* Aramco's annual contract with China Wanhua starts May
* Wanhua is Aramco's first direct term client in China
* China's Q1 LPG imports up two-thirds y/y -customs
By Chen Aizhu
BEIJING, May 16 (Reuters) - Saudi Aramco has entered its first annual liquefied petroleum gas (LPG) supply contract with a Chinese chemical producer, boosting its sales to the world's top LPG consuming nation as output of the fuel climbs at home.
The deal with Wanhua Chemical Group Ltd
Wanhua said it received its first Saudi LPG cargo under the deal earlier on Monday - a 40,000-tonne parcel at Yantai port of eastern China's Shandong province.
"Aramco's previous China shipments were mostly via majors or trading houses. Now it wants to sell direct to end-users," said an industry official with knowledge of the agreement.
Supplies under the new deal will partly come from Saudi Arabia's expanded Shaybah field in the northern edge of the Kingdom's Empty Quarter desert.
LPG, a mix of propane and butane, is used for heating, cooking, transport and for making petrochemicals.
Given surging demand for the fuel across Asia, mainly in countries like India and Indonesia, analysts see a supply deficit in the region widening to record levels over the next two years.
China too has seen a rise in LPG demand as more privately run propane dehydrogenation (PDH) plants that process propane into propylene, used in plastic products, have come online.
These new plants have eyed LPG, chilled at around minus 40 degrees Celsius and shipped in tankers, from the United States where a shale boom has led to a surge in supplies of butane and propane as a byproduct of shale gas production.
State-controlled Wanhua started running a 750,000 tonne-per-year PDH facility in August 2015 at Yantai that requires about 1.5 million tonnes of LPG annually, including 900,000 tonnes of propane and 600,000 tonnes of butane.
"We also secure LPG from other Middle Eastern producers such as Qatar and Kuwait, but Aramco is our single largest supplier," said Liang Bin, a senior Wanhua procurement manager.
China's LPG imports grew two-thirds in the first quarter of 2016 versus a year ago at 471,000 barrels per day (bpd).
By the end of 2015, Saudi Arabia was China's No.5 LPG supplier, after the United States, Qatar and Kuwait, with shipments at around 690,000 tonnes, or about a tenth of the Kingdom's total exports.
(Additional reporting by Li Peng Seng in SINGAPORE; Editing by Himani Sarkar) ((aizhu.chen@thomsonreuters.com; +8610 66271211; Reuters Messaging: aizhu.chen.reuters.com@reuters.net))
Keywords: SAUDI CHINA/LPG
