associated with a crude oil or natural
gas stream, its production is the inevitable consequence
of extracting the crude oil or gas (1.3). The crude oil
or gas cannot be taken out separately and the LPG left
in the ground for exploitation at some later time.
16.14 Whereas many petroleum products obtained by the refiÂ
ning of crude oil can be replaced by other forms of energy
available in Australia, as for example coal for fuel oil,
short term substitutes for motor spirit other than LPG are
not available.
16.15 Propane in a significant number of cases is an
alternative fuel for motor vehicles. Furthermore butane can
be used to replace naphtha in many petrochemical processes,
thereby releasing the naphtha for motor spirit manufacture,
and as a feedstock or blendstock in refineries, thereby
increasing the outturn of motor spirit.
16 .16 Motor vehicle engines fuelled with propane emit reduÂ
ced quantities of the atmospheric contaminants, carbon
monoxide, hydrocarbons and nitrogen oxides, when compared
with motor spirit fuelled engines. Additionally the use of
LPG in industrial processes has environmental advantages.
16.17 Producers have exported large quantities of this resource, initially because there was not sufficient domesÂ
tic market, but now because the permitted prices at which
LPG can be sold in Australia are well below export prices.
Price is an incentive to export and a disincentive to
develop the local market . In addition transportation costs
are high, if Australian flag shipping must be used and
storage and distribution facilities insufficient.
237
16.18 The two broad areas in which public policies have
to be developed are : -
(i) increasing the use of LPG within Australia to
replace crude oil based products;
(ii) maximising the benefits to be derived from LPG
exports.
Increased use in Australia ought to be in high form
value applications such as the replacement of the light
end fractions produced from crude oil. Fuel oil replacement
by LPG merely substitutes a surplus in one product for
another. As the Commission has indicated in its earlier
Reports, because of the increase of imported crude oil
as refinery feedstock, it is the light end products which
are going to be expensive and in short supply (see Fifth
Report, p .410) (1.8).
16.19 The use of substantially increased quantities of LPG will require the creation of new markets and this
in turn will take time. Even if the Australian Government
felt disposed to turn a large part of the Bass Strait
production of LPG into the domestic market there is at
the moment no demand for greatly increased supply. Such
demand will take time to generate and need positive
policies for its creation. Indeed it may be too late to
divert large parts of the Bass Strait reserves away from
the export market. But as already indicated new reserves of
LPG will be coming on stream in the medium and long term.
Now is the time when policies must be formulated for the
most beneficial exploitation of these resources.
238
16.20 The Commission suggests with respect to both LPG
and natural gas that a major objective of policy should
aim to ensure the maximum usable consumption of the
resource for the benefit of Australian industry, including
motoring, using exports as an initial base load and
gradually trading off exports against domestic consumption
as internal demand builds up.
16.21 The Commission has examined how LPG has historically
and is currently being used in Australia, within several
categories, domestic and commercial, industrial, automoÂ
tive, town gas utility, agriculture and petrochemical
(4.3). Comparison of Australian uses with uses in some
other countries shows that in Australia use tends to be
more concentrated on gas utilities, whereas overseas the
greater proportion of use is the categories of domestic and
commercial, automotive fuel and in the United States -
petrochemical feedstock (Table 4. 5) ·
16.22 Australian refiners will increase the severity of
reforming and cracking operations in order to produce
more motor spirit from heavier imported crude oils and
to counter reduced lead levels in motor spirit production.
This will result in a greater production of olefins for
alkylation units with a resultant greater need for iso
butane as an alkylation feedstock. More normal butane
will be needed as a motor spirit blends to ck (3.14 and
3.15).
16.23 If in the national interest the domestic LPG market
should be encouraged to grow, as the Commission reports
that it should, LPG must be able to compete in price with
alternative fuels and the producers of LPG must have the
incentive to turn their product into the Australian market.
239
Price regulations and controls should not provide the
producers with an incentive to export. At the present time
this is precisely what they do. For the price of LPG to
relate appropriately to the price of other petroleum fuels
such as motor spirit, those other fuels should be priced on
the basis of manufacture from crude oil at world parity
prices. In terms of national energy policy the Commission
has more than once referred to the need, if Australian
energy resources are to be appropriately husbanded and
exploited to bring the price of Australian crude oil up to
world parity (see Fourth Report at p.227). On the other
hand the producers of LPG must receive the same return for
their product on the local market as they receive on the
export market. Neither in the case of crude oil prices nor
in the case of LPG prices does the Commission advocate
increases flowing through to producers as windfall profits.
