Outlook Remains Bullish for Canadian LPG Exports

The Canadian share of waterborne LPG exports will continue growing amid rising Asian demand, bypassing a major potential chokepoint for U.S. cargoes as global supply flows rebalance, analysts say.

Since 2021, Canadian propane and butane exports have recorded steady growth amid its own supply boom and subsequent expansion of West Coast LPG export terminals.

According to the Canada Energy Regulator, the country’s total propane exports for 2026 to date averaged about 218,000 b/d, and butane exports so far this year stood at roughly 83,000 b/d. Last year, Canadian propane exports totaled over 211,000 b/d, and butane exports were about 62,000 b/d, according to CER data.

Of that share, Canadian waterborne exports of propane reached about 83,000 b/d. In 2025, propane marine exports stood at approximately 80,000 b/d, CER data showed.

In 2015, Canada exported an average of 112,000 b/d of propane, all to U.S. markets, by land. In early 2017, the country exported an average 204,000 b/d, increasingly to countries other than the United States, CER said.

Over time, the amount of propane exported to other markets such as South Korea, Japan and Mexico grew, surpassing exports to the United States for the first time in June 2021 and later in May 2022, according to CER’s website.

Canadian LPG exports are rising because western Canadian production of natural gas is increasing, mainly due to increased exports of LNG and growing crude oil production in Canada, Peter Fasullo, principal of EnVantage Consulting, told OPIS.

The main by-product of increased gas production are NGLs, and Canada’s midstream players have been increasing fractionation and export capacity to manage the excess LPG volumes produced, Fasullo said. The targeted market for these additional volumes, whether it be LNG or LPG, is Asia — as its export terminals are located along the coast of British Columbia.

“With LPG flows from the Middle East constricted, flows from western Canadian export terminals should increase to Asia,” Fasullo said. “Plus, you avoid the congestion at the Panama Canal. Even after crisis is over, Asian countries will want to have diversified LPG supply sources, and Canadian supplies represent a reliable and safe source of LPGs.”

Canadian LPG supply has a logistical advantage in that West Coast terminals can reach East Asia roughly 15 days faster than cargoes sailing form the U.S. Gulf Coast, Swetha Sivaswamy, principal analyst, Oil & Gas at Wood Mackenzie, told OPIS.

“That gives Canadian propane a meaningful freight advantage, particularly into Japan, Korea and China,” Sivaswamy said, pointing out that export infrastructure is about to expand substantially, with AltaGas’ Ridley Island Energy Export Facility project expected to come online in early 2027.

“Following the tariffs in 2025, China has completely replaced Japan as a top destination for Canadian exports of propane. China and many other countries are looking to diversify their LPG export suppliers beyond the Middle East and U.S.,” Sivaswamy said.

The ongoing U.S.-Iran conflict has had a bullish effect for Canadian supply, as the underlying Asian demand remains unchanged, making Canadian propane more attractive as a secure alternative, Sivaswamy said.

“Asian buyers have a stronger incentive to diversify away from Middle Eastern LPG,” Sivaswamy said. “Canadian propane offers geographic diversification, relatively reliable supply, and Pacific access. The conflict pushed international NGL/LPG prices sharply higher and increased demand for North American exports as buyers sought replacement supply.“

However, Canada is not the only beneficiary. U.S. LPG has captured a large portion of the replacement demand, Sivaswamy noted.

With U.S. trade uncertainty due to tariffs, Canada is also seeking alternate markets as much as Asia is looking for alternative suppliers due to the Middle East disruption. “We expect Canada exports to non-U.S. markets to increase and U.S. bound exports to weaken due to tariffs,” Sivaswamy said.

In March 2025, the United States initially imposed a 10% tariff on Canadian energy exports, while the general tariff on Canadian goods was 25%. However, officials subsequently exempted goods that qualify under CUSMA [Canada-United States-Mexico Agreement] rules of origin. As a result, compliant Canadian NGL shipments generally have not faced the full tariff burden, Sivaswamy said.

“So far, tariffs have not created the kind of structural demand destruction for Canadian propane/NGLs that one might expect from a 10%-25% import duty,” Sivaswamy said.

Current operating export capacity in Western Canada is 110,000 b/d but will expand as new capacity comes online, Sivaswamy noted. The first phase of the REEF project is expected to come online in early 2027 with a capacity of 56,000 b/d. The company also has announced that 30,000 b/d of additional capacity will be added by the second half of 2027.

Beyond 2027, there is additional upside, Sivaswamy said. AltaGas and Royal Vopak, which operate the 50/50 joint venture that is developing REEF, have identified another potential REEF expansion that could add as much as 60,000 b/d, although that should be treated as optional rather than base-case capacity today.

To keep up with demand for Canadian NGLs, Western Canadian infrastructure capacity will need to be further expanded. Currently, no pipeline exists that moves NGLs to Canada’s West Coast; instead, NGLs move by rail and must compete for space with other commodities, Shannon Watt, president and CEO of the Canadian Propane Association, told OPIS.

New processing, fractionation capacity, and storage require large amounts of capital, but the previous government’s pro-environmental stance discouraged capital investment in oil and gas. “Much of the regulatory environmental and permitting process did not prioritize oil and gas investments,” Watt said.

The current government, by contrast, has expressed a real desire for big investment in oil and gas infrastructure. The onset of tariffs also “made people realize how important it is or us to support our industry,” Watt added.

While U.S. tariffs have not directly affected Canadian propane, they have hit prices for U.S.-sourced steel, tanks, and specialized equipment. This boosts infrastructure costs and the ability to safely deliver propane, Watt told OPIS. “We expect those costs will be passed down to Canadian farms, families and businesses.”

Canadian energy companies are addressing its customer needs to move NGLs west with joint ventures and acquisitions.

In May, Keyera sanctioned the Alberta Corridor Energy rail terminal project in Strathcona County, Alberta. The project will combine Keyera’s ACE rail terminal with CN’s rail network and AltaGas’ West Coast export platform to offer its customers improved netbacks to international markets, Keyera officials said during the company’s second quarter earnings call on Aug. 6.

Keyera CEO Dean Setoguchi also said during the call that the company’s acquisition of Plains Exploration’s Canadian NGLs business would enhance its ability to efficiently provide gathering, processing, fractionation, storage, transportation and marketing solutions across all major NGL products, while giving its customers with greater market access and supporting higher netbacks.