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USA Counts on Heavy Liquids From Far Away Places November, 2005

USA Counts on Heavy Liquids From Far Away Places November, 2005. USA’s ethylene industry remains alive. US ethylene demand – believe it or not – actually looks OK, not great but reasonably good, in the near future. Loading of effective cracking capacity: 2003: 89% 2005: 97% 2007: 91%

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USA Counts on Heavy Liquids From Far Away Places November, 2005

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  1. USA Counts on Heavy LiquidsFrom Far Away PlacesNovember, 2005

  2. USA’s ethylene industry remains alive. • US ethylene demand – believe it or not – actually looks OK, not great but reasonably good, in the near future. • Loading of effective cracking capacity: • 2003: 89% • 2005: 97% • 2007: 91% • So what can the industry find to crack? • Natural gas prices keep ethane expensive. • Propane tends toward oversupply. It fell to plant-fuel value last Summer. But crackers can digest only so much of it. • For the past two years, Gulf coast crackers turned more and more to heavy feedstocks. • How can that continue?

  3. The post-ethane era • Ethane costs too much because too many Americans • use electric lights • bathe in hot water • eat cooked meals • heat their houses. • Expect a shift to propane in light-feed crackers. • Heavy feeds must keep the industry going. • USA faces a gasoil shortage. • Condensate does what it can. • Naphtha gives the industry its only real hope.

  4. Liquids cracking has a ceiling • US crackers can consume a lot of liquid feed – about 770 kb/d this year. • But we won’t see any additions to that capability any time soon. • The industry used 84% of its liquids-cracking potential in 2005. • If light-feed cracking economics remain poor, companies will use 88% to 93% of their liquids capability in 2007.

  5. Domestic supply fades • What can you expect in a country living at the limit of its mogas supply? • Refinery operators try as hard as they can to turn naphtha into gasoline. • Recently, natural gasoline exports to Canada became really interesting. • Repeal of the RFG oxygen requirement may allow more blending with PADD 3 naphtha by Spring, 2006. Source: EIA and Poten research.

  6. Everyone hungers for imported naphtha • Between 2003 and 2005, PADD 3 naphtha imports increased 110%. • Blenders want the sweet stuff. • Refiners want anything with a little N & A – for reforming. • Ethylene companies take the rest: sour, low-octane, wide-range. • Steam cracking used to get some naphthenic naphtha and very sweet natural gasoline. Now, they cost too much. Source: EIA and Poten research.

  7. Going global • The Gulf coast’s naphtha imports rose since 2003 • In spite of competition from the Atlantic coast • Note W Africa shrinkage • Note modest Europe gain • Because USAC wants sweet mogas blendstock. • Big increases: • S America, plus 74% • N America, plus 160% • Europe, plus 29% • E of Suez, plus 1875% Source: EIA and Poten research.

  8. The East has the oil • Cracker-naphtha imports rose 96%, 2003 to 2005. • Short-haul volume increased • N Am, plus 145% • S Am, plus 99%. • Trans-Atlantic volume fell • Europe minus 12% • W Africa minus 18%. • E of Suez volume soared 1718%, making that most-distant region the single largest supplier. Source: EIA and Poten research.

  9. Condensate can’t change the future • Europe, thanks to Algeria, remains USA’s top source of foreign liquid cracker feed. • But Europe’s availabilities don’t grow. New Russian bbls barely offset slippage in Algeria and elsewhere. • The future looks dark. • Alba lost. • Aasgard headed for crude. • Asian splitter-bound. • Algeria builds a splitter. Source: EIA and Poten research.

  10. USA’s north Atlantic naphtha-market rival • Europe has changed • Past: regular exporter • Present: in transition • Future: rival importer. • Jan–June, 2005, • Exports, 2.06 mmtons • Imports, 0.54 mmtons • July–October, 2005, • Exports, 0.46 mmtons • Imports, 0.21 mmtons • Europe even snatched a Caribbean cargo in October. • The Americas must look for more distant sources.

  11. West of Suez naphtha • Demand increases faster than supply between 2003 and 2005. • Demand remains larger than supply thanks largely to a shift in Europe’s balance from long to short. • WoS becomes a net importer. • Trade flow already swung from West-to-East to East-to-West in 2004.

  12. East of Suez naphtha • Supply increases faster than demand between 2003 and 2005. • Supply remains larger than demand thanks largely to naphtha derived from gas projects – natural gasoline from gas drying and distilled grades from field condensate splitters. • EoS becomes a net supplier.

  13. Poten & Partners Unless otherwise attributed, all data and findings in this presentation come from Poten & Partners’ own research and publications including Naphtha Prognosis, Condensates in World Commerce, and Naphtha News.

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