Levies of the sort imposed on LPG may prevent this and have
already been discussed by the Commission in its Fourth
Report at p .220. But there can be no doubt that if present
price distortions are allowed to continue, the very subÂ
stantial resources represented by Australia's reserves of
LPG will continue to be exported, to the detriment of the
nation as a whole.
16.24 The develooment of the LPG market depends upon comÂ
petitive and stabilised prices and this in turn depends to
a large extent upon the existence of a comprehensive and
efficient storage and transportation network. At the preÂ
sent time because much ofthe demand is for town gas utility
purposes, particularly in high offtake areas such as Sydney
and New South Wales country centres, the offtake is very
seasonally orientated. When natural gas is introduced in
New South Wales it will take over some of this seasonal
demand and some of the industrial base load from LPG. What
240
is needed for the development of the market is a broader
year round offtake. Such an offtake would result from
development, particularly in the Sydney, Melbourne, AdeÂ
laide triangle of a market for LPG as an automotive fuel
and as chemical feedstock. The penetration of these marÂ
kets, will have the effect of making this indigenous
resource attractive to consumers.
16.2 5 The Commission considers that standards for LPG
quality use and safety should be uniform and apply throughÂ
out Australia. At the very least this would facilitate
interstate movements and reduce the costs, eventually borne
by consumers, in meeting different standards in different
States. The need for uniformity will grow as the source of
LPG proliferates to more production areas in various States
in Australia, and as LPG becomes more widely used in the
community. The Standards Association of Australia should be
made responsible for publishing uniform standards to apply
throughout Australia and these should be given the force
of law by Federal legislation. It will of course be
necessary for standards to be kept up to date and the
legislation amended accordingly ( 8 . 4).
16.26 LPG is transported and distributed in seagoing vesÂ
sels, and road and rail vehicles specially designed for the
purpose and capable of withstanding comparatively high
pressures in the order of 1 7 atmospheres (kg/cm^) and, where refrigeration is used, low temperature. The conÂ
tainers are heavy, particularly those designed for high
pressure operation. Special safety features and construc tion materials are required. Transportation is therefore
expensive when compared with the transportation of other
petroleum products. In Chapter 9 the Commission describes
the several methods of transportation.
241
16.27 The Commission has considered four possible areas in which the market for LPG might be expanded:-
(i) by conversion to motor spirit
(ii) by direct use as an automotive fuel
(iii) petrochemical feedstock
(iv) refinery feedstock.
16.28 The Commission received a number of submissions on
the conversion of LPG to motor spirit, which led it to
conclude that unless changes in technology occur or the
cost of processes decreases or the value of feedstock
and/or product becomes markedly different that conversion
will remain uneconomic. It is not economically practicable
or in terms of energy management desirable to establish
plant designed solely to convert LPG to motor spirit
components (10.2.3) .
The Commission draws a distinction between propane on
the one hand and butane, iso butane and the unsaturates
propylene and butylene on the other hand. The latter comÂ
pounds all have the potential to be upgraded to motor
spirit and an increase in such use should be encouraged.
16.29 Propane can replace premium grade ( 9 8 RON) or standard
grade ( 8 9 RON) motor spirit as the sole fuel in an internal
combustion engine (10.3.2). The Commission estimates the
cost to convert a motor spirit engine to LPG at about
$400 to $600. This direct use of LPG should be preferred.
The Commission considers that its favourable findings on the use of propane as a direct automotive fuel, together
with the fact that butanes are blended in motor spirit or
upgraded to motor spirit, renders it unnecessary to create
an additional market to use butane gases on their own as a direct automotive fuel.
242
1 6 . 3 0 Advantages of LPG as Automotive Fuel
Advantages in using LPG as automotive fuel in a spark-
ignition engine are:-(i) lower cost of LPG, depending upon location.
(ii) longer engine life, particularly in respect of
cylinder bore wear during cold starting. This
is because LPG, being gaseous when it enters
the cylinder, does not wash off the walls. HowÂ
ever, it is necessary to ensure that suitable
valves and valve seats are used, generally stelÂ
lited or similarly hardened.
(iii) as a consequence of (ii), the effective life
of lubricating oil is longer as a result of the
absence of fuel dilution.
(iv) reduction of deposits on surfaces and spark plugs
owing to the cleaner combustion characteristics
of the fuel. Consequently the frequency of top
overhaul and plug servicing can be reduced.
(v) easier cold starting, because of the gaseous
nature of the fuel.
(vi) since LPG enters the engine in gaseous form,
the mixture distribution to the cylinders is
more often uniform than with motor spirit. ConÂ
sequently engines operating on LPG can utilise
leaner mixtures, giving improved economy.
(vii) exhaust emissions are greatly reduced in LPG
engines compared to those running on motor spirit.
The simplest type of LPG fuel conversion will
reduce significantly the carbon monoxide and hyd rocarbon exhaust emission when compared with a
243
motor spirit engine. If an LPG-only installation
is tuned for low emissions, a considerable reducÂ
tion in oxides of nitrogen can be effected (but at
the expense of a drop in engine performance).
Improvements of the order of 70% are possible for
all three pollutants by adjustments such as variaÂ
tion of the air/fuel ratio and ignition timing
alternations. There is no emission of lead to the
atmosphere from LPG fuelled engines, as the octane
rating of automotive quality LPG is sufficiently
high to do without the addition of lead. These
reduced emission characteristics make LPG propane
particularly suitable for vehicles, such as forkÂ
lift trucks, operating in relatively closed air
spaces, such as large warehouses or docks.
(viii) reduced possibility of pilferage of fuel, since
it has more limited and specific application.
(ix) vehicles with low annual mileage that spend a
large number of engine hours at idle or in low
speed ranges exhibit increased durability when
fuelled on LPG.
(x) lead usage in the total automotive pool is
reduced. (10.3.4)
16.31 Disadvantages of LPG as an Automotive Fuel
Some of the disadvantages of using LPG as automotive
fuel in spark ignition engines are:-
(i) the expense of engine conversion, estimated at
some $ 4 0 0 to $ 6 0 0 per vehicle.
244
(ii) lower power output because the amount of heat
per litre is less than that for motor spirit
(LPG 26 m j / l ; motor spirit 32 mj/l). Given similar
engines less power is produced by LPG resulting
in less kilometres per litre. However, if the
trouble and expense is taken to increase the
compression ratio, cool the fuel/air intake and
obtain a more suitable valve timing and distribuÂ
tor advance curve, this effect can be minimised.
(iii) carrying a gas bottle results in loss of vehicle
space and marginal (1% to 2%) increased weight;
also special safety precautions may be necessary.
The size of the gas bottle does of course depend
on the range required of the vehicle, but in
commercial vehicles (delivery, taxi and the like)
the bottle can take up carrying space unless
strategically located to avoid this. Being presÂ
sure vessels, the bottles are heavy and must be
inspected at regular intervals.
(iv) at the moment, a very inferior system of market
distribution and transportation and a lack of
terminal facilities.
16.32 Propane has a higher RON and MON rating than AustÂ
ralian premium motor spirit. This falls however if propyÂ
lene is mixed with propane. The Commission recommends
adoption of an automotive propane specification such as the
United States Natural Gas Processors Association SpecifiÂ
cation HD5 (10.3.6).
245
16.33 The possible advantages from a national viewpoint
of using LPG as a fuel and thereby tempering lead phase
down and emission controls, the cost of which the CommisÂ
sion has described in the Fifth Report led the Commission
to inquire:-
(i) can Australia use more LPG in its motor vehicles
and if so which motor vehicles and where?
(ii) as compared with motor spirit, what will this
cost the consumer?
(iii) how can the most desirable quality and specificaÂ
tion be maintained?
(iv) what will be the impact on pollution levels and
on the lead phase down program?
16.34 The market should be developed in areas:-
(i) to which LPG can be most easily transported;
(ii) where the major concentration of users of the
preferred type of motor vehicle exists so that
the lowest cost distribution can be achieved.
"Preferred type vehicles" embrace State and
Federal vehicles such as pool vehicles or post
office vehicles, local government vehicles such as
garbage collection trucks, taxi fleets, delivery
vans and the like.
Such developments are directly in line which successÂ
ful overseas experience.
246
16.35 The principal areas in which LPG should be used are:-
(i) Melbourne, because of its high population of
motor vehicles, and its proximity to the LPG
propane sources at the three refineries at Altona,
Geelong and Westernport and the Bass Strait proÂ
duction source at Long Island Point, Westernport.
(ii) Sydney, because it has the highest population
of motor vehicles and is adjacent to two refineÂ
ries at Clyde and Kurnell and its photochemical
smog problems. It has presently no easy access to
a field production source of LPG.
(iii) Adelaide, third in the list of motor vehicle
population, close to one refinery at Port Stanvac,
and potential supply of LPG by pipeline frcm
the Cooper Basin, possibly in conjunction with
the development of LPG export from this production
centre.
16.36 The price of motor spirit will rise as a greater
percentage of feedstock is imported crude and/or alternaÂ
tively as the price of Australian crude rises. The price of
LPG which prior to the decision of the Prices Justification
Tribunal in October 1976 was orientated largely to imported
crude and import/export parity is more likely to remain
constant or fall as increased supplies from the Middle
East soften the world market. Thus in terms of price LPG
may be cheaper than motor spirit.
247
16.37 There is a need to have in Australia a uniform
separate specification for propane to be used as automotive
fuel.
The Commission feels it imperative that the LPG
producing and marketing organisations and the Australian
Liquefied Petroleum Gas Association consider the quality
and specification of LPG automotive fuel which will best
serve the long term production picture and market developÂ
ment in Australia to ensure maximum absorption of LPG from
the former and maximum penetration of the latter, and then
take action accordingly.
16.38 The preferential marketing of LPG in a city area
can have a synergistic effect on contaminant reduction
because fleet operated vehicles such as taxis travel
between 50,0 00 and 100,000 miles per annum, whereas private
motor cars generally travel only 10,000 miles per annum.
The conversion of one taxi will have the same effect as
converting five to ten private cars, and the taxi has a
better chance of contributing positively to exhaust effÂ
luent reduction in central city areas which are the highly
emission polluted areas.
The use of LPG propane has the same effect on the
automotive motor spirit pool as the use of unleaded motor
spirit, and the conversion of one taxi with lead particuÂ
late in exhaust reduced to nil can allow 20 to 30 private
cars to use present quality motor spirit while achieving a
lead/air contamination in a city area equivalent to a
2 5% reduction in lead in motor spirit from present levels.
248
The Commission has not attempted to quantify the
impact of this on the lead phase down program discussed
in depth in its Fifth Report. However, it is certainly
in the right direction.
16.39 The Commission has been concerned with the logistics of supply in potential market areas. In Melbourne there
is no basic problem (11.2.1). In Adelaide in the medium
or long term pipeline facilities need to be installed
to transport LPG from the Cooper Basin to seaboard loading
facilities and thence logically into the Adelaide area.
16.40 Sydney is the problem area. The potential for developÂ
ment of the LPG automotive fuel market in Sydney, and in
Newcastle and Wollongong is greater than any other area,
and is presently the least developed. An increase in demand
of 100,000 tonnes per annum of LPG propane for this purpose
could be achieved with relative ease, provided it was
available in dispersed areas and at the right price.
Moreover, the environmental benefit of using LPG as an automotive fuel is much more marked in Sydney than in
other Australian capital cities. Sydney is already short of
refinery capacity for light products such as motor spirit
and the position will continue to grow worse.
16.41 Long term supply into Sydney will be by sea to bulk facilities at Botany Bay or Port Kembla and thence by
road. New facilities could be developed by use of presently
existing facilities at those locations. Carriage would
be by a 10,000 cubic metre (5,000 tonne propane) semiÂ
refrigerated vessel. Further study is needed but direcÂ
tionally the strategy seems feasible.
249
16.42 In the short term the Sydney market must be supplied
and developed by the use of road/rail transportation.
The Commission considers this should be developed, even
if profitability is marginal.
16.43 The Commission has therefore looked at the logistics
of supply to the Sydney market in this interim period,
and concluded firstly that full road transport is not
possible because of costs and resultant road density of
the LPG carriers. However a combination of road/rail/road
using rail tank cars from the Dynon Road, Melbourne
southern terminal of standard gauge line to Sydney deserves
to be examined in detail.
16.44 The limited studies which the Commission has been
able to undertake suggest that the cost to land Westernport
LPG in Sydney will not be greatly reduced in the short
term. In the long term it may reduce as a larger market
and more efficient transportation and distribution are
developed.
16.45 The appropriate and adequate integration of LPG reÂ
sources into Australia's energy economy needs a sufficientÂ
ly researched energy policy.
The continuing problem of the price of indigenous
crude creates a major distortion in the energy economy.
Most of the recommendations made in this and earlier
Reports are based upon an increase in the price of
Australian crude in the short term. Only by so doing
can rational and economic energy usage be established.
2 50
In this connection the recent (30th September, 1976)
Industries Assistance Commission report on Crude Oil
Pricing which recommends that indigenous crude rise to 49%
of import parity plus the $2 per barrel levy from 1st
January, 1980 merely postpones the problem and continues a
pricing policy which encourages the misapplication of reÂ
sources. It is difficult to see under such circumstances
how conservation policies in restraint on consumption can
be generated under conditions that involve artificially low
prices, or alternatives encouraged in the face of competiÂ
tion from refinery products that do not bear their true
value. These policies have in part been responsible for the
near total exclusion of field resource based LPG from autoÂ
motive consumption in Australia in the face of the produÂ
cers' understandable preference for exports at world parity
prices and if continued can only, in whole or part, have
the same effect.
(R76/526) Cat. No. 76 3592 8
251